The world of work has changed significantly since the Great Recession. According to the U.S. Government Accountability Office, as much as 40 percent of the American workforce can now be considered “contingent labor.” The use of contingent labor across multiple industries – especially in health care, manufacturing, retail, and technology – has exploded. According to Deloitte, some large enterprise organizations report that as much as 30 percent of their procurement spend is focused on their contingent workforces.
As these programs grow in size, they can also grow in complexity. Contingent workforce management therefore becomes increasingly challenging.
Barriers to Contingent Workforce Management Success
Employers using contingent workers often face challenges in managing their programs. When it comes to contingent labor, organizations have to deal with obstacles like regulatory concerns, access to top candidates, and much more. While regulations and access to talent are issues that employers face in traditional talent acquisition, the rules and strategies differ when working with contingent labor.
Here are a few common challenges that organizations tend to face in the arena of contingent workforce management:
1. Fragmented Management of the Contingent Labor Engagement Process
In many organizations, the contingent labor engagement process is managed by individual hiring managers. This makes transparency difficult to achieve. Often, this fragmented engagement can lead to high spend on contingent workers, decreased visibility into who is actually performing work on site, and compliance difficulties.
When contingent workforce management is performed by one entity – such as a managed service provider – rather than a loose collection of hiring managers, the engagement and management of contingent workers becomes more efficient and cost effective. When contingent workforce management remains unstructured, however, it can be difficult to create a truly efficient or cost-effective program.
2. Reduced Access to Qualified Candidates
The strength of a contingent workforce program depends largely upon access to qualified candidates. Often, unstructured contingent workforce management leads to few relationships with suppliers and inadequate access to qualified candidates. Organizations may rely far too heavily on one supplier, but what happens if that supplier can no longer meet the organization’s demands? Where will candidates come from?
This over-reliance can result in positions sitting open for far too long, exorbitant rates for candidates, or the elimination of an employer’s contingent workforce program altogether.
3. Worker Misclassification
Updates to classification guidelines have challenged many employers. Misclassification of non-employee labor can result in fines, penalties, and even lawsuits.
Organizations are at the most risk of running afoul of regulatory bodies when hiring managers are responsible for contingent workforce management. These hiring managers are not experts in worker classification, nor should they be. Without an expert on hand to make worker classification decisions, contingent labor programs could become ticking time bombs for employers.
4. Lack of Visibility Into Program Spend
When contingent workforce management is not transparent, it can be difficult for supply chain or procurement to have a clear picture of actual contingent labor program spend. This can undermine an employer’s budget goals and the strategic vision for the contingent labor program itself.
When contingent labor programs grow in size and scope, contingent workforce management can become a nightmare of complexity. Employers seeking to overcome these challenges should seek to partner with managed service providers in order to mitigate risk, reduce cost, and streamline operations. This can provide the transparency and accountability that contingent workforce programs require in order to be strategic drivers of success.
Catherine Hess is the marketing manager for RightSourcing.