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Businesses are always looking for ways to increase cost-efficiency and maximise productivity. And one solution that has gained a lot of traction over the past few years is the use of contingent workers.
According to a 2023 survey, 80% of global firms already use contingent workers in some capacity, with 65% planning to expand their use over the next two years. In this article, we’ll explore the benefits of building a contingent workforce and provide some tips on the best way to manage it.
What is a contingent workforce?
An organisation’s contingent workforce consists of individuals who work for the company without being engaged as employees. These workers typically provide their services for a fixed period of time and may be hired on an hourly basis or for a project-based fee.
The contingent workforce encompasses various worker types, including:
- Freelancers
- Independent contractors
- Temporary agency workers
- Consultants
- Gig workers
The benefits of hiring contingent workers alongside permanent employees
Leveraging different types of workers allows businesses to stay agile and competitive in fast-changing markets. It can also be a more cost-effective way of working than relying solely on permanent employees. Read on to learn more about the benefits of the contingent workforce.
Increased agility and flexibility
A business’s needs change frequently — and using contingent workers allows you to flex and scale your workforce in line with those changing needs. This ensures you’ll always have the people you need in busy periods, without overspending when things are quieter.
Access to niche or specialised skills
Contingent workers are often experts in their fields, bringing specialised skills that can be hard to find on the traditional talent market. By working with freelancers, consultants and independent contractors, businesses can meet operational needs without having to hire highly experienced (i.e. expensive) employees on a full-time, permanent basis.
Potential for cost-savings and increased efficiency
Hiring talent on an as-needed basis is often more cost-effective than relying solely on permanent workers because you only have to pay workers when you need them. You’ll also be able to avoid all of the additional costs that come with hiring an employee, like taxes, social security contributions and even work equipment.
Faster access to talent
According to a recent study, it takes companies an average of 44 days to fill an empty role. And once a new employee starts, there’s usually a long process of onboarding and training that needs to be completed before they reach full productivity. Hiring contingent workers is usually a much shorter process. Because they are hired on their existing skills and experience, training and onboarding is typically faster too.
Access to a wider talent pool
Incorporating contingent workers into your workforce broadens the scope of potential hires you have available — especially if you’re open to remote hires. This can help you address local talent shortages and find the people you need, even in competitive industries. Plus, engaging contingent workers often means hiring people from diverse backgrounds, which can bring fresh perspectives and even drive innovation.
Introducing the internally managed contingent workforce programme
While building and managing a contingent workforce can bring many benefits to an organisation, it does require time, work and resources. Many companies choose to outsource this task to external providers. However, this can result in increased costs and a lack of control and visibility over your workforce. Before deciding whether to manage your workforce in-house or work with an external partner, it’s worth weighing up the pros and cons of each approach.
The benefits of managing your contingent workforce programme in-house
Here are some of the benefits of managing your contingent workforce internally:
- Enhanced cost-control: Hiring temporary workers through agencies and other external providers often comes with hidden costs. When you manage the process in-house, it’s easier to understand what you’re spending. Creating efficient and cost-effective processes can also help you to reduce your contingent workforce spending.
- Increased visibility and control: Relying on multiple intermediaries to manage your contingent workforce can lead to a loss of control and visibility, increasing costs and compliance risks. Handling it in-house lets you keep a close eye on what’s going on — especially when you invest in the right technology.
- Reduced compliance risks: When you manage your contingent workforce internally, you don’t need to rely on external agencies to meet compliance requirements. Instead, you can closely monitor your operations and ensure adherence to all relevant laws and regulations.
- Cohesive company culture: When you engage contingent workers directly, they’re more likely to feel connected to your organisation. This sense of belonging can improve their experience with your company, strengthening your employer brand over time.
5 steps to implement a successful internally managed contingent workforce programme
There’s no denying that setting up an internally managed contingent workforce is a lot of work. But by taking the right approach, you can set up your business for long-term success. Follow our step-by-step guide to ensure your program is as effective as possible.
- Establish clear policies and procedures
Without clear policies and procedures in place, contingent workforce management can become chaotic. Managers may be forced to make ad-hoc decisions, leading to uncontrolled spending and inconsistent experiences for workers. To avoid this, you should set clear, consistent policies and procedures for processes such as:
- Recruitment
- Onboarding
- Payroll
- Performance evaluation
- Redeployment
- Offboarding
To maintain order and consistency, you’ll need to ensure these policies are followed across the organisation. This might involve delivering training or creating resources that managers and other stakeholders can use to aid decision-making.
- Invest in the right technology
Effectively managing a contingent workforce requires a variety of software solutions. For example, you’ll need tools for onboarding, worker classification, payroll, time tracking and performance management. It’s important to think carefully about the tools you choose, which may be different from the ones you use to manage permanent workers.
It’s also a good idea to look for software that provides real-time analytics on your workforce, as this can help you track the effectiveness of sourcing methods, worker engagement, training needs and more. Monitoring these insights will enable continuous improvement of your contingent workforce programme.
- Assemble a dedicated team
Managing a contingent workforce involves a lot of different tasks, all of which require particular skills and expertise. It’s a good idea to put together a cross-functional team to oversee the management of your contingent workforce. This might include experts from:
- HR
- Procurement
- Legal
- Finance
Developing a collaborative approach that takes different points of view into account can help you think about your contingent workforce from new angles and refine your programme over time.
- Set up systems for communication and engagement
Regular communication is essential for keeping your workforce engaged and productive. But, while many companies put considerable effort into engaging their permanent employees, contingent workers are often neglected. Establishing communication systems that connect with your non-permanent workers in a meaningful and human way is crucial to the success of your programme.
You should also think of ways to integrate your non-permanent workers into your business. For example, you may consider giving workers access to your employee app or intranet and inviting them to group events and activities to foster a sense of community and belonging.
- Continuously monitor and evaluate your programme
No company’s contingent workforce programme is perfect — and it’s likely that yours will evolve over time. At the beginning of the process, you should identify the key metrics you’ll track to monitor the success of your programme. For example, you may want to keep an eye on metrics related to:
- Cost: E.g. cost-per-hire, total cost of workforce
- Efficiency: E.g. time to hire, fill rate
- Satisfaction: E.g. employee engagement ratings, eNPS score
- Performance: E.g. performance ratings, productivity metrics
Keeping a close eye on these metrics and adjusting your programme when needed will help you to continuously improve, ensuring each iteration of your programme is more effective than the last.
Complementing your internally managed contingent workforce programme with external expertise
As we’ve seen, there are a lot of advantages to managing your contingent workforce internally. You’ll have full visibility over your workforce, and you’ll be able to better control the costs involved. Your workers will also benefit from a cohesive, consistent company culture and a solid HR experience — which could improve your value as an employer.
However, choosing to manage your contingent workforce in-house doesn’t mean you have to do it all alone. Many companies that operate successful internal contingent workforce programmes do so with the help of an external partner.
At CXC, we provide a range of solutions to help you manage your contingent workforce more effectively. For example, our compliance tool, CXC Comply, ensures correct worker classification for every hire, helping you avoid costly lawsuits and reputational damage. We can also support international hiring through our EoR and AoR solutions or help you source workers through the power of your brand.
When you work with CXC, you’ll maintain full control of your contingent workforce. But you’ll also be backed up by our 30 years of compliance and legal expertise. Want to learn more? Get in touch with our team to get started.
