SOW Management & Contingent Labor

Worker classification has been tricky for companies since the dawn of regulations. Considering today’s stringent contract requirements and benefit stipulations, the stakes have only gotten higher. With better SOW management, you can reduce your risk while improving your communication with all members of your team. Here, we look at how SOWs are different from temp workers and why you might need some external help to effectively manage your labor.

Understanding SOWs


Statement of Work (SOW) sets the terms for an outsourced engagement. It lists not just the scope of the work and the timeline, but also the milestones the worker is expected to complete and the payment for approved work.

A more detailed and transparent SOW can mitigate everything from confusion to overspending. This transparency in detail gives you the insight to make more data-driven decisions, and it typically makes for faster and higher quality deliverables. When you have all of your ducks in a row, it takes much less time for everyone to get up to speed.

Temporary Workers vs SOW Contingent Labor


The main difference between temp workers and SOW staffing is the sourcing method. With a temp worker, you’re likely to go through a staffing agency during times of peak production or on a new project. With an SOW , you might go through an independent entity (e.g., a sole proprietor), but you might also go through a consulting or specialty outsourcing firm.

Whereas a temp worker may come into the organization, work a certain number of hours, and get paid a set hourly rate; an SOW worker is typically driven by milestones as opposed to punching a clock. They’ll have all the details upfront, which means they usually have increased motivation to deliver on time and at, or under, budget. When deciding to select temp workers or initiate a SOW, it’s important to have firm guardrails in place to help hiring managers determine if what they are hiring for is a SOW or a temp worker. 


Managing SOWs Effectively: Strategies and Insights


Some considerations to ensure you are managing SOWs effectively:

  • Proper classification: It’s easy (and relatively common) for people to misclassify workers. For example, you might pay a temp worker at an independent contract rate, which can balloon your costs considerably. You can’t always rely on department heads or managers to catch this mistake either — they’re often more concerned that they’re meeting their own deadlines.
  • Legal implications: Every class of workers has rights, regardless of how long they work with you or for you. Should you violate any of these rights, they would have sufficient reason to sue for the missed benefits. Plus, if you make one mistake, the IRS is more likely to target you for your hiring practices, which can end up being a headache of clarifications, if nothing else.
  • Follow-up: It’s important to follow up with your contingent workers, regardless of how they’re classified. This doesn’t necessarily mean micro-managing them, but it will mean tracking everything from their costs to their time to their deliverables. So, if you believe that you paid an SOW worker too much based on the scope of work, you have more insight into whether it would be cheaper to hire an hourly temp worker the next time around.

Budget Management


Managing your budget can feel like a full-time job, whether you’re using SOW staffing or temp workers, especially if you have plenty of one-off projects to go around over the course of the year. You can easily end up onboarding an SOW worker with one stack of tasks only to pivot several times, extend the contract, or otherwise ask for additional work. This is normal, but it can send your budget spinning out of control.

The best way to manage your budget is to collect and analyze as much information as possible in order to write an accurate SOW from the jump. Only when you can see the bigger picture can you validate that the SOW you are crafting will hit the mark. For example, if you have a deliverable based project that you are writing a SOW for, it’s critical to consider your deliverables down to a level that will help to ensure there is clarity in how the top line milestone is to be met. This will help decrease the odds that a change order and more budget will be required down the road. 

SOW Management and MSP/VMS


There are ways to better manage your SOWs when you work with a Managed Service Provider (MSP) and a Vendor Management System (VMS). By combining the powers of a MSP and VMS, you get expert advice and help manage your contingent workforce, increased controls, and increased visibility of your contingent workforce program.

The MSP will look at the overall efficiency of your program, and perform the proper maintenance to optimize the program’s performance. The VMS will help ensure the process is repeatable, such as onboarding, timekeeping, offboarding, and invoicing. 

If you choose an MSP like Monument, you can use their network to choose a VMS that is as professional as they are capable. Unlike a run-of-the-mill staffing agency, you can take more specific requests to your MSP and get customized answers for your business. The advantage of working with the same partner year after year is that you can grow at nearly any pace without having to worry about wasting your resources as you go from one rung to the next.

Decision-makers don’t always have the time or the help to manage a contingent labor force, and this is true for small businesses and conglomerates alike. If you feel like you could use some help in cutting costs, reducing liability, or improving your workflows, contact Monument Consulting today to discuss.