**The big picture:** Many companies are misclassifying staff augmentation as Statement of Work (SOW) engagements, blurring the lines between project-based outcomes and direct labor. **Why it matters:** This practice, while not a 1099 misclassification risk, can lead to significant financial inefficiencies and a lack of control over contingent labor spend. **Between the lines:** - Estimates suggest 20% to 50% of SOW spend could be misclassified staff augmentation. - Key indicators include time-based billing, client direction of workers, and lack of supplier delivery risk. - Federal Acquisition Regulation (FAR) guidelines for "personal services contracts" offer a robust framework for identifying misclassification. **Staffing & HR impact:** Staffing firms can leverage this insight to offer compliant staff augmentation solutions, while HR and procurement must audit SOWs to ensure proper classification and cost control. **The bottom line:** Companies must proactively audit their SOW spend to uncover hidden staff augmentation and optimize their contingent workforce strategy.