What is Contingent Workforce Management

Contingent Workforce Management

Now, more than ever, people prefer more flexible forms of employment as opposed to the traditional workforce model. The concept of the contingent workforce is one that has become increasingly popular – especially over the last decade. A contingent workforce is one that is made up of freelancers, independent contractors, and consultants who are hired for either a specific amount of time or on a project-by-project basis. There are no illusions that these workers will stay with a company on a permanent basis – instead, the opposite is true. They are temporary positions that can pay well and are important, creating a mutually beneficial situation for all parties involved.

What Is Contingent Workforce Management?

A contingent workforce is one that can certainly bring advantages to any organization – but the management of the contingent workforce is equally important. With the right approach and long-term strategy, companies can enjoy all the benefits of this process with as few potential downsides as possible.

There are many elements that make up the contingent workforce management process. Simply put, contingent workforce management is the hiring and managing of temporary employees. Organizations will typically pair a managed service provider (MSP) with a vendor management system (VMS) to manage their contingent workforce process. The MSP works with each of the client’s vendors to ensure all open positions are properly recruited for, and the MSP works with the client to ensure management of the contingent workforce is done compliantly.

Why Is Contingent Workforce Management Important To A Business?

More often than not, contingent workers are brought into a business via MSP oversight assisting  third-party agencies or suppliers. In this situation, the supplier would be the worker’s employer of record. The employee does not technically work for the business in question – they work for the agency and have simply been assigned to a specific job for a specific period of time.

All of this also helps to underline the idea, and the importance, of contingent workforce management. These types of workers play an invaluable role in the narrative of any business, but they still require a steady hand in terms of management to ensure that everything flows as smoothly as possible. Contingent workforce management helps to keep permanent employees separate from temporary employees, thus allowing workers to fill the exact position that is required of them at precisely the right time.

When it comes to the effective management of a contingent workforce, there are a number of important things to keep in mind. Foremost, a contingent workforce can quickly assist a business scale as it continues to grow and evolve – or better position the business to account for seasonal fluctuations that are inherent in certain industries. With a permanent workforce, it’s harder to respond to market fluctuations quickly. If you don’t have a certain degree of foresight, you’ll end up at a disadvantage more often than not.

Of course, none of this is to say that effective contingent workforce management isn’t without its fair share of challenges. Yes, employers are able to effectively scale their workforce up or down as an ever-changing situation dictates it. But at the same time, human resources teams aren’t just managing the employees themselves – they’re also managing a relationship with the company who supplied those employees as well. Therefore, things become challenging in that the client doesn’t necessarily have the same level of oversight that it normally would.

Contingent workforce management can be made easier with the following a few key best practices. Finding the right partner for contingent workforce procurement can mitigate challenges that arise when managing your contingent workforce. The right partner will understand what the client is trying to accomplish, and is every bit as invested in its own success as they are.

From a technology perspective, a vendor management system is highly – one that allows organizational leadership to effectively manage the various sources that these contingent employees are coming from. With a strong vendor management system, the client can easily administer, manage, and locate their contingent workforce.

Lastly, the help of a managed services provider (MSP) will also be recommended to bring these contingent workers together with the more permanent workforce, allowing them both to become something stronger as a collective than they ultimately would have been able to achieve on their own. That will in turn help not only the employees, but the business itself.

Workforce Marketplace Projections And Impacts To A Contingent Workforce Program

At times, there will be a surplus of workers who can offer their skills and services on a temporary basis. These workers, known as the contingent workforce, may have more room to negotiate their contracts with employers who need them. However, employers may also use contingent workforce management systems to find and hire the best workers for their projects. This could make the market more competitive for both workers and employers.

In addition to the ever-shifting supply and demand, we’re likely to see certain trends start to play out based on projections in the industry:

  • Adaptable services: Workforce programs may start to expand to meet the needs of quickly scaling companies. It will make for a more competitive environment.
  • Risk mitigation: Compliance violations can quickly derail a company’s relationships with its clients, not to mention the company itself. Because hiring contingent workers can be tricky, workforce programs will need to spend more time on their risk mitigation strategies to protect everyone involved.
  • Better performance: Contingent workers may not need very much training, but it will take at least a little time to get up and running in their role. You should start to see workforce programs building a stronger culture of teamwork as a way to reduce friction during every step of the process.

For anyone looking to either hire in the future or continue relying on contingent workers to fill the gaps, it’s likely to be a hospitable environment for at least the rest of the year and into 2024.

Why Recent Events Made Contingent Workforce Programs More Prevalent

Events like COVID shifted people’s mindsets in ways that the world could have never predicted. The rules of the game, which included everything from commuting to set hours, became far murkier. And while it’s true that these changes were happening before they started making headlines, the pace at which it happened was unprecedented. It left employers wondering how they could manage a workforce that had very different expectations and priorities.

The solution turned out to be contingent workers for many employers. These professionals may have sacrificed some degree of security, but they were willing to do so in exchange for more freedom. Plus, they were able to step in when they were needed and then exit based on the project they were working on. Given the fluctuations of the economy, this also helped employers manage staff without having to go through the rigamarole of endless rotations and contracts.

Contingent workers are nothing new, even if the workforce programs have ramped up in terms of scale and scope. In the past, a conglomeration might have hired seasonal workers during the holidays or outsourced the work to a vendor. Today, companies of nearly every size may find themselves needing the expertise of a specialist on a fixed timeline. It’s a phenomenon that we’re likely to see more across industries, and it can be directly traced back to how the government, citizens, and employers responded to an economy that was forced to pivot on a dime.

How A Contingent Workforce Program Can Align To Hr Cycles

The most efficient workforce programs will be aligned with the cycles of HR. Here are a few things to focus on if you’re trying to streamline different groups:

  • Details: The most efficient contingent worker programs are ones that can identify not just who is needed but where and when they’ll be required. Once this is all determined, it can be checked side-by-side against the performance management, hiring, and offboarding cycles of HR.
  • Policies: Ideally, your contingent workers will be treated the same as permanent employees, even if there are a few key differences. It helps foster camaraderie and build a sense of loyalty, even for contractors who will eventually leave the organization.
  • Automation: Automation makes it possible to smooth out any wrinkles in onboarding, performance tracking, and payment schedules. It can translate to far fewer hassles and confusion, which can make for an easier experience all around.
  • Suppliers: The right workforce suppliers will be able to take a lot of the responsibility off of HR’s plate, which can make for a much more organized process. There should be less confusion as to who is responsible for what, making it easier for contingent workers to jump into the role and get to work.

Every organization will have its own HR policies to contend with, but it’s critical for every company to reconcile one workforce with the other. It’s the only way to keep teams working together during tough projects.

How Much Can An Industry Save With A Contingent Workforce?

A contingent workforce can save an industry a significant amount of money, though it’s clear that these figures are heavily dependent on the sector and the timing of the estimations. Some estimates put it at an average of 15% of labor costs, while others put the estimates as high as 30%.

It’s easy to see how costs can rack up for the hiring of one worker. From the benefit package to an HR manager’s time to the training, there are numerous factors that go into the onboarding of hiring an employee. Should that employee quit in a few months, this can make for a major financial loss. Some companies have built turnover into their budget, but they shouldn’t necessarily have to. A contingent workforce can remove a lot of these costs right from the word go. Not only will you cut back on the amount of training that you have to do for each worker, but you can standardize the contract so there’s far less work involved on either side of the table. Plus, you have a firm end date for the worker, so everyone can plan ahead.

Benefits Of Contingent Workforce Management

In order to understand the finer points of a contingent workforce, we must first come to a better understanding of what it is acting as a viable alternative to. In the vast majority of situations, a business will hire all of its employees as part of an in-house workforce. Those employees officially work for the business itself. They are paid some type of yearly salary or, in the case of some positions, an hourly wage. This results in a mutual understanding between both the employee and the employer that the worker will hold the position for a significant amount of time. In addition to the terms of employment, workers who fall under this category also receive the option for additional benefits such as healthcare, paid time off, and retirement benefits.

A contingent workforce comes with numerous advantages for the employee and the employer. These benefits include increased flexibility, fewer costs, and access to high-quality, in-demand talent. Organizations can fluctuate their contract labor numbers depending on their business demands, resulting in fewer layoffs, lower costs, and worker flexibility.

  • Increased flexibility
  1. A contingent workforce can provide organizations with the flexibility it needs to rapidly scale up or down depending on business needs without delays associated with full-time employees.
  • Cost-effective
  1. Although contract workers often have higher salaries than full-time employees, organizations do not have to pay the contingent workforce medical benefits, vacation time, or sick pay.
  • Training
  1. Organizations save time and money with a contingent workforce. Contract workers are highly specialized – they do not require a significant amount of training.

Challenges Of Contingent Workforce Management

Although a contingent workforce provides an organization with an abundance of advantages, contingent workforce management also comes with its fair share of disadvantages. Some of these challenges may include difficulty with compliance, job security, training restrictions, and communication barriers.

  • Non-compliance
  1. Contingent workforces often include a network of vendors – this makes compliance more difficult with a contingent workforce.
  • Job security
  1. Contingent workers have limited job security due to being hired based on business demands. This may result in contingent workers being less committed to the organization.
  • Training restrictions
  1. Contingent workers may not have access to corporate training resources that are available to full-time employees.
  • Lack of understanding the arrangement
  1. The end date of the contingent worker’s contract is not always set in stone. Because of this, contractors may feel led on once their contract has come to an end.

Monument Consulting Can Help

Founded in 2003, Monument Consulting is built on a commitment to our clients and our shared values. Through our genuine passion for delivery, relentless pursuit of perfection, and bold decision making, we are creating a more agile contingent workforce so businesses can dream bigger and achieve more. Our expertise is proven, and we’ve worked with a suite of Fortune 500 companies to help implement innovation that lasts. Our agile model allows us to pick the best tool(s) based on the flows and features that will truly meet our client’s needs and bring them the best outcomes.

If you’re looking for a partner who’s ready to help, contact us.