The contingent workforce continues to grow, with 40 per cent of the U.S. workforce already consisting of highly skilled, non-permanent workers who are engaged on a contract or project basis. A contingent workforce strategy is critical for employers in order to manage their contingent workers and ensure compliance.
Employers are reassessing their workforce strategies – reimagining total supply chains and restructuring operating models to achieve immediate, short-term and long-term business goals.
In fact, a recent report released by Gartner revealed that 32 per cent of organizations are replacing traditional employees with contingent workers as a cost-saving measure. Yet, while the contingent workforce comes with many inarguable advantages, including increased flexibility, access to highly skilled talent and cost savings for both short-term and long-term engagements, it also comes with its own set of unique challenges.
The information below will help your organization make informed decisions when it comes to planning for solid contingent workforce management.
Considering your contingent workforce strategy
Employers who don’t have a business-wide contingent workforce strategy in place to manage contingent workers and contingent worker compliance are opening their companies up to a whole slew of challenges in the form of liability and risk.
With almost half of the U.S. workforce consisting of Independent Contractors, it’s critical for employers to re-visit their workforce strategy and planning approach to include their agile workforce.
If you’re re-evaluating your current contingent worker program, here are a few questions to consider to help shape the direction of an effective contingent workforce strategy:
How is your contingent worker strategy mapped to your workforce strategy?
Do Independent Contractors fall under your organization’s Procurement Department, which is experienced in dealing with third parties, or does the human element of contingent workers make it the responsibility of the Human Resources Department? Who is in charge of what function and are there policies in place?
How many contingent workers do you have in your contingent workforce?
Do you have visibility into who is doing work for you? If you don’t know how many Independent Contractors you have in your program, could you find out? Nearly 60 per cent of these costs is unaccounted for in financial planning, forecasting and annul budgets within the average organization.
This lack of visibility can undermine budget goals and the strategic direction of an organization.
What is your annual spend on contingent workers?
Global spend on contingent workers is estimated at just under $300 billion, yet the average organization is only aware of where less than half those dollars are spent. Contingent workers are typically managed between procurement and human resources, and these departments use fragmented processes and inconsistent hiring practices when engaging these workers.
These inconsistencies lead to a lack of visibility that could be costing thousands if not millions in avoidable contingent spend.
Who owns the acquisition and management of your contingent workers?
Is it your organization’s procurement or HR function that owns the engagement and management of your contingent workers? If the responsibility is shared between both departments, are there policies and procedures in place to ensure consistency?
To achieve a successful and cost-effective workforce, HR and Procurement must foster collaboration and communication to promote the types of cross-functional strategies that create greater visibility, access to data and enhanced control.
Now, more than ever it’s critical for employers to understand the large scale shifts that are affecting how the world is working and then apply this knowledge to their workforce strategies.
Here’s how to get started re-designing your contingent workforce strategy:
Get key stakeholders on board
Getting key stakeholders on board allows management to reshape processes and policies between departments to ensure an effective, centralized management program all in one place.
Aligning procurement and HR will prevent administration errors and inconsistent hiring practices across the organization- ensuring critical aspects like payroll and compliance are executed seamlessly for contingent workers.
Engage the services of an MSP
While the rise of a flexible talent provides many benefits, it also leaves employers grappling with the hurdles of managing the many complexities that come with these types of workers. For answers, organizations committed to a more strategic approach to contingent talent management are turning to a Managed Services Program or Managed Services Provider (MSP) as an effective resource.
At its most basic delivery level, an MSP will help an organization easily streamline and manage its entire program by improving efficiency, controlling costs and mitigating heavy fines, penalties and reputational damages associated with compliance risks.
An MSP will oversee the management of the every aspect of Independent Contractor engagement from the initial job request to offboarding.
Automate the process with the right tech
Using a manual-heavy process in your program is a sure way to make costly mistakes. However, advancements in technologies have made it easier for employers to automate the approach.
A Vendor Management System (VMS) is a software application, typically cloud-based, that helps to facilitate the process of contingent engagements and management. A VMS will automate and streamline the sourcing, engaging, managing and payrolling of contingent workers sourced through an organization directly or by their Managed Services Provider (MSP) like a staffing agency.
This automated tool will help maximize productivity, decrease compliance risks and streamline your operations.
Communicate any program and policy mandates and changes
As with many organizational challenges, employers must understand the advantages and disadvantages of contingent labor and then implement strict management that includes a program with data-driven KPIs.
If your organization makes the move to change policies and procedures, ensure to notify the right decision makers and people involved on an internal and external basis. This would include your hiring teams, Procurement and Human Resources departments, vendors and Independent Contractors.
The role of a trusted staffing partner
A trusted staffing partner should be committed to advising on the best solutions available to meet an organization’s business goals and to deliver innovative services that transform how they acquire and manage talent.
An experienced staffing partner will work with a client organization to align their business objectives with their workforce strategies. This is done by listening to an organization’s specific needs and tailoring a solution that delivers both short and long-term value across an entire organization.
Remember: Compliance is key!
Compliance is also an essential component to any contingent workforce management strategy, yet for many organizations, contractor compliance is a very confusing and complicating process, as organizations must classify aspects of the worker relationship to ensure compliance with the correct tax and employment laws. Organizations that partner with a staffing agency will shift the hiring compliance burden to that agency. This puts the onus on the staffing agency partner to mitigate the risks associated with Independent Contractors and ensure compliance.
With proper management structures in place, engaging contingent workers provides employers with access to their industry’s best talent, fresh perspectives, more diverse workers and cost-saving opportunities that a less flexible workforce can’t provide. However, until employers implement a company-wide strategy – all of these benefits could transform into costly risk.
If you’re interested in deeper insights into how to manage the risks posed by your current program, download our free whitepaper: A Checklist for Contingent Worker Risk: