Contingent Workers Management: A Definitive Guide

It’s no secret that as our world has changed and so has our workforce. Technology and evolving values have led to significant changes within our current and future workforce, not the least of which now includes contingent workers. 

So, what are contingent workers? They are freelancers, part-time workers and other groups who have long been relied on to fill skills gaps or help in other areas of business. However, now it’s becoming clear that this group of the workforce is growing at an ever-increasing rate. There are many reasons for this but the bottom line is that contingent workers are here to stay, so it’s up to businesses to adapt and learn how to manage them effectively.

What is a Contingent Worker?

A contingent worker is typically seen as a non-payroll worker. They are also called contingent labour and services providers such as consulting firms, agencies and others. They are often contracted to do project-based work via a Statement of Work (SoW). They can also include part-time workers and gig workers, a modern term for freelance workers. Today, a contingent worker could even be a part-time worker that predominantly or completely works from home.

What do the Contingent Workforce Statistics Reveal?

There’s a good chance you rely, at least in a small part, on contingent workers in your organisation, but if you haven’t noticed an increase within your own business or have never utilised these job roles in any significant way, then you might be sceptical that this is just another fleeting trend. The fact is, there are clear statistical indications that contingent workers are now a huge part of business-as-usual for many companies.

To get an idea of just how significant this group now is within the current workforce, SuccessFactors did their own digging. They found that 75% of businesses they surveyed reported contingent workers now make up at least 5% of their workforce. Another 18% reported that contingent workers made up 20% or more of their total workforce, a huge number compared to just a few years ago.

This trend also looks set to continue with 34% of businesses planning to maintain their external workers in the next 5 years while even more companies (39%) intend to increase engagement with contingent workers.

Why are Contingent Workers Becoming so Essential?

The increase in the contingent workforce is at least partly due to a changing population and future workforce that is looking for more flexible job roles to fit their evolving lifestyle, but it’s not just the workforce dictating this change. Businesses themselves are encouraging this change as they increasingly see the benefits of contingent workers, especially as today’s markets and industries present new challenges and needs that contingent workers seem to be able to answer. This includes rising cost pressures, shortage of critical skills and the need for workforce agility and diverse workforce composition.

The same SuccessFactors survey found that 61% of organisations now agree that contingent workers contribute to organisational success. Contingent workers advantages include improved workforce agility, wider talent pools, reduced costs, increased productivity and mitigate risk. To operate and compete successfully in today’s job climate, businesses simply can’t afford to ignore contingent workers as an important part of their workforce.

Managing Contingent Workers Effectively

Contingent workers can answer many challenges and needs for today’s businesses, but can also present their own problems if not managed effectively. Unfortunately, while it’s clear that organisations today recognise and value contingent workers, many are still unsure how to manage them properly as part of their total workforce. Unlike payroll employees, businesses are often daunted by the task of sourcing, managing and tracking this more ambiguous side of their workforce.

If this is sounding familiar, then have no fear. Looking at current trends, challenges and successes of organisations using contingent workers can help to guide future effective strategies. 

Based on findings from the SuccessFactors survey and our own experience in managing contingent workers as part of the workforce, take a look at these simple tips:

Make it “strategic imperative”

Traditionally, contingent workers have just been used for cost savings or as a ‘try-before-you-buy’ strategy to test out potential employees before taking them on full time. 

Today, there is a clear trend of adopting contingent workers as a key strategic imperative with survey respondents highlighting workforce agility and speed as the primary reason for their contingent worker usage. While cost savings were also an important driver, it’s clear that businesses are now seeing contingent workers as a potential competitive advantage.

This is great news as recognising the strategic necessity of external worker is essential to managing them effectively. Without understanding the most valuable benefits of contingent workers, businesses will never realise these benefits. Those that do will be able to rapidly address the changing business, demographic and technology changes that are currently presenting real challenges to organisations today. This means using contingent workers to drive innovation and growth at a faster rate than competitors.

Use the Right Technology

With powerful cloud-based HR softwares now available at more affordable prices than ever before, not having the right technology and infrastructure to manage your workforce is no longer an excuse. Unfortunately, it seems many organisations are still failing to utilise the best technology now available with 52% of businesses surveyed are still using Excel to manage contingent workers despite poor satisfaction rates with this system.

Core HR, Vendor Management Systems, Learning Management Systems and Attendance tools were all used less than Excel but showed much higher satisfaction rates. It’s clear that there are tools out there to help, from standalone software aimed to specifically managing your contingent workforce to end-to-end HR solutions like SuccessFactors that can help you manage your contingent workers in line with the rest of your workforce at every stage of the employee experience.

Visibility and Integration

With their extensive experience and based on survey findings, SuccessFactors were able to identify the two key characteristics of an effective contingent worker strategy. While administrative efficiency and business goal alignment were both important elements, it was visibility that became the critical foundation to effective contingent worker management followed by complete integration with the rest of the workforce and employee experience. 51% of survey respondents recognised that contingent workers could bring more value to their culture and programs if they were more integrated and 70% said it was critical to engage contingent workers yet only 45% agreed their current practices were effective.

Essentially this means minimising negative perceptions associated with being a contingent worker by ensuring they are a complete part of your company culture. Visibility, in particular, is essential for both effective management and managing budgets and expenses. Again, technology should play an important role here. The right HRMS can give you complete visibility over your total workforce including your contingent workers and should be able to track these workers through from recruitment and onboarding to performance and beyond.

Integration can be trickier because of more ambiguous employment law and legal considerations for managing regular full and part-time employees with your contingent workforce. While these challenges can make it tempting to treat them as two separate entities, it’s essential that businesses don’t ignore integration as a key part of their contingent worker strategy.

Integration forms an important part in many areas including learning, certifications, business objectives and overall engagement. For your business, you need to make sure that your contingent workers are following the same compliance and overall workforce planning strategy that you have aligned with your business goals. For your workforce as a whole, integrating contingent workers into social programs is essential for collaboration and overall well being.

It’s therefore critical that companies foster clear communication and promote the value of contingent workers to the entire company. Technology can play an integral role here too, providing a single platform for managers and teams to be able to see and communicate with everyone including contingent workers. A self-service portal like SuccessFactors, for example, can provide internal social networks and message apps along with all the resources and information they need to get complete visibility over everyone in their team and the work they are responsible for. You can also track certifications, training and skills as well as performance.

Company-wide Collaboration

With contingent workers expanding in recent years to include independent contractors and SoW project teams there has also been increased involvement of line managers who now often source these resources. Today, 48% of businesses indicated that responsibility for contingent workers rests with the hiring manager. This is a big change from the traditional management strategy of external workers which fell predominantly with HR owning the full and part-time workforce while Procurement managed contingent workers. Again, 34% of today’s respondents indicated HR had the responsibility of contingent workers with just 7% falling within the Procurement bracket.

There clearly needs to be management restructure here, especially considering visibility and integration are such key characteristics of effective contingent worker management. This confusion over responsibility and siloed management makes knowing who is doing what and where they are extremely difficult, if not impossible.

Organisations should be looking at an integrated approach that provides complete visibility of contingent workers to all functions and subsequently enables complete end-to-end management throughout the employee experience. This means leveraging Procurement personnel expertise to identify the right contingent workers needed within contract budgets in line with Finance.

Line managers should provide feedback from sourcing and beyond as they can provide insight into the skills and qualities needed, and whether these skills and services were actually delivered so that Procurement can improve in the future. Finally, HR needs to be managing the employee journey with the right onboarding, developing, reviewing and rewarding of contingent workers just as they would with any other payroll employee.

Want to know more about effectively managing your contingent workforce? Contact us today to find out SuccessFactors could help you leverage this competitive edge.