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Best practices for how to manage a contingent workforce

Jun 22, 2020


Contingent workforce management is a complex employer responsibility that requires organizations to design, plan and implement a program that aligns their contingent workforce strategy with their overall workforce strategy in order to reach business objectives.

For many organizations across the globe, this means augmenting traditional employment models with a more flexible and responsive one: A contingent workforce. 

And while the contingent workforce brings many benefits, it can also introduce more problems and risk into the organization if the program is  not managed correctly.

If you're interesting in learning about operating a contingent workforce and the best practices involved in ensuring a successful and effective program, the following information below will help guide an informed decision.

Yes, there are risks involved in operating a contingent workforce

Employers will see an increase of organizational complexity as they emerge from the response stage of the crisis. A flexible employment model is, by nature, highly complex and will cause management challenges across the organization as employment models shift and evolve.

However, an organization can implement or improve their contingent workforce management efforts, it's important to understand just what exactly the contingent workforce is and the benefits it can offer an organization.

What do you mean by contingent workforce?

The contingent workforce is comprised of outsourced, non-permanent workers that are commonly referred to as Independent Contractors, contract workers, freelancers, gig workers, consultants, temporary workers or remote workers. They are engaged by an organization on a short-term, long term or on a project-by-project basis.

When a contingent worker's contract is at its end or the project for which the contingent worker was hired for is complete, the employer has no responsibility to provide continuous work to that worker on a permanent basis – they are not on staff.  

A contingent worker is a highly specialized expert in their field. Typically, they are engaged when an organization has a project or a temporary position that requires a niche skill or a high level of expertise.

A contingent workforce provides organizations with greater workforce management flexibility. However, these workers must be managed by a separate set of employer responsibilities and measured with defined contingent worker KPIs. 

What percentage of the workforce is contingent?

Pre-pandemic, almost half of the United States workforce was comprised of contingent workers. However, a recent Gartner survey revealed that 32 per cent of organizations are replacing full-time employees with a contingent workforce as a cost-saving measure.

Contingent workforce planning is key to successful contingent workforce management!

As more and more organizations are planning to further augment their traditional employment models with contingent workers, it's critical that employers first understand the difference between the management of employees and the management of a contingent workforce.

Contingent workforce management is a complex and often confusing process.

Why mismanagement happens

The management of a successful contingent workforce is complex, and contingent workforce management is often split between Human Resources and Procurement teams.

To add greater complexity to management, HR is concerned with talent opportunities and Procurement cares about cost and compliance, leading organizations to operate their traditional and contingent workforces as separate entities, creating fragmented processes, inconsistent hiring practices and added costs.

Furthermore, while HR will track metrics like engagement and retention and Procurement KPIs will focus on cost and risk, shared goal between the two functions. Most organizations have not embraced breaking down the silos between departments to understand what drives the other and what objectives they must meet. Failing to understand the needs of both departments and connecting priorities creates a lack of working towards their common goal: filling skill gaps with high-quality workers in the most cost effective manner.

Data also suggests that contingent workers aren't being screened using the same assessment factors as full-time employees, and therefore, can lack the soft skills or cultural fit factors that a traditional HR hiring strategy would uncover during the screening and qualifying stage.

So, how do you manage a contingent workforce?

While contingent workforce management can be complex, it doesn't have to be. Organizations that have plans to implement a contingent workforce strategy or improve their current contingent workforce program can do so by leveraging the following tactics in their contingent workforce strategies.

If you're keeping contingent workforce management in-house in its entirety or in part:

Break down silos between HR and Procurement

To achieve a successful and cost-effective workforce, HR and Procurement must foster collaboration and communication to promote the types of cross-functional strategies that create greater visibility, access to data and enhanced control.

While HR will track metrics like engagement and retention and Procurement KPIs will focus on cost and risk, it’s critical for each function to identify and embrace a shared goal. This means breaking down the silos between departments to understand what drives the other and what objectives they must meet. Understanding the needs of both departments and connecting priorities encourages each one to work towards their common goal: filling skill gaps with high-quality workers in the most cost effective manner.

Invest in a Vendor Management System (VMS)

Business leaders admit they lack insight into who works for them. A recent study conducted by Oxford Economics and Fieldglass finds only 40-47 per cent of business executives consider themselves "highly informed" about compliance, contingent workers' responsibilities, tenure, quality of work, headcount and access to facilities.

Similarly, a familiar pattern emerges with procurement professionals - the same study finds just over half of executives surveyed (53 per cent) are "highly informed" about the responsibilities of the service providers, and even less are informed of the duration of work, access to facilities, systems and confidential information, work quality, progress against milestones and/or deliverables, and compliance with licenses and certifications.

A VMS  tool will help employers achieve greater visibility across their entire contingent worker program while earning cost savings, improving program efficiencies and enforcing compliance.

Mandate business-wide processes and procedures

To be successful, a contingent workforce management program should be centralized in one place. A centralized program will prevent inconsistent hiring and management tactics and allows for a seamless administration over functions like payment, compliance and performance.

However, implementing a successful contingent management program doesn't happen by simply informing the separate departments of a change in management functions and hoping for a swift and seamless adoption. To be successful, employers must create a detailed plan that will bring all departments involved into one centralized program.

Get on board with total talent management

Total Workforce Management or Total Talent Management, is an emerging workforce strategy that gives employers the ability to make better data-driven decisions about the type of resource that is most appropriate to fill a role or complete a project. A Total Workforce Management System joins both an organization's traditional employees and contingent workers, breaking the traditional barriers between permanent and non-permanent workers.

A total workforce management strategy will consider all types of workers available to fulfill a business objective. This will involve an in-depth assessment of the requirements and the identification of the appropriate resource - this includes traditional employees, contingent workers and technology.

This type of management bridges the gap between Human Resources, typically tasked with traditional employment engagements, and Procurement, which is typically tasked engaging temporary resources. Together, these department functions can ensure a standardized approach to talent acquisition across the entire organization.

Engage external resources

Managing contingent labour comes with risks and costs. Often, organizations will adopt a unified approach by outsourcing the management either in its entirety or in part to a third party like a staffing agency or a Managed Services Provider (MSP) to identify and manage contingent worker risks.

An external resource like a great staffing partner will support an organization's total talent needs, streamlining its workforce program to elevate quality and drive efficiency across the entire talent lifecycle. A partner with a reliable Vendor Management System (VMS) will also control work costs and manage the risks associated with contingent labor.

Be careful not to treat contingent workers like traditional employees!

Just like their full-time colleagues, contingent workers participate in and help create an organization’s company culture. They bring skills and perspectives that contribute to innovation, knowledge sharing and employer branding. They also represent the brand to clients, customers and partners. 

However, contingent workers must be managed according to their status and not in the same manner as traditional employees.

Stemming from the court ruling established in Dynamex West Inc. v. Superior Court of Los Angeles, the onus is on the company that hires a worker to demonstrate that the worker should be classified as an independent contractor rather than the default classification as the company’s employee.  

Under AB5, the company is forced to prove all three factors of the ABC test have been met. A worker is presumed to be an employee unless the employer can prove that all the following factors are true: 

  1. The worker is free from control and direction in the performance of services.  
  2. The worker is performing work outside the usual course of the business of the hiring company; and 
  3. The worker is customarily engaged in an independently established trade, occupation, or business. 

However, there are exemptions.

If you're interested in engaging temporary talent, or want deeper insights into how to manage the risks posed by your current program, download our free whitepaper: A Checklist for Contingent Worker Risk.


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