7 January 2022

4 Ways to Minimize Risk in Your Contingent Workforce Program

3 min read

Organizations are continually evolving their talent strategies to find ways around workforce shortages and the skills gap. As a result, the contingent workforce has grown significantly in recent years, as companies use non-employee workers in an effort to augment their permanent workforce.

Yet managing a contingent workforce is a complex and highly-strategic business process. When managed incorrectly, new challenges and risks can seep into a business and have serious implications on a company’s bottom line.

A highly-strategic contingent workforce program is essential when it comes to mitigating those risks.

To help your business do just that, this blog will take a look at some of the risks that come with a contingent workforce and how your business can minimize those risks through both better internal management and third-party outsourcing.

What are the risks associated with the contingent workforce?

As we mentioned, managing a contingent workforce is complex. It requires innovative tools (such as a Vendor Management System), expertise in the contingent category, and enough dedicated resources to manage both contingent workers and the staffing agencies used to source them.

A contingent workforce program comes with thousands of data points, hundreds of non-employee workers and the management of staffing vendors.

With that comes two primary risks for your business. 

Firstly, is the risk of losing control

When your contingent workforce isn’t managed correctly, risk seeps into the entire program. Your company loses visibility and control over the entire program, and that results in high costs, low workforce quality, poor vendor choices, process inefficiencies and so much more.

This not only has an impact on the performance of your contingent workforce program, it also has a significant impact on the profitability of your business. 

Compliance risk management includes areas such as contractual adherence, insurance maintenance, adherence to health and safety requirements, adherence to company policies and many more.

Secondly, is the risk of worker misclassification

The next risk is the possibility of falling foul of compliance laws. The misclassification of contingent workers occurs when a business incorrectly identifies the relationship between their business and the non-permanent worker - this could involve misclassification, alleged wilful misclassification or co-employment.

This can result in hefty fines, lawsuits and penalties. 

How to mitigate contingent workforce risks

✔️ Utilize technology in your contingent workforce program

When it comes to contingent workforce management, so many companies are still using manual spreadsheets. This results in fragmented processes and inaccurate data recording across a company’s hiring managers.

Instead, businesses should implement a vendor management system. A VMS is a software platform that enables businesses to manage and procure staffing vendors, as well as manage all of the data and information that supports their contingent workforce.

This means you can standardize rates and processes across your entire organization, as well as track contingent workforce compliance across hiring managers and staffing vendors.

✔️ Work with a third-party with expertise in the contingent category 

To successfully manage the contingent workforce businesses require a strategic-management program, expertise in the contingent category, VMS technology and dedicated resources. For some companies, this simply isn’t feasible. 

For organizations that can’t manage all, or some, of their contingent workforce internally, outsourcing to a Managed Services Provider (MSP) is a great option. 

In an MSP arrangement, the outsourced expert will be responsible for the entire contingent workforce program - from setting up the program, engaging with vendors, hiring externally-sourced workers, billing and so much more.

✔️ Standardize processes across all hiring managers

When your contingent workforce processes are fragmented within your own organization, your company will suffer from hidden risks, a lack of visibility and control over your contingent workforce, and rogue costs that directly impact your ability to improve candidate quality and save money.

By mandating contingent workforce processes across your entire organization, you’ll be able to standardize actions such as from which staffing agencies hiring managers source contingent workers and how much they pay those vendors. This reduces the risk of rogue spend and poor workforce quality. 

 ✔️ Ensure all contingent workers are documented correctly 

As we’ve mentioned, the contingent workforce comes with a range of compliance risks and falling foul of those can lead to unforgiving fines, penalties and damages for an employer. When managed incorrectly, risk is almost inevitable. 

Whether done internally or outsourced to an MSP, it’s important to mitigate this risk by properly documenting all externally-sourced workers. This will help ensure your business complies with both local and national employment regulations. 

Interested in learning more about contingent workforce program risk and how to mitigate it? Contact us today. The Contrax team would love to answer any questions that you may have. 

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