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Contingent Labor Spend: What’s In Your Wallet?

Can anybody tell me how much they plan on spending on contingent labor this year? No? Shocking isn’t it?

But not surprising. For years, contingent labor has been categorized as “temporary” labor, even though many workers are on assignment more than 12 months. And guessing how many will be used in any given time period, is nothing short of predicting the winner of next year’s Superbowl.

So why is this the case? Because workforce planning has never included temporary labor. It’s too hard to figure out how and when it’s used. Also – the terminology for this type of labor is innately flawed. It’s not really temporary in a lot of cases and ‘contingent’ is not clearly defined or understood. What is it contingent upon? But that’s a subject for a future discussion.

But the time has come for at least better management of this workforce, which may indeed lead to a way to better predict usage. How? Here are a few suggestions:

  • Admit that contingent labor is a living, breathing part of your workforce – Most companies can no longer afford to ignore 20% or more of their workforce. We have talked to many companies who said, “Our spend is about $25 million,” only to later find that it was more like $35 million (and still more that they still don’t know about or can’t find).
  • Properly categorize your contingent labor – Meaning you must define what a contingent worker is to your organization. This is also important from a co-employment point of view. Hiring managers must understand who contingent workers, independent contractors and employees are in their department – and deal with each appropriately.
  • Use contingent labor consistently – This means that you must first categorize it properly and then make sure that its use is consistent moving forward. For example, defining what positions and conditions warrant a ‘temporary’ worker vs. a direct employee or another type of non-employee. Who is making those decisions and why.

If it sounds overly complicated, then maybe that’s the point. It seems so simple to say, “Just hire a temporary to do it,” and your problem is solved. However, with legions of contingent workers being hired on a more regular basis at many companies, the opportunity for misuse, or risk increases.

Managed staffing engagements are one way to help contain and control use, but it all starts with realizing that this contingent workforce exists and it’s here to stay. There is much to be gained from leveraging this flexible workforce, but also some risks if it’s not dealt with appropriately.

At the end of the day, companies need to include this population in workforce planning, but it will have to start with better overall control and visibility to enable this type of planning – without having to predict the future.

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