<img height="1" width="1" style="display:none;" alt="" src="https://dc.ads.linkedin.com/collect/?pid=22574&amp;fmt=gif">

HCMWorks Insights

Why Your Business Needs to Analyze Contingent Labor Costs

Posted by Julia Fournier on 6 Oct 2015

Your contingent labor includes all of your non-permanent workers, including your independent contractors, consultants, temps, freelancers, advisors, and all of the other type of workers you hire on a short-term, temporary basis.

Though your contingent workforce adds great value to your organization, through flexibility, a bridge in your skills gap, and the reduced costs associated with health coverage and other benefits that permanent employees receive, if you’re not careful, it can cost your business more than you’d expect. In fact, labor will inevitably be your largest indirect procurement spend category. You must control this spend to get the most value for your money. You can benefit from analyzing your contingent labor costs.

The Rise of the Contingent Worker

Gone are the days of nine-to-five employees making up the majority of your workforce. With the rise of the contingent worker in this current on-demand economy, your non-permanent workers now likely make up a large amount of your total workforce. Though it can be advantageous to your company to hire more and more contractors and freelancers, it means your indirect procurement spend in this category is naturally going to rise with your increased use of contingent workers.

If you only hired a few contractors per year in the past, it makes sense that you didn’t consider cost analyses to be critical to your organization’s success. But now, you simply cannot afford to ignore the significant amount of money you are spending in this category. It’s time to analyze your costs.

Invisible Costs

The numbers are not cut and dry when it comes to your contingent labor. To be able to see how much you’re truly spending on this expense, you need to perform a full analysis to improve your visibility into the category. After all, you cannot control costs that you cannot see.

It’s not just about how much you’re spending on the contractors per hour or the markup fee you’re providing your staffing agency. The invisible costs that come with using contingent labor can add up significantly and affect your bottom line if you’re not controlling them. Some of these hidden costs include compliance, business value, productivity, and risk management.

For example, if you are not effectively mitigating the risks that come with using contingent workers and are not staying compliant with the unique regulations that come with this type of workforce, you can be hit with costly fines, penalties, and lawsuits that could significantly hurt your profits.

Contingent Labor Management Solutions

The only way you can increase visibility into this spend category in order to analyze and reduce the costs associated with utilizing a contingent workforce is to invest in contingent labor management solutions. By using workforce management consultation services and a software program, you can not only track your labor in order to be able to analyze your spend, but you can also see trends and patterns, set authorization limits and freezes, and do so much more. You can effectively manage the entire contingent labor cycle, from procurement to payment, and everything in between, so you can reduce your costs.

In fact, companies that invest in contingent workforce management usually see cost savings of 15 percent or more, which could translate into the millions. Invest in the right tools, technology, and personnel, and you’ll be sure to maximize the value of using contingent workers while also reducing your costs.


If your company does not have the resources or capabilities to effectively manage your contingent labor and evaluate the costs associated with this spend category, it’s time to look into outsourcing the responsibility to a managed services provider. Let the experts perform the analyses and you’ll reap the rewards of a fully managed and totally visible contingent workforce.

Exploring Your Contingent Workforce Ecosystem

Tags: Contingent Workforce Management

New Call-to-action