Contract workers are becoming more prevalent. But do multinational companies know how to manage them?
By Alexis Whyte
As the use of external workers rises, HR leaders must effectively manage the contingent workforce in conjunction with permanent staff. Contingent labor can be used inefficiently without a strategic plan in place throughout the organization. The Conference Board published The Rise of the Invisible Workforce, exploring how contingent workers and resources can be mismanaged while providing insights to remedy this too-common problem.
“As a growing number of organizations deploy a contingent workforce, significant problems created by an ad hoc approach to management of these workers have been revealed,” says Marion Devine, The Conference Board’s principal researcher of human capital in Europe. “From inefficient use of resources to the serious and potentially costly risk of misclassifying workers, companies can no longer be passive about managing their contingent employees.”
Using contingent labor gives organizations a multitude of opportunities. The nature of external workers allows for heightened business agility by scaling the amount of labor to match demand or economic volatility. Labor costs for contingent workers are not fixed, so businesses can manage and amend this cost accordingly. Plus, using a variety of external workers often introduces new skills and processes to the permanent workforce.
The Conference Board utilized discussions and polls with senior HR leaders in global companies to find that an effective approach to integrating contingent workers should be based on three foundations.
- Strategic governance. Utilizing contingent labor effectively means creating and implementing a strategic framework to minimize risk while maximizing efficacy. Priorities include tracking costs, standardizing job titles and worker classification, managing worker deployment, and monitoring business risks.
- Integrated workforce planning. HR leadership must create a unified approach to integrating contingent labor by tracking oversight responsibilities and workforce data. External workforce data must follow applicable laws and regulations.
- Providing clear and consistent guidelines for managers in compliance with local laws. Since the nature of contingent work varies, managers must adapt their supervision levels and evaluation methods accordingly.
Technology plays a vital role in maximizing the use of contingent labor and successfully adopting integrated workforce plans. “Technology can also be useful for performance analytics,” Devine says. “By generating data and insights on the productivity of contingent workers and the outcomes of their work, HR leaders and managers can increase the sophistication of their workforce planning.”
While technology eases the burden of managing a contingent workforce alongside permanent workers, HR leaders must exercise caution within global companies as global compliance laws around data and security vary. However, emerging platforms and AI can help implement a strategic and integrated approach.
“It is up to HR managers, alongside other executives, to develop and implement a unified strategy for their contingent workforce, so the organization can avoid risk and maximize the potential of this important and strategic resource,” Devine says.