A Comprehensive Overview of How to Manage the Non-Employee Workforce

The world of work has changed dramatically in the past few years. Shortages in skilled labor, remote work, The Great Resignation, and the increasing need for business flexibility are just some of the factors that have contributed to the surging rise of the contingent workforce.

Organizations today are increasingly utilizing the contingent workforce in an effort to reduce costs, improve business agility, and access talented labor. In fact, Staffing Industry Analysts (SIA) found that globally over $5 trillion was spent on tens of millions of contingent workers in 2021.

Yet despite the growing use of contingent workers, contingent workforce management at most businesses is failing to keep up. Organizations are failing to implement effective and strategic programs that reduce cost, improve workforce quality and help them better achieve their overall workforce goals. 

In this blog, we take a look at some of the issues holding back your contingent workforce program, and what strategies you can implement to significantly enhance the ROI of your non-employee workforce. 

What is the contingent workforce? 

The contingent workforce comprises various types of non-employee workers. Understanding these categories can help organizations align their strategies and engagement models accordingly. Here are some common types of non-employee workers:

• Freelancers: Freelancers are self-employed individuals who work on a project basis. They often have expertise in creative fields, such as graphic design, writing, or web development, but can also be found in other industries.
• Independent contractors: Independent contractors are self-employed professionals who provide services to organizations on a contractual basis. They have more autonomy over their work and typically work on specific projects or assignments.
• Consultants: Consultants are highly specialized professionals who offer expert advice and guidance to organizations. They bring industry-specific knowledge and skills to solve complex business problems or provide strategic insights.
• Temporary workers: Temporary workers (or temps) are hired for a fixed duration or to cover short-term staffing needs. They can be sourced through staffing agencies or hired directly by the organization. Temporary workers often fill roles in administrative, customer service, or seasonal positions.
• Gig workers: Gig workers, also known as on-demand or platform workers, engage in short-term, task-based assignments facilitated through online platforms or apps. They work independently, accepting projects as per their availability and skills.

Benefits of utilizing contingent workers

1. Flexibility: The contingent workforce provides flexibility in scaling up or down based on business demands. Organizations can quickly adjust their workforce size and composition to meet project needs or respond to market changes without long-term commitments.
2. Access to specialized skills: Non-employee workers often possess specialized expertise and niche skills that may not be readily available within the organization. By tapping into the contingent workforce, businesses can access a diverse talent pool and bring in individuals with specific capabilities required for project success.
3. Cost savings: Engaging contingent workers can be a cost-effective strategy for organizations. Rather than maintaining a permanent workforce, businesses can utilize non-employee workers on an as-needed basis, reducing expenses related to benefits, training, and overhead costs.
4. Scalability: The contingent workforce allows organizations to quickly scale their workforce up or down without the complexities of traditional hiring processes. This scalability enables businesses to meet fluctuating demands, maintain productivity, and seize opportunities while minimizing the risks associated with fixed labor costs.
5. Innovation and fresh perspectives: Non-employee workers bring fresh perspectives and new ideas to the table. They can inject innovation into projects, challenge existing norms, and contribute diverse viewpoints that foster creativity within the organization.

Common challenges holding most contingent workforce programs back

Due to a mixture of a lack of expertise, minimal resources and a lack of know-how, the vast majority of organizations are behind the curve when it comes to successfully managing their non-employee workforce. 

Just like any business process, when the contingent workforce isn’t managed effectively, risks can run rampant across your organization. 

Lacking program visibility and control

With no program in place, organizations lack visibility and control over their contingent workforce. This results in a complete lack of program standardization, in which hiring managers source and hire contingent workers independently - without using the requisite screening, quality control, preferred contractual terms, and predetermined rates that are part of your vendor agreements.

Rogue spend

Lack of visibility and control over your contingent workforce program leads to an array of risk, with the most impactful one being rogue spend. Rogue spend is spending that doesn’t adhere to your contingent workforce protocols, and often goes unnoticed. This leads to your business missing significant opportunities to reduce cost and optimize contingent workforce spend. 

Worker misclassification

As the mixture of workers changes over time, new regulations are introduced to dictate how companies can hire and manage them. Falling foul of employment laws could result in back taxes, hefty fines and penalties for your business, and a lack of program visibility can lead to significant risk of misclassification and co-employment. 

A lack of insights into vendor performance

The staffing agencies you partner with are the backbone of your contingent workforce program. Without data and insights into vendor performance, you’ll have no idea how staffing agencies are performing and whether they are helping you achieve your workforce objectives. A lack of data when it comes to staffing agency performance is often paired with low workforce quality, slow hiring times and overpaying for non-employee workers.

Best practices that will move your contingent workforce program from laggard to leader

To successfully mitigate the above risks and better manage your non-employee workforce, it’s critical that organizations implement a highly-strategic contingent workforce management program. Here are a few best practices to help you do just that. 

1 - Outsource your contingent workforce program

Building an effective contingent workforce management program isn’t easy. It requires expertise in the contingent category, technology, and the right resources in place. That’s why many businesses choose to outsource their entire, or parts of, contingent workforce program.

Outsourced contingent workforce management solutions - such as a Managed Services Provider, MSP lite or supplier consolidation solution - will ensure your organization is able to implement an effective program that improves workforce quality and increases ROI. Not only that, but outsourcing will also save your internal team time - allowing them to focus on core competencies that grow your business.

2 - Centralize the program across your entire organization

When a business has no contingent workforce management program implemented, they suffer from a lack of standardized processes that results in hiring managers engaging staffing agencies on their own terms and at their own price. Centralizing your program helps solve this issue. 

With a centralized non-employee workforce program, you can ensure that all internal players associated with managing it and hiring contingent workers are singing from the same hymn sheet. This helps to ensure that you:

• reduce costs and minimize rogue spend;
• build standardized processes and rates that all hiring managers can follow
• improve your access, and speed, to top talent
• and mitigate further risk across your program.

In tandem with a strategic contingent workforce program, a vendor management system should be considered to help your business centralize and automate all departments. 

3 - Bring data into the heart of decision making

The organizations that are paving the way when it comes to managing non-employee workers are those who put data and analytics at the forefront of all program decision making. These insights are crucial when it comes to identifying improvement areas, reducing costs, improving workforce quality and finding new opportunities within your program. 

Without insightful data, businesses simply lack the information they need to make truly valuable contingent workforce program decisions. 

Are you interested in learning more about how to better manage your non-employee workforce? Get in touch with Contrax today. We have a range of solutions to help you improve your contingent workforce program and optimize ROI.