We live in an era where demand for a commodity is too flexible. This is where the concept of contingent workforce comes in. A contingent worker is not an employee. They are hired to complete projects temporarily. This is one aspect that has increased the popularity of these workers.
Contingent workers often have unique skills that are required seasonally. Temporary workers are ideal for organisations that wish to avoid the time and expenses associated with hiring and onboarding new staff members.
What is Contingent Workforce Management?
Contingent workforce management (CWM) can be defined as the process of hiring and managing non-permanent employees in a workplace.
In contingent employment, workers are non-permanent and work on a contractual basis, meaning they will remain in the workplace until their job or project is completed. Non-permanent employees can include gig workers like temporary agency workers, independent contractors, consultants, etc.
Key Components of a Contingent Workforce
- Sourcing
As far as the result of a project is concerned, the sourcing of contingent workers must be top-notch. Instead of relying on intermediaries and agents who bring gig workers to the workplace, companies often adopt direct sourcing. It is a process where the company takes things into its own hands and attempts to pick up the perfect candidate.
Direct sourcing has multiple benefits. The company knows the biodata of the gig workers, their scale of loyalty and commitment toward the workplace. Direct sourcing guarantees a pleasant and easy relationship between the workplace and the contingent worker.
- ROI Measurement
Assessing your contingent workforce's ROI (return on investment) is crucial. ROI influences the decision-making process regarding the size of the force and its composition.
By measuring the ROI, a workplace can identify the critical areas for improvement and increase the effectiveness of the contingent workers. If a company achieves a satisfactory ROI, it will have greater access to budget allocations.
You can analyse the cost and benefits of hiring contingent workers, as well as evaluate the speed of project completion. However, gathering accurate data on employee performance and retention across departments can be time-consuming.
- Cost Management
When it comes to a contingent workforce, managing costs can be difficult. Since contingent workers lack a set schedule, it can lead to increased pay.
Moreover, a contingent worker is not technically an employee. As a result, the expenses rise when handling disciplinary actions, security, privacy, and other legal matters.
Even the recruitment and screening procedure of the workers costs a considerable amount of money. It has often been observed that well-skilled contingent workers have more demands than a business can provide them.
How to Reduce Costs?
- Time and Materials Contracts
Try opting for a time and materials contract where the billing is based on the number of working hours at an agreed-upon rate. As a result, there are fewer unanticipated expenses.
- Negotiate a Rate Card
It is imperative to have a precise rate card that specifies the highest rates for various job titles, locations, and experience levels. A rate card can keep track of any additional costs.
- Specify the Roles of the Workers
The contingent contract should be drafted in such a way that all the roles and duties of the worker are duly specified. Non-performance or overperformance of a contract can lead to a breach. This ensures no unnecessary work is performed, reducing the risk of additional costs.
- Monitor the Project
The expenditures incurred on the project must be duly monitored and assessed. It is suggested that the estimated cost be calculated before initiating the project. You can even conduct third-party audits to identify any breaches in the calculations.
Benefits of Contingent Workforce Management
Contingent workers, including freelancers and independent contractors, offer companies multiple advantages. In fact, a company's productivity can rise dramatically by employing contingent workers. Here's how your company can benefit from hiring contingent workers:
- Flexibility
One of the best parts of hiring contingent workers is that you can avoid being stuck with a long-term contract. After the project is finished, your relationship with the contingent workforce ends. You can hire them again whenever there is a spike in demand.
The flexibility makes it easy for companies to choose and release contingent workers as needed. While traditional employment procedures make it challenging to handle employees, this approach helps businesses maintain optimal staffing levels.
- Cost-efficiency
Even though hiring contingent workers may result in certain extra costs, you will not lose out if you create the most advantageous contract. You only have to pay a non-permanent employee for the work they complete when you hire them.
The advantage of hiring a contingent worker is that you do not have to pay any additional money to them, such as insurance, paid leave or pensions. This approach allows businesses to manage their finances in a better way, thereby contributing to profits.
- Fresh Perspectives
If you're looking for a unique angle to your project but want to avoid hiring a new employee, then contracting a contingent worker can be the right decision.
Sometimes, the employees need help brainstorming and carving something new. Independent contractors often suggest unique perspectives to a project, ultimately increasing its success rate.
- Access to Specialised Skills
Contingent workers are highly talented individuals who have expertise in a specific skill. It is realistically not possible to have all kinds of expertise in an organisation and this is where contingent workers can be advantageous.
Choosing such workers with specific skill sets can help bridge the workplace gap. These workers can reduce the scale of shortcomings in a project and offer you specialised expertise.
Challenges of Contingent Workforce Management
When you hire contingent workers, your company may face the following challenges.
- Managing a Diverse Workforce
Choosing contingent workers has its disadvantages. You can always brief the workers on what they are expected to do, but you cannot suggest the process. This is where contingent workers can create additional expenses because you cannot control their work hours. Moreover, managing permanent and non-permanent workers in the organisation becomes difficult. Look for contingent workers who have received favourable feedback regarding their work hours.
- Law and Non-Compliance
Ensuring your contingent workers comply with labour laws and regulations poses another significant challenge. All employees must abide by the particular laws and regulations to maintain discipline within the company. Failing to do so may result in serious legal repercussions that will damage the company's reputation.
As an employer, you can face legal consequences if you cannot categorise your workers. Improperly labelling employees as contingent workers can result in lawsuits and penalties.
- Difficulty in Measuring Performance
Choosing contingent workers would be disadvantageous if you cannot assess the performance rate. Just because a well-skilled workforce is selected for the project doesn't mean that an employer's job is over. It is necessary to track and measure the performance of the contingent workforce regularly.
The workers must be placed in the right arena to ensure optimal productivity. If not, your business might end up paying a large amount of money for subpar work.
- Integration between Contingent workers and Employees
To establish a productive work environment within the organisation, there must be smooth integration between contingent workers and full-time employees. A smooth integration promotes collaboration within the organisation. When contingent workers experience a sense of belonging and value, they become more driven to work harder.
While contingent workers can offer a fresh and unique perspective, full-time employees can share their in-depth knowledge about the company’s operations. A unified approach reduces misunderstandings and contributes to achieving a common goal.
Strategies for Contingent Workforce Management
Every organisation must construct a well-defined strategy to handle the contingent workforce. Establishing strategies for contingent workforce management is necessary to harness the potential of these workers. Here are some effective strategies.
- Invest in technology
Adopting advanced technologies to automate the management of contingent workers is a crucial strategy. You can invest in specialised automated systems to regulate and monitor the movement of contingent workers.
Data must be constructed so that departments in the organisation, especially the finance and IT departments, are notified about the appointment of contingent workers. This data is essential when it comes to payments. Moreover, the data will help the IT department access specific systems or equipment for these workers.
- Governance program
A robust governance program is necessary to have an effective contingent workforce management strategy. There are several key components that you must consider in this aspect.
The first thing you must do is ascertain the program's owner. This is necessary to determine who is eligible to govern the program. Secondly, the implementation of governance requires clear communication of program standards. Additionally, the employer must inform all parties involved about appointing contingent workers.
Another essential component of good governance is demonstrating the program's success in attaining efficiency in the project. It's necessary to assess whether the appointment of contingent workers will lead to any increase in effectiveness.
- Assessing the performance of the workers
The employer must decide how much independence should be given to the contingent workforce. Will they have unrestricted access within the premises, or must access restrictions be implemented? Finding answers to a few crucial questions like these can help make your decision more informed. For instance, the organisation must determine how many contingent workers are required for the project.
The second important step is to finalise the yearly budget for contingent workers. Deciding who will be the person who shall oversee the governance of the contingent worker policies and procedures is essential. All these questions will ultimately increase the performance of the workers.
- Build strong relationships
Maintaining a positive relationship with your contingent workforce can increase the project's success rate. Consistent check-ins, periodic progress updates and dedicated feedback sessions are pivotal in maintaining a solid relationship between the organisation and the contingent workforce. This strategy helps address any concerns and resolve all relevant issues.
Final Thoughts
When it comes to optimising talent resources within organisations, the role of contingent workforce management cannot be overstated. By effectively incorporating and managing the skills of such workers, companies can explore a varied range of skills and expertise.
Use Rapid, which is India’s #1 employer of record. With this portal, organisations can easily hire employees, make hassle-free payments and draft sound legal contracts, among many other facilities. They manage all aspects, from handling taxes and offering benefits to generating payslips.
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