Many HR and procurement professionals associate human capital spend with their permanent and contingent workforce. Contingent workers are far too frequently contracted and placed on a project where they are expected to self-manage, out of sight and out of mind. While many regrettably forget to manage and account for contract workers and deliverables, automating the contract can help create consistent processes. In other words, Statement of Work automation may be the solution to documenting and managing workers while ensuring visibility and compliance.

To understand how to efficiently manage human capital spend, one must first understand the common management practices that may cause friction.

Common Mistakes in Managing Human Capital Spend

One of the first mistakes some employers make in managing their contract workers is packaging them up neatly in a Statement of Work (SOW) and forgetting to account for them as an expense. When it comes to reporting finances, non-salaried workers are not accounted for on payroll but rather as a business expense, or as part of the budget for third-party contractors and consultants. This shifts contract workers to the back burner, resulting in limited visibility into expenses and performance. Even when employers adequately budget for contract workers, it can become difficult to track spending over time. 

The next mistake managers make is assuming that the cost of labor is limited to hourly rates and fees. While contingent workers minimize surface-level fees such as holiday or vacation pay or income tax, other hidden expenses and limitations may sink the budget. For example, many managers are unaware of Ontario’s 3-hour minimum pay rule or a U.S. contractor’s 1,040-hour cap per employer. Thus, managers do not account for the time and cost of halting a project during the unplanned search for another contractor. Other hidden expenses such as onboarding, training, and fixing equipment are also not considered during budgeting.

Managers may also spend inefficiently due to a lack of visibility on third-party spend. Non-employee workers must be financially visible, managed, and accounted for throughout the contract lifecycle. Mismanagement can lead to financial burdens, such as those which stem from noncompliance and potential liability. Visibility is key; that which an employer can account for, they can manage.

Better Spend Management with Statement of Work Automation

By automating a statement of work, managers can organize certain fields to ensure all expenses are accounted for and communicated, including hourly rate, hour cap, equipment used, training, etc. Creating a standardized document for each type of contract work performed can help:

• reduce the time taken to write out an entire contract, leading to more efficient spending,
• clearly communicate requirements to increase contractor compliance, 
• prevent misclassification and management risk expenses. 

By partnering with a contingent workforce management solution that leverages SOW automation, businesses can effectively document and manage their contract workers within their budget. HCMWorks is a managed service provider (MSP) which specializes in SOW strategy for managing contingent workforces. To discover how we can help your business build the right SOW management strategy, contact our team of workforce experts today.