As the workforce landscape continues to evolve, organizations are increasingly relying on contingent workers to fill critical roles. These workers can improve a company’s flexibility, help them manage rising labor costs and augment their permanent employee talent.
In 2021, Staffing Industry Analysts (SIA) estimated that there were 52 million contingent workers in the US, representing 35 percent of all workers and accounting for $1.3 trillion of revenue. The analyst firm also reports that based on early numbers from 2022, temporary staffing continues to increase, an indicator that business spend on contingent workers is also increasing.
While the use of contingent labor can provide numerous benefits, however, it also poses unique risks and challenges. These risks become even more pronounced when a company’s contingent workforce is distributed around the globe.
In this article, we'll examine the top five global contingent workforce management risks and provide actionable solutions to mitigate them.
1 - The Misclassification of Workers
One of the most significant risks associated with managing a contingent workforce is the misclassification of workers. Misclassification occurs when an organization categorizes a worker as an independent contractor rather than an employee. Misclassifying workers can result in significant legal and financial consequences, including back taxes, penalties, and lawsuits.
It takes a lot of work and maintenance to ensure that a global contingent workforce doesn’t fall foul of classification rules. Businesses must understand the regulations in each of the regions in which they manage workers, and implement the appropriate procedures to ensure they comply with them.
The Solution: Develop and implement a clear and consistent worker classification policy that adheres to the guidelines set forth by the IRS and other regulatory bodies. Additionally, consider using a third-party provider to manage the classification process and provide expert guidance, such as a managed service provider (MSP).
2 - Lack of Program Visibility
Contingent workers are often hired on an as-needed basis, with hiring managers not documenting their hires or following standardized procedures set by the business. This leads to lack of visibility and control over the company’s entire contingent workforce.
This lack of visibility and control can make it challenging to standardized hiring practices, mitigate the risk of rogue spend or ensure talent quality. The result is wasted time and money that affects the organization’s bottom line.
The Solution: Implement a vendor management system (VMS) that allows you to centralize your contingent workforce management processes in one place, including worker onboarding, performance tracking, and payment processing. A VMS can provide real-time visibility into your entire contingent workforce and help you identify potential issues before they become significant problems.
3 - A Lack of Resources and Expertise to Implement a Successful Program
There’s no doubt about it, managing a contingent workforce is highly complex. It involves complex processes, large amounts of paperwork, requires expert knowledge of the contingent category and is incredibly time consuming. This becomes even more complex when a company’s contingent workforce is spread out across the globe.
In most cases, businesses simply do not have the internal resources or expertise to implement an effective contingent workforce program.
The Solution: Third-party providers, such as MSPs or Supplier Consolidation services, can help ease the burden of managing your contingent workforce processes, while also providing your business with the required category expertise. These programs typically save you money so engaging them doesnt mean your price increases.
4 - No Data to Underpin the Strategy
A contingent workforce should always be a highly strategic initiative. It should be planned out in a way that ensures your business both saves money and improves the quality of talent hired. To do this, it’s critical that you have the ability to gain insights into how your program is performing.
Businesses should collect the data they need to gain an understanding of how their contingent workforce program is impacting their business, in terms of both spend and workforce quality.
The Solution: A vendor management system will give you the data you need to understand program performance. This will include an oversight of your contingent workforce, as well as metrics and KPIs that allow you to determine whether the staffing agencies you partner with are helping you to meet your workforce objectives.
5 - Talent Scarcity
As the demand for contingent workers continues to grow, organizations are facing increased competition for top talent. Failure to attract and retain high-quality contingent workers can result in reduced productivity, increased costs, and missed opportunities. When this occurs, the success of your contingent workforce program is put into jeopardy.
The Solution: Develop a comprehensive talent management strategy that includes a strong employer brand and competitive compensation packages. If this is a struggle for your contingent workforce program, make sure you are actively positioning your organization as an “employer of choice” for the contingent workforce.
Interested in learning more about how you can successfully maintain a global contingent workforce management program? Book a meeting with the Contrax team of contingent workforce management specialists.