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The Growing Need for Contingent Workforce Leaders

July 15, 2022 Leadership
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By Sarah Fister Gale

Contingent labor — also referred to as gig or contract workers — is now a significant and permanent part of the labor market, representing roughly a third of the US workforce. These outside experts have become a vital asset for many companies, especially those struggling to find full-time hires to fill key roles.

Yet, lack of leadership training on how to hire, manage and pay this burgeoning category of talent is putting companies at risk.

“Contingent workforce management should be a core competency for all leaders,” said Jeff Mike, managing director and head of research at Flextrack. “This workforce offers a principal way to access new skills, but it comes with risks.”

Start With the Law

Every state has unique labor laws that govern how contingent workers are classified, what tasks and rules they are exempt from, and how they must be treated and paid. If managers break any of these rules, companies can be sued. Yet in most organizations, contingent labor is still handled as a procurement process with little oversight from HR or senior leadership.

“HR has been slow to get involved with contingent workforce management, which means managers are making all of these decisions alone,” Mike said.

The problem is that the rules regulating contingent labor aren’t always obvious. For example, some states have laws about whether contingent workers get invited to all company meetings and off-site events; whether managers are allowed to provide feedback or performance reviews; and whether workers can be given a company email and access to internal company databases.

“If managers don’t know all the ins and outs of managing contingent labor, it creates risks,” said Mike.

It also creates a black market labor environment, where managers bring on contingent workers based on word-of-mouth recommendations and negotiate their pay and contracts independently, without any formal guidance.

Related Article: Contingent Employees Are a Missed Opportunity for Many Employers

Train Managers on How to Make the Most of Contingent Workers

Many companies use contingent labor as a way to get around budget constraints — spending project dollars on outside experts when they can’t afford a full-time hire. While all of this can streamline access to talent, if managers have no guidelines or training on how to work with contingent talent, they are likely wasting money, lessening productivity and causing the business to miss out on capturing valuable data about how the workforce operates.

“Training on how to use contingent labor can be woefully inadequate,” said Eric Osterhout, contingent workforce management expert with Enbridge, the oil and gas company. He argued that if companies expect contingent workers to be a permanent part of their labor force, they have to train managers on the legal, financial and cultural implication of using these workers.

To avoid inadvertent compliance risks, he urges HR leaders to define specific policies for how contingent labor is hired and managed — customized for every geography — and require all managers who want to use these workers to complete a training course on the laws and internal best practices governing their use.

Related Article: The Greatest Risk and the Greatest Asset: People

Make Contingent Labor a Permanent Part of Workforce Strategy

Managers often turn to contingent labor as a last-minute move when they find themselves short-staffed or unable to fill a full-time role. This panic-buying approach can result in overpaying and picking candidates based on immediate availability instead of more relevant qualifications.

To prevent this, managers need proactive guidance on when to use contingent labor and how to plan ahead. This should include assessing the availability of talent in the current labor market before deciding to fill an open spot with a full-time hire and determining whether the skill in demand is a core competency or a temporary need.

Setting basic guidelines for when contingent labor is the better choice and establishing clear processes for where to find them and what to pay helps companies get the most value from these workers, Osterhout said.

“That way you can bring in known talent without sacrificing quality and cost,” he said.

Related Article: How Gig and Freelance Workers Can Support Your Workforce Strategy

Create Contingent Leaders

Some managers tend to treat contingent workers as second-class citizens, not worthy of guidance or effort because they're not really part of the company or won’t be around for long. This attitude can trickle down to full-time hires, who may come to resent or ignore their contingent coworkers. Unfortunately, this type of culture often drives down productivity and increases attrition among both groups.

To prevent an "us vs. them" culture emerging in the workforce, managers need training on how to meld these workers, in compliance with regulation, into the team and provide appropriate guidance so all can succeed, Osterhout said.

“Our philosophy is to focus on the work and the tasks, not the job type,” he said. When teams are jointly task-focused, it creates a more unified workplace experience.

Related Article: What It Means to Be a Human Leader, and Why It's Important Today

Keep Track of Your Favorites

Contingent labor may be temporary, but if you find workers who do a great job, spread the word, Osterhout said. His company keeps a talent pool to keep track of past workers, referrals and short-list candidates who weren’t hired full time but remain open to gig work in the future.

“If someone in the talent pool fits a need, we can submit them to that manager,” he said. It fast-tracks selection and ensures the company is working with great people.

“The biggest benefit of contingent labor isn’t cost savings, it is quick deployment of the best talent," Osterhout added. "They get up to speed faster, and they do better in the role.”

Using contingent labor comes with some risks, but it doesn’t mean companies shouldn’t use them.

“These workers are a part of the global talent system, and they are helping to fuel innovation,” Mike said.

Providing managers with training and establishing clear policies for using contingent labor will help mitigate risks and make these workers an integral part of workforce management strategy.

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