Strategic Sourcing and the Contingent Workforce
July 9, 2018
HR and Procurement both have a role to play
As the digital revolution continues to empower new and more efficient types of working, a dynamic workforce ecosystem has emerged. From small companies to Fortune 500 enterprises, HR leaders are pursuing the right mix of talent to drive innovation and productivity. For most businesses, the right talent pool consists of full and part-time employees, and contingent workers, including temporary and contract employees, temp-to-perm workers, and independent contractors.
One factor leading businesses to use more contingent labor is the ability to control or reduce labor costs, especially in terms of benefit costs. But what business team should be responsible for sourcing contingent talent—Human Resources or Procurement?
The rise of the contingent workforce
The use of contingent workers by organizations has grown by leaps and bounds over the past decade. There are more than 77 million freelance workers in Europe, India and the U.S. Deloitte noted that with the rise in contingent work arrangements “the traditional employer-employee relationship is being replaced by the emergence of a diverse workforce ecosystem—a varied portfolio of workers, talent networks, gig workers, providers that offers employers flexibility, capabilities, and the potential for exploring different economic models in sourcing talent.”
These statistics deliver a sense of the pervasiveness of the contingent workforce in U.S. and European organizations:
- According to Staffing Industry Analysts, “the contingent workforce accounts for more than 20% of the average large organization’s workforce (those with more than 1,000 full-time equivalents).”
- 83% of executives acknowledge their organizations are using greater numbers of contingent workers.
- Overall, contingent workers represent 15.8% of all workers in the U.S., according to economists Lawrence Katz (Harvard) and Alan Krueger (Princeton).
- Upwork and Freelancers Union commissioned a study that estimated 36% of U.S. workers are working freelance gigs (though many work these projects in addition to traditional full-time jobs).
- A survey by Brandon Hall Group found that organizations are most likely to use the following types of contingent labor consistently or frequently: independent contractors (51%), paid interns (47%), part-time employees (36%), and temporary workers from a staffing firm (34%).
- Globally, independent contractors earned an estimated $1.026 trillion and businesses spent almost $1.072 trillion through Statements of Work.
Creating a center of excellence for contingent sourcing
Labor costs can account for nearly half of the operating budgets of many organizations. A growing reliance on the contingent workforce is causing organizations to consider more carefully how to source contingent labor and manage it.
According to the survey by Brandon Hall Group, “Overall, HR owns all talent in 40% of organizations, HR and Procurement jointly manage contingent labor in 34% of organizations, and Procurement manages all contingent labor in 26% of organizations. But HR is more than twice as likely to have sole ownership of contingent talent in small and mid-size organizations than in large organizations.”
As businesses have relied more heavily on contract and temporary workers and began dealing directly with independent contractors and freelancers, the emphasis for managing the cost and contracts for contingent talent shifted toward strategic sourcing teams within Procurement.
The problem with this approach is that while costs are managed carefully, work quality and organizational fit are not closely monitored. Contingent workers may represent 20-30% of an organization, yet they were not assessed for skills nor vetted for personality and cultural fit by HR. Most do not go through the company’s full, formal onboarding process. Contingent workers do not share in company incentive programs—usually contracts are not designed to pay extra for overperforming expectations. For these reasons, many experts now believe that the best management approach is to create a center of excellence for contingent worker procurement and management by blending both HR and Procurement professionals onto a dedicated team.
Today’s human capital requires modern management solutions
The decision to hire permanent or contingent workers for any given position depends on many factors. Most businesses use a combination of full-time and part-time employees, temporary workers and independent contractors. Whatever your unique mix of employees and contingent workers, Asure’s cloud-based Human Capital Management solutions will help you automate key HR management processes to ensure the most productive, efficient workforce possible.