Contingent Workforce Management Guide

A detailed look at everything you need to know to implement a successful contingent workforce management program, including the successful management of your non-employee workers and staffing vendors.

Everything You Need to Know About the Contingent Workforce

The contingent workforce is an ever-growing resource for organizations that want to fulfill their staffing requirements, yet many organizations are still struggling to implement successful contingent workforce management programs. 

That's because contingent workforce management is complex. It’s not something that can simply be passed over to a company’s HR department and managed on a spreadsheet.

It requires some basic knowledge of the contingent category, an understanding of vendor management and the use of technology to underpin the entire program.

With the above in mind, we have created this page to give you all of the information you need to understand exactly what contingent workers are, why contingent workforce management is complex and what you need to implement a successful contingent workforce management program.

 


What is the contingent workforce?

The contingent workforce is a pool of non-employee workers who are hired by an organization on an on-demand or project-by project basis. These workers are not considered employees of a company. Instead, they work under a contract or on a temporary basis. 

Contingent workforce definition

Unlike permanent employees, contingent workers are only with an organization for the continued existence of the job at hand - whether that be completing a specific project or working for a predetermined period of time. 

Once this short-term engagement is completed, a contingent worker then moves onto a new job with a different organization.

The contingent workforce category is made up of a variety of workers, including independent contractors, freelancers, consultants and temporary workers. However, the contingent workforce can be separated into two main categories; temporary workers (temps) and independent contractors:

Temps

Temporary workers are typically employed through a staffing agency, places within your organization to fill specific staffing requirements you have. They generally work for a business for a predetermined period of time to meet seasonal demands, fill temporary positions or to help companies scale up rapidly.

Independent contractors

The term independent contractor is an umbrella term for different types of workers, such as freelancers, consultants and gig workers. Independent contractors, who are classified as self-employed and not placed within a business by a staffing vendor, are usually hired to work on projects or to perform a defined set of deliverables and deadlines. They are able to work from where and when they want, and are generally experts in the specific field they are working in. 

The management of the contingent category is complex. 

Any department or team manager who oversees a non-employee workforce simply must understand contingent workforce management if they are to optimize their program and realize true ROI for their organization.

Here are some statistics on why organizations must focus on contingent workforce management:

  • When asked to forecast the makeup of their workforce in 2020, 37 percent of survey respondents expected growth in the use of contractors, 33 percent in the use of freelancers and 28 percent in the use of gig workers - yet, despite this growth, only 16 percent said they had an established set of policies and practices to manage a variety of worker types, pointing to an enormous gap in capabilities (Deloitte).
  • Visibility remains an issue for the average contingent workforce program. The average rate of visibility into non-employee workforces has dropped nearly 20 percent since late 2018 (Ardent Partners).

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Your Guide to Understanding the Different Types of Contingent Workers

What’s the Difference Between Contingent Workers and Full-Time Employees?

When building an internal contingent workforce, compliance is crucial. Companies must comply with local regulations and laws, making sure not to misclassify their contingent workers as contingent when lawmakers would see them as employees.

Contingent worker

This can be difficult, because the difference between a contingent worker and a traditional employee isn’t always clear and classification laws vary in each country, state and even city.

There are three important factors that distinguish the difference between contingent workers and employees:

  1. Contingent workers are not on the company payroll.
  2. Unlike employees, contingent workers are only hired either for a defined period of time or for a specific project.
  3. Some contingent workers are not eligible for the same benefits that employees are entitled to, such as vacation time, sick pay, bonuses or retirement plans. However, this can become confusing as it differs depending on the category of worker and the location they are being sourced. T4 or W2 contingent workers sourced via a staffing agency, for example, are entitled to classic employee benefits - although it’s typically the staffing agency who provides these benefits and not the hiring organization.

To ensure you are properly classifying your contingent workers, most jurisdictions will have online tests. Performing these tests for contingent workers can help companies to determine whether a worker falls under the employee or contingent category.

How an Organization Can Benefit From Non-Employee Workers

Utilizing contingent workers can provide organizations with considerable advantages and benefits. There are a few reasons why companies opt to use talent from the contingent workforce, and we’ve listed just a few of the key reasons here.

Contingent workforce benefits

Access to hot skills: Acquiring top talent is more competitive than it has ever been before. Organizations are now contending with their competition to access in-demand talent from a small pool of workers. Using the contingent workers is a great way for organizations to navigate the skills gap and hire hot skills for immediate positions.

Lower workforce costs: To attract full-time employees companies must spend money on benefits and other incentives that help them to attract and retain the top talent. By using contingent workers, however, companies only need to pay non-employee workers for the work they actually do. 

Increased flexibility: The use of contingent workers gives companies the ability to assess company needs on an ongoing basis. Whether an organization needs expertise on a short-term basis or seasonal workers during a peak season, the contingent workforce gives companies the capability to immediately meet their workforce targets.

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How the COVID-19 Pandemic is Impacting the Contingent Workforce

Why Are Staffing Agencies a Significant Aspect of Contingent Workforce Management?

As the hiring of contingent workers increases, so does the requirement for staffing agencies which companies use to improve how they source and engage temporary workers. 

Staffing agency contingent workforce

A staffing agency works on behalf of companies, and job seekers, to match talented temporary workers to the skills and experience required for a specific position. Staffing agencies are usually specialized to specific industries, geographic areas or job categories,

Typically, temp workers are employees of staffing agencies. That means they are paid directly by the agency and not by the organization. Instead, the organization pays the agency a “markup”, which is a payment to the agency for its services on top of the wages it pays the staff members. 

Partnering with a staffing agency is about choosing the right vendor who can place the correct non-employee workers, in the right company positions at the right time and price point. For most companies, staffing agencies will be an important component of their contingent workforce management program.

When choosing a staffing agency to work with, keep the below questions in mind:

  • Is the staffing agency experienced in your industry?
  • What costs are included in their bill rate?
  • How will the staffing agency help your company meet its specific staffing needs?
  • Does the vendor have good response times to your queries?

Read more…

How to Choose a Staffing Agency for Your Company’s Unique Requirements

5 Reasons to Use Staffing Agencies, and How to Manage Them Effectively

Why Contingent Workforce Management is Complex

Managing a contingent workforce is complex. It needs to be a company-wide initiative, in which hiring managers are all using the same vendors, at the same rates and sourcing the right non-employee workers that truly help your business to grow.

Conexis_Contingent_pillar_page5

This isn’t an easy program to implement, and many companies are left with issues such as:

  • Different hiring managers across the business are paying inconsistent rates.
  • No visibility into their program, largely due to no centralized management method.
  • Fragmented processes across the entire organization, that lead to wasted time and human error.
  • No way to track the performance of vendors.
  • Hidden costs and rogue spend that is going undetected throughout the contingent workforce program.

For an organization to build a successful contingent workforce management program, they must be able to increase visibility into their program. That means using technology to manage both non-employee workers and the staffing agencies they use to source them. 

Our next section will explain more about how a vendor management system (VMS) will significantly improve contingent workforce management. 

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What is Rogue Spend in Non-Employee Workforce Management?

How to Gain Visibility and Transparency Into Your Non-Employee Workforce (Part 1)

How to Gain Visibility and Transparency Into Your Non-Employee Workforce (Part 2)

HR or Procurement: Who Should Manage Contingent Workers? (Part 1)

HR or Procurement: Who Should Manage Contingent Workers? (Part 2)

Why You Need a Vendor Management System (VMS) to Successfully Manage Your Contingent Workforce

Despite the above complications, most organizations with smaller contingent workforce spend (anywhere from $1m to $10m) are still using manual spreadsheets, in-house databases or Sharepoint-like websites to manage their contingent workforce.

Vendor management system VMS

This is simply ineffective - and where a vendor management system will help.

A VMS is a cloud or web-based platform that acts as a mechanism for an organization to procure and manage its non-employee workforce. It’s a software platform that supports a company in structuring and optimizing every process related to contingent workforce management. 

By automating every process in contingent workforce management and consolidating all vendors and information into one centralized location, a vendor management system significantly improves how you manage each step in the contingent workforce management process from sourcing, hiring, tracking and invoicing non-employee workers.

This leads to better visibility into your program, significant cost savings, improved process efficiencies, and contingent workforce compliance. 

These technologies were previously only designed for enterprises with incredibly high contingent workforce program spend.

Conexis VMS has changed that. We have developed the very first vendor management system designed to automate and consolidate contingent workforce programs for organizations with smaller non-employee budgets.

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How to Build a Winning Business Case for VMS Implementation

4 Strategies That Will Improve Your Access to Talented Temp Workers

4 KPIs That Will Improve Your Temporary Workforce Management Program

How to Manage Temp Workers and Staffing Agencies in Your Warehouse

About Conexis VMS