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HCMWorks Insights

5 Reasons Why You Can't Manage Contingent Workers on Your Own

Posted by HCM Works on 4 Sep 2015

There has been a growing reliance on the use of a non-traditional workforce in the United States. Companies are hiring contingent workers now more than ever due to the fragile economy. Contractors provide increased flexibility and reduced costs. Although a contingent workforce can be highly beneficial, it also comes with unique risks and responsibilities, such as management.

Managing one or two contractors or consultants can be simple enough, but when you have a growing number of contingent workers employed at your company, you need to be able to effectively manage them all in an efficient manner—and you can’t do it on your own.

Here are five reasons why you need to outsource the responsibility to a managed services provider (MSP) and invest in contingent workforce management solutions.

1. Compliance Issues Will Be Complex

Employing contingent workers comes with bigger compliance risks and liabilities than employing permanent workers who are on payroll. You cannot manage them in the same way that you manage your full-time staff. You cannot treat them equally in terms of health coverage, holiday pay, overtime, and other perks and benefits or the IRS may deem them to be employees. Though there are some legal tests you can follow, in reality, there is no foolproof way to classify independent contractors.

Misclassification can violate many laws that cover overtime, workers’ comp, taxes, and unemployment insurance—making this mistake while managing your contingent workforce can be incredibly costly. You may have to pay all withholding taxes, plus interest. If you manage your contingent workforce on your own, you’re going to be increasing your risk of noncompliance with classification.

2. The Contingent Workforce Is Paid Differently

Since your contingent workers won’t be on payroll, you have to go through a separate process to ensure they are paid correctly, promptly, and legally. Considering most of your contractors will be paid different rates and on different schedules, it can become time consuming and complex to handle their payments. The more contractors you hire, the more difficult this task is going to be. If you handle it on your own, you will be increasing your risk of error and wasting time, which isn’t an efficient or effective way to do business.

3. You Won’t Be Able to Measure Performance

To optimize your contingent workforce you need to be able to track and measure your contractors’ performance. If you don’t have systems in place to do this, you could be paying high prices for sub-par work. With a contingent workforce management solution, you can have the metrics in place for you to monitor performance.

You’ll have the data you need to place the right workers where you need them, ensure that optimal productivity is being met, and see performance issues early on so you can fix them before they damage your company. You need a contingent labor management program to gain visibility, which will allow you to make informed decisions about your continent workforce.

4. Your Sourcing Needs Will Increase Beyond Your Capabilities

With the use of contingent workers surging in business, it’s going to become more time consuming, costly, and important for you to source talent. If you keep increasing your number of contractors, you won’t be able to effectively manage the sourcing process on your own. You’ll need a contingent labor management program to provide you with greater insight into your sources, so you can reduce your risks and your contingent labor spend by having the best people on your projects.

5. Management Inefficiencies Will Cost You

Streamlining your management efforts is nearly impossible without the use of a managed services provider’s state-of-the-art technology. With a labor management solution, you will be able to manage your contingent workers from one centralized place, which will enhance organization, speed, and accuracy. Without it, you’ll likely be making expensive administrative errors, increasing compliance risks, duplicating your efforts, and wasting time due to disorganization, which will cost you.

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Tags: Workforce Management, Contingent Workforce Management

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