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HCMWorks Insights

5 Serious Contingent Workforce Challenges You Have To Fix

Posted by Julia Fournier on 28 Jul 2016
If you're responsible for managing your Contingent Workforce, you're continuously trying to maximize efficiencies and cut costs in order to increase profitability. And as a result you're faced with managing some significant contingent workforce challenges.
With labour being one of the biggest expenses in business, it’s only natural that companies would start looking for innovative ways to get work done more efficiently at lower costs, which is how the contingent workforce was born.
Contingent workers are defined as freelancers, independent contractors, consultants, or other outsourced and non-permanent workers who are hired on a per-project basis. 
They can work on site or remotely. However, they are not simply temp workers, this discounts the high-value nature and complexity of today’s contingent workforce. Contingent workers are often highly skilled experts in their fields ... usually hired specialists to complete specified tasks under a statement of work (SOW) provision. 
But once the project is over, they leave, though they may be called back when another project arises. As such, they are not employees and there is no responsibility to provide continuous work on a permanent basis.
So here lies the challenge. Managing a non-permanent workforce requires significant insight and visibility across your entire organization. These are some of questions you should ask, what are you measuring, and is all the data known. How many contingent workers are engaged by you company at this point in time? Where are they located? How are they managed efficiently as a group, and as individuals? 
As the saying goes, you can’t manage what you can’t measure. So a lack of visibility of your contingent workforce headcount, and total spend can translate into challenges for an organization. 

Here are 5 serious contingent workforce challenges you may have that will need to be fixed, to name just a few:

  1. Are you paying above fair market rates? Lack of visibility leads to waste. Many organizations don’t have a clear picture of fair market rates for a given category of worker. Better visibility on your current pay rates and the fair market rates for a given class of worker can lead to substantial savings.
  2. Do you take unnecessary risks? One of the most overlooked aspects of contingent workforce accounting is the lack of insight into the potential risks associated with various classes of contingent workers. This is particularly true of independent contractors. Greater visibility leads to better governance and compliance with federal, state, provincial and local regulations.
  3. Do you have poor company decision-making regarding your contingent workforce? Incorrect information can lead to bad decisions across multiple areas, including workforce rationalization. Businesses that gain full visibility on their contingent workforce pay rates can generate significant savings, often without reducing headcount.
  4. Do you have poor planning and forecasting? The cause of last-minute scrambles to fill key contingent labor positions on demand, fluctuates from season-to-season or project-to-project. This kind of poor planning leads to costlier sourcing options, like staffing vendors, to fill urgent and unplanned needs.
  5. Are your rates of pay inconsistent for your contingent workforce? It’s common to find organizations paying vastly different rates for the same category and level of resource from one department to another.

How to increase visibility into your contingent workforce

Lack of contingent workforce visibility can potentially represent millions of dollars in needless overpayments and hidden rogue spend, as well as potential liability for misclassification and co-employment challenges by the IRS and DOL.
Throw in the risk of class-action lawsuits by contingent workers themselves, and it becomes clear that getting a handle on the full extent of your contingent workforce is a strategic and urgent undertaking.
Here are some steps you should consider:
  • Consolidate and centralize – Put information on all your contingent workers in one place, regardless of their type and source. Build a central repository that consolidates all the various types of non-permanent across your organization.
  • Catalog, classify and validate – Create a comprehensive job catalogue of all non-permanent positions in your organization. Understand the nature of the work they do for you. Make sure they are properly classified and, if they are independent contractors, verify that they actually qualify to be classified as such. Not everyone who claims to be an IC is eligible to work as an IC.
  • Document, educate, propagate – Success depends on managing change. Make sure your managers understand the value of centralizing the management of your contingent workforce. Demonstrate the positive impact on the business. Then roll out best practices across the various departments, divisions and locations.

How a Managed Services Program can help

To achieve all this, many organizations turn to a Contingent Workforce Managed Services Program, often referred to as an MSP. It used to be that MSP solutions were reserved for large enterprises, but now they are accessible to mid-sized organizations across a wide range of industries.
In addition, there are several intermediary solutions that enable you to gain better visibility and control over portions of your contingent workforce, including Independent contractors and directly sourced candidates.
Want a clearer view of your Contingent workforce? Need some help? Ask one of our contingent workforce consultants how HCMWorks can audit your contingent workforce and build a roadmap for greater visibility and control. 
Exploring Your Contingent Workforce Ecosystem

About HCMWorks

We are a contingent workforce service provider helping organizations gain better access to talent through the use of independent contractors, consultants, temporary workers, freelancers and other non-payrolled employees. We provide the expertise, the technology, and processes to help you reduce your workforce costs, mitigate against misclassification and co-employment risks, and increase the efficiency and timeliness of your contingent recruitment process. Read more about what our clients say about us here.

Tags: Workforce Management, Contingent Workforce Management, Managed Services Programs

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