Contingent Labor: To Use…or Not to Use? That is the question….
Frequent readers of CPO Rising will have noticed a common theme running throughout my articles focused on contingent workforce management: there’s a certain “best practice” and “forward-thinking” flavor to them. However, one question that consistently pops up from time-to-time when I’m on the road meeting with clients or “talking shop” with various providers and practitioners in my network, “With so much discussion about how to manage the contingent workforce, is there any take at all on whether or not we should be actually be using temporary labor?
For a conversation like this, playing devil’s advocate is our best bet. Tens of thousands of organizations across the globe will sing the praises of contract talent and how this type of labor has revolutionized their enterprises. But, would we continue to use this type of talent if we couldn’t effectively mitigate (or even look past) some of the biggest risks in the contemporary contingent workforce?
Back in 2009, as we were digging ourselves out of an economic recession, most companies realized one major aspect in regards to the totality of their organization: there was no way that their workforce would equal the numbers it did pre-downturn. “Doing more with less” was uttered in the offices of executives across the world, and companies reeling from adverse financial conditions were forced to turn to shorter, project-based work to achieve corporate objectives. What was the underlying force of that type of labor? Contract talent. This talent took the form of temporary workers (sourced via staffing agencies / vendors), ex-employees and retirees hired back as contractors, true independent contractors (those workers that choose to freelance), and, as we would come to know as the most complex component of this evolving contingent workforce umbrella, SOW-based projects and services.
So, what are the benefits of leveraging contingent labor?
- Flexibility. You set the terms, length of work, scope of project, objectives, goals, etc.
- “Facelessness.” The organization does not have to deal with the “emotional” issues of the standard manager and employee relationship.
- No benefits. Hiring temp labor or contractors carries several key benefits, however, this one may be considered above the rest. Income taxes and health benefits are not part of the contractor / employer relationship, and thus, the organization can eliminate many of the HR-specific tasks and concerns that come with hiring and managing traditional talent.
- It’s a short-term hire. Again, any of the above items could be considered the “best” aspect of contingent labor, but what most organizations enjoy is the fact that, whether they’re utilizing ICs, professional services or a temp worker, it’s usually a short-term relationship. There are no worries about the long-term viability or quality of contract talent.
- “Highest-level” talent. Some contractors remain in the flexible / freelance world because they are the most experienced talent out there and refuse to “settle down” with one organization. This bodes well for any organization choosing to leverage ICs, as they’re receiving the talent and expertise they require without the long-term commitment.
We can’t speak of the benefits without looking at the risks (and there are a few!):
- A lack of trust. We mentioned the “emotional” angle in the benefits above, however, some organizations may rely on an emotional bond with an employee as a means of trust. This type of “bond” can be very elusive with contract talent, since companies know that whoever is hired won’t be a permanent part of their organization. Without that strong sense of trust, some executives and managers may be hesitant to utilize contingent labor to support projects that have significant corporate ramifications.
- Uncertainty regarding quality and effectiveness. Traditional hires typically flow through a rigorous interview process, one that normally doesn’t traverse into the contingent workforce world. Because contractors, temp workers and services are all sourced via varied means (and by different groups), there can be some level of uncertainty regarding the quality of contract talent. As with the bullet above, a lack of trust, combined with ambiguity regarding effectiveness in achieving project-based goals, may steer some executives away from leveraging contract talent.
- Co-employment, federal audits, misclassification, etc. I spoke of these risks in my “Independent Contractor Conundrum” article a while back. Some organizations feel the need to source contract talent outside of traditional means (staffing suppliers, VMS system, etc.) and engage directly with contractors. While this brings back high-level talent (and, remember, we’ve been hearing for years that ICs are often considered any given industry’s “highest-level” talent), there are numerous inherent risks if those contractor-employer relationships are mismanaged, including federal audits and the dreaded co-employment label.
While there are arguments for both sides, the market is making a clear choice to use contingent workers. By 2015, I fully expect 32%-to-36% of the average company’s total workforce to be comprised of contract talent. By 2020, that number could rise as high as 45%. Contingent labor isn’t going away anytime soon; in fact, it’s increasing day-by-day, and organizations must be prepared to manage this evolution.
If the answer to today’s question is to “use” contingent labor, it makes sense to use it well. Users are invited to click here to read more best practices in using contingent labor.
