Organisations are increasingly relying on contingent workers to fill talent gaps and support their business growth. Fuelled partly by the pandemic, the gig economy has seen a huge increase in recent years, as workers look for more flexibility or perform “side hustles” to boost their income.
A contingent workforce can bring plenty of benefits to a company – but it’s also a complex employer responsibility that requires careful management. What is a contingent workforce, and what are the best practices in contingent labour management?
What is contingent workforce management?
Contingent workforce management is managing non-permanent workers who are hired for a fixed time period, or a particular project. This includes temporary workers, independent contractors, gig workers and SOW (Statement of Work) consultants. Managing contingent workers requires a separate approach to how permanent employees are managed.
The definition of a contingent workforce varies from market to market, and is often synonymous with the gig economy. In the US, the term contingent workforce can also include business owners with no full-time employees, and consulting firm employees who are on a consulting engagement with a client.
A contingent workforce allows organisations to bring in talent quickly, from hiring specialist IT workers on a fixed contract, to using a consultant to oversee a project. Contingent teams also allow managers to address situations that require immediate attention, but don’t present long-term attention. Successfully managing a contingent workforce can help create an agile company, reduce staff costs, boost productivity, and drive business growth.
How to successfully build contingent teams
When it comes to hiring contingent workers, employers can recruit directly, or use an agency. A specialist employment agency with a wide network of contract workers can be a faster approach. For example, it can help build a whole team, like a finance or IT team, or fill critical skill gaps with independent analysts or consultants.
It can also handle admin like checking visas and drawing up contracts, and taking care of compliance. One benefit of using a contingent workforce is that if someone leaves their position can be filled quickly, while if a project overruns, a consultant’s temporary contract can be extended. Flexibility is one of the main benefits of contingent work for all involved, so it’s important to keep that in mind as you build out the team. To be truly effective, it should be able to work on different projects, or even teach and guide the permanent workforce. It should also understand the organisation’s vision and goals.
While a contingent employee may only work for a business on a short-term basis, they should not be forgotten by HR or their line manager. Giving regular feedback can improve their work – in the same way it can for a permanent employee – and taking the time to build a relationship with them can motivate and engage them. This can create happier and more productive contingent teams.
How to manage a contingent workforce
Don’t be tempted to manage contingent workers in the same way as permanent workers. There are some big differences between the two types, as well as more subtle nuances. For example, many contingent workers see themselves as entrepreneurs and contractors – they value their independence, and don’t want to be treated like traditional employees.
Managing a contingent workforce needs to take into account issues around payroll, tax and employment laws. Expertly handling these matters reduces risk and ensures the contingency workforce is cost-efficient.
There are other issues to be aware of, such as diversity and inclusion, and how contingent staff can become part of the company culture. The best contingent workers are in demand and can be sourced quicker than ever thanks to the rise of freelance platforms. Taking the time to consider how to value and motivate contingent workers could hold the key to attracting and retaining them – and re-hiring them in future.
How to create a contingent workforce management plan
Creating a contingent workforce management plan can be done in-house, or outsourced to a separate company. If it is being managed in-house, HR and procurement should work together to create a “total workforce management system”. This produces greater visibility of the total workforce – both permanent and contingent. Once this is in place, the two departments can work towards a shared goal of filling skill gaps with high-quality workers in the most cost-effective way.
They can also create a separate management strategy for contingent workers already at the company, covering things like payroll, tax and job performance. However, given the complexity of managing a contingent workforce, outsourcing part or all of it could be a sensible solution.
One contingent workforce management solution is to use a vendor management system (VMS). This keeps workforce data in a central, digital location, giving employers visibility across their entire contingent workforce. The data can be used to spot cost savings, inform management plans and enforce compliance.
A VMS is a helpful software solution, but note that it’s only as good as the data that gets fed into it – and it does require management internally or through another management solution. This could be a managed service provider, which manages all or part of contingent workforce recruitment, including the VMS.
Contingent workforce management best practices
While a contingent workforce brings many advantages, it can also introduce problems if best practices aren’t followed. Here are our top tips:
- Check and keep up to date with government rules, ensuring you’re always aware of how they differ between contingent and traditional employees.
- Keep contingent workforce management plans centralised in one place, to prevent inconsistent hiring, and allow for seamless administration over functions like payment and performance.
- Leverage your contingent workforce to achieve more strategic returns, rather than using them solely for task-based assignments. Remember their work will be better when they understand your business objectives, and that if properly managed their expertise can be institutionally embedded for long-term gain.
- Read about how Save the Children harnessed the power of contractors in project teams to deliver a vital finance transformation project here
- Read about how John Laing used a team of business analyst contractors to help integrate finance, procurement and project systems into one streamlined application here
As the gig economy continues to grow, it’s vital businesses have effective contingent workforce programs in place. This will ensure they can build teams that are agile and fit for the future – while driving savings and efficiencies, and mitigating risk.
Find out how SystemsAccountants can give you the agility to fill critical skill gaps with high calibre, independent consultants here!