Although the contingent workforce segment is growing in importance and its size, many organizations may not be skilled at managing it effectively. Major challenges include the lack of an integrated workforce management strategy, ad hoc (and at times high-risk) managerial behavior, poor data management, and inadequate technology. These shortcomings can expose companies to significant business, financial, and public relations risks. Additionally, the lack of an integrated solution across these areas can inhibit an organization’s ability to make decisions about what type of talent to deploy where.
As more companies understand the issues associated with contractors and manage them well, they can benefit from improved operational performance, lower labor costs, informed staffing decisions, more organizational flexibility, and stronger HR alignment with business objectives. This gives them the ability to source and procure contingent workforce talent that is high-quality, aligned to the specific business needs, and available “on demand” to meet immediate talent needs. Managers can make good talent decisions at the time of need, and the processes and systems are in place to manage and mitigate the risk of contingent worker administration across the worker lifecycle.
Conversely, poor management of contingent workers can negate many of their potential benefits. One risk can be legal and regulatory challenges when governments pursue companies that misclassify contingent workers.
This can lead to significant penalties, fines, and legal costs. Another potential downside is when managers use the contingent workforce to work around headcount and labor spend controls, driving increases in baseline costs with no discernible increase in value.