Contingent Employees Are a Missed Opportunity for Many Employers
The use of contingent labor has been on the rise, and the economic fallout of the pandemic only exacerbated this trend. Laid-off employees saw gig work and freelance assignments as a way to fill income gaps, and now that companies are reopening many of them don’t want to go back.
That could be good news for business leaders who are willing to reimagine the role this talent pool plays in their business model. Companies that make contingent labor part of the total talent strategy can quickly access hard-to-find skills, manage the ebb and flow in demand, and lower overhead costs related to full-time employees.
“Whether work gets done by full-time talent, part-time workers or contingent labor shouldn’t matter,” said Joe Hanna, chief strategy officer for Workforce Logiq, a contingent workforce management platform. “What matters is that you have the right talent and the right approach to achieve what you are trying to achieve.”
Yet, most companies still treat contingent labor as a crisis management tool. They bring them on after a critical position sits vacant for months or realize that a project is going over deadline and they need to get it done. This approach wastes time and money and creates talent blindspots in the business. Even though contingent workers now make up roughly a third of the workforce, companies have almost no tools to track which talent they are using, how they performed, what they were paid, and where their skills could be effectively deployed for the next project.
Where Is the Workforce Technology?
This is partly the fault of the workforce technology industry, said Tim Sanders, vice president of customer insight at Upwork, a platform for connecting employers with freelance and contingent workers. Venture capitalists have been funding the evolution of full-time workforce management solutions for years. That has led to a mature marketplace of tools that streamline every aspect of the full-time employee experience from recruiting and onboarding, through training, career development and performance management.
Meanwhile, contingent labor is still largely handled by procurement teams who rely on spreadsheets and clunky vendor management systems (VMS) to oversee the acquisition and payment of contingent workers. In most companies, HR has little insight into this substantial segment of labor pool, and that creates a host of costly inefficiencies.
“HR has a seat at the table, but contingent labor management is nowhere nearby,” Sanders said. “It’s a huge disconnect.”
Contingent Workers Are Part of a Total Talent Approach
The pandemic shined a light on this problem, said Dawn McCartney, vice president of the contingent workforce strategies council for Staffing Industry Analysts, a Mountain View, Calif.-based staffing and workforce advisor. “Leaders are starting to realize they don’t know how work is getting done or who is doing it,” she said.
They are also recognizing that making contingent workers part of the total talent approach can help them deal with stiff competition in the labor market, and the challenges of ramping up new projects as they emerge from the pandemic. “We are seeing an increased willingness to consider where and when non-employees should do the work,” McCartney said.
That’s changing the way they think about workforce management. CXC Global’s 2021 Contingent Workforce Trends report found that only 16 percent of companies have a "total talent acquisition" strategy in place today. However, 51 percent of respondents said they will embrace this model in the next two years.
Among the other findings from the CXC report:
- 77% of executives believe freelance and gig workers will substantially replace full-time employees within the next five years.
- 32% of organizations are replacing full-time employees with contingent workers as a cost-saving measure.
- 54% of companies will make contingent workforce part of their strategic planning in the next two years.
- More than 80% of large corporations are planning to substantially increase their use of freelance and contingent workers.
“Business leaders are realizing that acquiring and owning all of your talent is an outdated idea,” Sanders said. “When contingent labor is part of the total talent solution it vastly increases project velocity and gives companies access to a huge talent marketplace.”
When Is a Contingent Worker the Right Solution?
Contingent labor isn’t the solution to every talent problem, however. If the work that needs to be done is core to the business, it probably shouldn’t go to contingent workers, McCartney said.
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When choosing between hiring full-time workers or using contingent labor, companies should consider whether the project will create new corporate knowledge or custom skills that will be of value in the future, and whether that need is long term. “You don’t want that knowledge walking out the door at the end of the project,” she said.
If the work isn’t part of the core business, only meets a short-term need, or if it requires a hard-to-find skill, contingent labor can be the ideal choice. It can also become a funnel for full-time talent, giving companies a way to vet potential employees and build relationships before offering these roles. McCartney noted that some organizations she has spoken with state that as much as 30 percent of new hires come through these assignments.
Who Owns Contingent Labor Management?
Along with being more proactive in the use of this labor, business leaders also need to rethink how they attract and oversee them. In the most successful models, procurement and HR work in partnership, McCartney said.
"Procurement focusing on their key strengths and expertise, such as identifying suppliers, agreements, terms, insurance requirements, supplier management, risk/indemnification, etc., and HR focusing more on the talent and skills is really a win/win," she said.
Legal teams should also be part of these conversations to ensure companies meet all regulations regarding how contingent talent is used, the types of engagements they fulfill and their classifications.
“Different states and countries have different rules, and there can be a lot of scrutiny,” Hanna said.
The Future of Contingent Tech
While the technology landscape for contingent labor is still evolving, companies like Workforce Logiq, Avature and Coupa Contingent Workforce offer solutions for managing contingent talent in the context of total workforce management. Enterprise software companies, including Workday and SAP Successfactors, are also adding contingent labor management tools, giving companies hope that the marketplace will quickly accommodate their need for better insight into this segment of their talent.
Once a company adopts a platform, Sanders encourages them to allow managers to use it to meet their individual team needs, rather than leaving it in the hands of procurement.
“Until you give access to the people who are responsible for the work, you won’t fully benefit from these investments,” he said.