How to ease into the changing labor marketplace with different types of workers.
By Russ Banham
Imagine it’s the year 2030 and the company’s annual holiday party has just begun. A generation ago, there’d be all 500 employees here wearing funny hats, Jim getting a bit tipsy again, and needing a ride home. Today, Jim is gone and there are 60 full-time, salaried employees in attendance. The other 270 contingent workers are probably home with their families.
Welcome to the total workforce, the term describing the diverse mix of full-time employees and contingent workers sprouting across the business landscape. The latter group of workers comprises the growing number of provisional, non-permanent workers, such as freelancers, independent contractors, temporary contract workers, and consultants.A study by Intuit predicts that 40 percent of American workers will fall into this category by 2020, employed on short-term assignments or gigs—hence the coining of another new phrase, the gig economy.
Hiring these workers used to fall to a company’s procurement organization: the same folks that buy the computers and hire different vendors. This is increasingly no longer the case, with more and more HR leaders taking on the responsibility of the total workforce manager.Given today’s patchwork quilt of worker types, this is a good thing. No function is better equipped to take on this transformative task than an organization’s HR department.
The reason is because the most important capital to a business is its human capital. And right now this capital is in flux. “The definition of an ‘employee’ is being redefined,” says Josh Bersin, principal of Bersin by Deloitte, at Deloitte Consulting LLC. “A significant increase in non-salaried workers is expected in the next three to five years. Faced with this upheaval, many employers are frankly confused and grappling with how to manage this new workforce.”
The New Paradigm
According to the recent Deloitte Global Human Capital Trends 2016 report, more than 70 percent of the 7,000 companies surveyed by the consulting firm are having difficulty integrating the various types of workers into a unified whole. The report’s title references this epochal change in the workforce: The New Organization: Different by Design.
As more companies employ a greater volume of nonsalaried workers, HR must “build a culture of collaboration, empowerment, and innovation,” the report states. To do this, HR must redesign “almost everything it does, from recruiting to performance management to onboarding to rewards systems.”
It’s a big responsibility, but the rewards for businesses are even greater. The disparate elements of the total workforce are integrated into a cohesive unit of productive people inspired by the company’s purpose, culture, and values.
To address the need, superior HR organizations are developing total workforce strategies that leverage a single platform, providing visibility into all workers.
In doing so, they can improve their access to quality contingent hires, coordinate recruitment activities to know which type of worker is best to hire based on current needs, and provide faster onboarding. Other benefits include increased transparency into contract worker labor expenses, and enhanced corporate compliance with local and national employment laws and tax regulations.
“By having greater visibility into the blended workforce, companies can optimize talent to meet demand fluctuations, and balance labor costs with workforce agility,” says Beth Roekle, president of Advantage xPO, US, a provider of contingent and permanent workforce staffing solutions.
Drivers of the Total Workforce
Many factors collide to create the new workforce paradigm, including mobile digital technology which makes collaboration easier across time zones and geographies, continued economic uncertainty, non-stop globalization, and pronounced skills shortages which produce the current war for talent.
Other reasons prompting the change in the workforce are demographics and career and work expectations.
“Baby boomers and older Gen X’ers have reached an age and skill level where they may no longer want to work full-time for one company,” says Bersin. “They may suddenly realize that their talents are in high demand from multiple companies wanting to hire them, albeit on a contingent basis.”
A case in point is software engineers. Not only can such skilled individuals achieve a more flexible work-life balance through contract work, in some cases they can make more money.
With regard to younger generations who came of age during the Great Recession, many of them may not want full-time work with a single employer for life, having seen their parents, aunts, and uncles lose their jobs and experience difficulties finding replacement work at their previous income levels. Unlike older generations that did not have the opportunity to pursue such a wide range of contract work when they were starting out, Millennials have plenty of opportunities to pick and choose.
Another factor in the creation of the total workforce is economic uncertainty. Although the economy is in much better shape today than it was five years ago, a significant measure of job insecurity prevails.
“Traditionally, part-time work is cyclical, with more people working on a contract basis when full-time work is harder to come by,” says Bersin. “Then, when the economy improves, more people take full-time jobs.”
He explains that it would be tough for a contract worker to turn down a salary that is two or three times what he or she is currently making.
“The Bureau of Labor Statistics backs up this cyclicality,” says Bersin. “The question, though, is whether or not the historical trending will continue in an environment of economic uncertainty.”
Challenges of the Total Workforce
Assuming the total workforce is here to stay, the challenges presented in managing these workers bear deep consideration. Ninety-two percent of respondents to the Deloitte survey ranked future “organizational design” as the primary issue of importance to their companies’ workforce-related goals. Nearly half the respondents said they were in the middle of restructuring from a traditional workforce model to a more interconnected, flexible, and team-based one.
In this process of integrating the workforce, companies must contend with legal issues regarding what specifically constitutes a full-time employee. The U.S. Department of Labor does not make a distinction between full-time and part-time employees, leaving it up to employers to make this determination. This is important, since the Family and Medical Leave Act (FMLA) triggers certain benefits for employees working over a prescribed length of time and duration of hours. Consequently, employers must be careful to maintain policies that restrict the duration of contingent worker contracts.
“It’s a bit of a gray area with regard to people working part-time who receive no vacation benefits, sick leave or medical benefits,” Bersin says. “It’s one of the things that make people nervous; they’re not sure what kinds of problems they’ll get into.”
He adds, “With the current discussion over income inequality in the political sphere, we may begin to see proposals to provide new types of contracts protecting this class of worker in the future.”
For the time being, Roekle advises employers with total workforce strategies to endeavor to become more knowledgeable about labor regulations, co-employment issues, statement of work (SOW) criteria, and related risk mitigation. “Increased legislative scrutiny of worker compliance demands this,” she says.
The total workforce foists another challenge upon employers—the security of their intellectual property, given the risk of contract workers divulging this information to other businesses they work for.
“The benefit of contingent or contract workers is that employers can access great skills quickly, without the need to train them or wait to get them onboarded,” Bersin says. “The downside is that contractors also are security risks, since they’re privy to your secret data and systems.”
Non-salaried workers also pose the risk of not fitting into an organization’s culture—preferring to work in isolation, for instance, when the company is hoping for more teambased collaborations. “Integrating contingent and other non-salaried workers with the employed workforce is a challenge,” Roekle says.
Exacerbating the problem is corporate aversion to risk. “The lack of senior management support for change management and conflicting interdepartmental priorities,” she adds. “There’s also the challenge of gearing up systems and data functionality to a total workforce business model.”
Solving the Challenges
Many companies fortunate enough to have overcome these obstacles have implemented a holistic framework that encompasses their entire workforce. Their current processes and systems were reengineered to address not just salaried fulltime employees but all workers. “With such a framework in place, companies can gain a better understanding of their total workforce spend under management,” Roekle says.
This improved visibility provides insights into the number of open positions, employee tenure, compliance processes, and the motivations, skills, and productivity of all workers.“From these insights, metrics like key performance indicators can be customized to streamline operations and increase workforce productivity,” she adds.
Bersin affirms the merits of a holistic framework for total workforce management.
“Traditional software systems addressed salaried workers and non-salaried workers separately,” he says. “The systems were separate categories with different sets of functionality. We’re now seeing HR management system vendors build out new modules to address the need for visibility into the workforce as a whole.”
The previous one-size-fits-all approach to workforce management is no longer an option in today’s vastly changed labor marketplace. With a single integrated total workforce management solution, companies can discern and implement human capital best practices, improving talent objectives like worker engagement, candidate quality, and recruitment and retention metrics.
“By leveraging scalable, repeatable recruitment processes under one platform, companies can tap into the full range of available talent resources — permanent and temporary workers — and benefit from the consistency of results,” Roekle says. “Companies that embrace this holistic approach can gain competitive advantage, optimizing their talent to meet demand fluctuations and balancing their labor costs with workforce agility.”
That workforce agility may not guide a return to the company holiday parties of yore, but at the very least, it will inspire greater esprit de corps.
Russ Banham is a Pulitzer-nominated business journalist and author of 24 books, including “Higher,” his company history of Boeing, in bookstores now.