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HCMWorks Insights

Contingent Workforce Cost-Savings: 3 Solid Strategies

Posted by Julia Fournier on 21 Jan 2016

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You can’t manage what you can’t see

When hiring managers in different branches/locations of your organization engage contingent or non-permanent workers on their own, these workers function unseen, under the radar of your HR department. Here are three actions you can take to regain visibility of your entire contingent workforce and take control of rogue spend.

EXECUTIVE SUMMARY

FAIR MARKET RATES
Know what you should be paying for your contingent talent. Focus on rate card management by developing a comprehensive job catalog of all your contingent workforce positions. Get an educated baseline cost by comparing the rates you pay to the current rates other organizations pay for similar positions. Use this knowledge in your negotiations with staffing vendors.

HIRING STRATEGIES
Internally sourced candidates are usually your best-qualified and most cost-effective hires because colleagues and staff tend to recommend people who are a good fit with your organization. Eliminate costly last-minute scrambles by planning ahead for upcoming workloads and hiring the resources you will need well in advance.

VALUE ENGINEERING
Keep your HR department focused on performing the important tasks they are best at. Use workforce value engineering to offload the many non-productive tasks of contingent workforce management to a third party such as a Managed Service Provider (MSP).


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Any organization, however, would benefit from implementing a clear rate card strategy, employing an effective talent sourcing strategy, and using a value engineering approach to properly manage contingent workforce costs.

Workforce cost-savings strategy #1
Rate card management

Most organizations think of cost management as negotiating staffing vendor markups. But this is not enough. Here are two reasons why:

First, in our experience, most organizations don’t have an accurate view of the going market rate for the various categories of non-permanent workers they retain. As a result, they may be consistently paying far more than the prudent rate for their contingent talent. Even though the differences may appear small on an hourly basis, they can easily add up over a one-year contract to tens of thousands of dollars for each resource.

Second, since the hiring of non-permanent workers is generally disparate, organizations find they are paying varying rates for the same category of resources. Sometimes the same worker is offered by several vendors at vastly different rates.

With this in mind, the starting point of a rock-solid cost management strategy is to focus on the rate card. How?

Develop a comprehensive job catalog. This will be a holistic view of your contingent workforce program that should include for each and very position:

  • The job title
  • The job description
  • The average, low, and high rates currently paid for these positions

The next step is to evaluate these rates to determine if they are in line with the going market rates for similar positions. When building a rate card, we always like to use two objective external data points from independent organizations that monitor market rates, in addition to our own extensive market knowledge.

Once this is done, you end up with an educated baseline cost that you can then manage pay rates more effectively. This may facilitate a pay rate strategy that balances rates with working conditions to achieve desired cost savings.

The rate card then serves as the cornerstone of your negotiation with staffing vendors. Instead of simply holding vendors to a fixed markup – and paying too much because the rate is above fair market – you can make sure that the marked up rates are in line with what the position truly commands.

The negotiated rate card should then be published throughout the organization and steps should be taken to ensure compliance by every hiring manager.

Workforce cost-savings strategy #2
Contingent workforce sourcing

For starters, you must be able to readily access the best possible talent for the job you have to fill. Otherwise, you will always be scrambling at the last minute to find qualified talent and, as a result, pay far too much for the workers that you retain.

You also need to utilize the right resources at the right time to access your talent. Obviously, you pay a hefty premium when you source through your supply base. Staffing vendors in the U.S. typically charge anywhere from 30% to well over 60%, and even much higher on niche skills.

A solid internal talent attraction strategy: Internally sourced candidates are usually your best hires because employees will generally only refer someone with a solid work ethic who is a good fit for your organization.

Internally sourced workers are also your most cost-effective hires. If you have a solid attraction strategy – one that includes referral bonuses for staff who refer quality candidates – you’re going to end up with better talent and save the cost of vendor markups, not to mention a host of sourcing costs.

Your own internal talent pool: This central database will contain people who have previously worked for your organization. These are tried and proven people who have the skills, experience, and work ethic that you’re looking for and are ready to hire. They have previously been interviewed, screened, vetted, on-boarded, and have demonstrated their ability to produce results for your business.

Your talent pool will also include high-value candidates such as referrals from employees or people you know.

Better workforce planning: To manage your workforce strategy correctly, you need to identify the workloads coming down the pipe in the near future and ramp up the hiring process well in advance of the planned start date. Contingent workforce requirements need to be mapped to the business plan using predictive insights to manage your sourcing strategy.

Using this strategy, you’re able to communicate to your internal talent pool that a major project will start in a few months. You can then find out in advance who is interested and available rather than scrambling to procure talent at the last minute.

Workforce cost-savings strategy #3
Workforce value engineering

When you examine the amount of time and energy spent by hiring managers, internal recruiters, as well as Finance and Procurement on contingent workforce management, it’s not hard to see a lot of inefficiencies in the process. Among them:

  • Scrambling at the last minute to find resources; reaching out to multiple staffing vendors in hopes of finding a qualified candidate
  • Qualifying of resources, which usually includes screening, vetting and interviewing – a time-intensive and costly process.
  • Time wasted on onboarding, setting up ICs as vendors for payment, not to mention the ensuing flood of invoices and payroll activity.

A value engineering strategy analyses all the activity generated by the contingent workforce management process and finds ways to offload non-productive tasks to a third party.

This third party will typically handle the entire sourcing function, manage job requisitions, execute on-boarding and off-boarding, and provide a single consolidated invoice for all non-permanent workers that is properly coded and reported in a way that is meaningful to the organization.

Value engineering is really a structured approach to freeing up the highly valuable time and resources of HR and enabling Procurement and Finance to do more important things.

So there you have it. 3 cost-savings strategies to help manage your contingent workforce.

Need help implementing one or all of these strategies? Speak with an HCMWorks Contingent Workforce Consultant today.

Related content:

How to minimize costs with contingent labor management

Why your business needs to analyze contingent labor costs

Don't Have the Resources to Engage A Contingent Workforce MSP? 

Tags: Workforce Management, Contingent Workforce Management

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