According to Staffing Industry Analysts (SIA), businesses spent $4.4 trillion on contingent labor in 2020. Over 61% of those services were provided by independent contractors. Such contingent workforce trends are a reflection of the contingent workforce’s growing importance in the business world. Employing contingent workers helps businesses quickly fill gaps in their staffing, get specific projects done, and cover for employees who are on leave.
Although contingent workers bring many benefits to businesses, they also introduce new challenges for an organization. Without proper management of the contingent workforce, businesses may find themselves facing higher costs, compliance risks, and even reputational damage.
Potential problems caused by the mismanagement of contingent labor
A contingent workforce consists of workers who are not permanent employees of a company but are hired to work for a specific period of time. They can be sourced from a staffing agency, online platforms, or independent contractors. Some common problems that arise from the mismanagement of contingent labor or the absence of a total workforce management strategy include:
Increased costs
When contingent workers are not managed properly, businesses can end up spending more money than necessary. For example, if a company does not have a process in place for vetting contractors, they may end up working with someone who charges higher rates than other providers.
Compliance risks
There are a number of compliance risks associated with the contingent workforce. For example, if a company does not have accurate records of the hours worked by its contractors, it may run into problems with labor laws. Additionally, if a company does not conduct background checks on its contractors, it may be opening itself up to potential legal liabilities.
Reputational damage
In today’s social media age, one bad review from a disgruntled contractor can do a lot of damage to a company’s reputation. If a company is not careful about managing its contingent workforce, it may find itself the subject of negative press. An example of this happening today is Amazon’s recent problems with its contractor workforce. Amazon has been criticized for the way it treats its contractors, with some workers saying they are treated like “second-class citizens.”
Best practices for effective contingent workforce management
Your contingent workforce program should be guided by a clear strategy that is aligned with your business goals. When developing your strategy, there are a few best practices you should keep in mind:
1. Define the purpose of using a contingent worker
The first step in managing your contingent workforce is to define the purpose of using them. By defining the purpose of hiring contingent workers, you avoid the common pitfall of using them for tasks that could be performed by full-time employees. You also set the stage for developing clear criteria for selecting temporary workers.
2. Develop criteria for selecting contingent workers
Once you have defined the purpose of using contract workers, you can develop criteria for selecting them. These criteria should be based on the specific needs of your organization and the skills required for the task at hand. When developing criteria for selecting contingent workers, it is important to consider both their technical skills and non-technical skills.
3. Create a vetting process
After you have developed criteria for selecting contingent workers, you need to create a vetting process. This process should be designed to ensure that the workers you select are qualified and meet your organization’s standards. When creating a vetting process, it is important to consider both online and offline screening methods. Some companies opt to use third-party screening services, while others prefer to conduct their own screenings.
4. Develop an onboarding process
Once you have selected your contingent workers, you need to develop an onboarding process. This process should be designed to help the workers acclimate to your organization and get up to speed on the task at hand. When developing an onboarding process, it is important to consider the type of training and support that will be needed.
5. Create a system for tracking hours
One of the most important aspects of managing your contingent workforce is tracking the hours worked by each worker. This is important for two reasons: first, it ensures that you are compliant with labor laws; and second, it helps you budget for future projects. There are a number of different ways to track the hours worked by contingent workers. Some companies opt to use time-tracking software, while others prefer to have their workers submit timesheets on a weekly basis.
6. Implement a performance management system
When it comes to managing contingent workforce performance, look at project-specific outcomes, on-time completion of deliverables, as well as the quality of work delivered. Positive feedback should also be given when work is delivered on time and meets or exceeds expectations.
Being positive and open and transparent in your communication with contingent workers about their performance is key to keeping your contingent workers engaged and addressing any deliverability issues before they become unmanageable.
7. Invest in a vendor management system (VMS)
If you plan to use contingent workers on a regular basis, then investing in a vendor management system (VMS) is a wise decision. A VMS helps you streamline the process of sourcing, selecting, and onboarding contingent workers. It also gives you the ability to track the performance of your contingent workforce and manage them in a centralized location.
A VMS also provides a central repository for all of your organization’s contingent workforce data. This data can be used to improve your organization’s contingent workforce management process and make better decisions about the use of contingent workers.
If you are unfamiliar with what a VMS can do, try out the Onsiter VMS, which is a free-to-use vendor-neutral cloud-based platform that helps organizations manage their contingent workforce. It allows you to post jobs, source candidates, track time and attendance, manage performance, and much more.
Summary
Contingent workforce management is a critical process for any organization that uses contingent workers. By following the best practices outlined in this article, you can ensure that your organization is able to identify, select, onboard, and manage its contingent workforce effectively.
Keep in mind that the world of work is constantly changing, and your organization’s needs will change over time as well. As a result, it is important to review and revise your contingent workforce management process on a regular basis to ensure that it is meeting your organization’s needs.
