How to manage contingent workers

There’s no doubt that the pandemic has fast-tracked the growing reliance on contingent and contract workers. Employers have now fully recognised that a workforce which is better balanced between full time employees and other more fluid working arrangements can be hugely valuable. That’s not to say this appreciation of the gig economy and the contingent workforce didn’t exist prior to the pandemic, though. 

Before Covid-19 changed the world of work, Deloitte’s Global Human Capital Trends report revealed that only 42% of the 11,000 experts surveyed reported that their business was primarily made up of permanent employees. Half were using a significant number of contracted workers and 23% were using a large number of freelancers. And a further 13% were using a significant amount of gig workers. 

In today’s new – or should we say ‘better’ – normal, this will certainly have shifted further in favour of a more fluid workforce. But while this is great news for those that recognise how valuable this segment of the talent pool is to a business, the challenge now is how to manage contingent workers. 

Here are a few of our top tips.

Know the differences

Independent contractors:

• A self-employed individual delivering services to a client under a contract for services for a pre-defined price & timeframe (country / regional differences will see them referred to as a Limited Company Contractor, Personal Services Company Contractor, Sole Trader, Freelancer or 1099)
• The individuals are not personally subject to supervision, direction or control by the end client, and the client has the right to control or direct only the result of the work (the ends); not what will be done & how it will be done (the means)
• Independent contractors are typically skilled consultants sourced to provide specific skills and experience or provide project support.

Gig workers:

• A gig worker can be any type of worker (freelancer, consultant, temporary employee, etc.).  Gig workers enter into formal agreements with on-demand companies to provide services to the company's clients via a “gig” portal versus through an approved vendor.  Gig is not a classification of worker such as the above, but rather focuses on how the worker was sourced.

Statement of Work (SoW): 

• A SOW engagement is where a client engages a third-party professional services company (for example, consulting, tax, clinical or legal services) to deliver services or perform a specific scope of work, typically for a predefined price & timeframe.
• These agreements are usually billed based on a fixed price deliverable or for reaching specific milestones, which are agreed prior to the commencement of the project.
• The individuals delivering services under an SOW, may be employed by a services company or directly via their Limited Company.

Agency contract labour:

• This is an individual who is employed & compensated by a third-party temporary agency to perform work for a fixed duration (based on country legislation, referred to as PAYE, W2 or employed temps) and generally billed to clients on an hourly basis
• These resources are typically used to cover permanent roles for a client (such as sick leave, maternity, holiday, peak periods); dependent upon country specific legislation, they may be paid benefits (such as holidays, shifts, pension, sick leave, bonuses)

Temporary staff:

• Also usually sourced, managed and paid by a third-party recruiter. These individuals tend to be paid on an hourly basis.

The challenges of contingent workforce management

While there’s certainly a recognition that the contingent workforce can provide access to highly valuable skills, managing this labour group does come with several challenges. If we take the descriptions above, there are a variety of suppliers that will be used to source and pay your contingent labour, so it is common to see a disjointed approach to management with such differing work arrangements. 

Gaining sight of all the required information on the fluid workforce is also difficult, with data being stored in varying degrees of detail, across multiple locations. Then of course there’s compliance concerns – is everyone being employed and operating compliantly and who is responsible for overseeing this? 

For HR teams, this can be a real drain on time for a function that is already over-stretched in many cases. 

Best practice when managing a contingent workforce – our advice

• Transparency is key: The more accurate information you have on your fluid workforce, the more strategic you can be in managing them. It’s crucial that you have complete transparency of all of the skills your business has available – no matter how they are employed or how long their contract will last. 
• Don’t operate in siloes: there has long been a challenge of HR and procurement working in silos when it comes to managing the non-permanent workforce. This has led to an overlap of resources and can impact efficiencies. You don’t want potential talent – no matter what section of the labour talent pool they are categorized under – to slip through the net. So, working together really is crucial. 
• Use technology appropriately: Managing the contingent workforce means controlling a wealth of widely distributed data. Having a centralized source to log information and give you clear visibility will streamline your contingent workforce management solutions. Using a cloud-based Vendor Management System (VMS) will act as that central hub of information. 

Use the experts around you

While the above tips will better help HR teams manage their contingent workforce internally, it is important to add that there are experts out there who can manage and control this on your behalf. Arguably, the easiest way to manage your external and non-permanent workers is to use a Managed Service Provider (MSP). 

As we mentioned in our earlier blog, an MSP has to have a VMS or similar technology in place. As a result, a Managed Service Provider can give you access to the tech you need, without the headache of trawling through the variety of tools on the market to find the one that works for you.

Beyond the technology, an MSP can add much more value to your business when it comes to managing your contingent workforce. They can shoulder the burden of compliance checking, supplier visibility, vendor rate standardisation, supplier management, control of the candidate experience and much more. 

So, what are you waiting for? Contact the team today to find out how they can better manage your contingent workforce.