Today independent contractors, temporary workers and service firms make up a growing proportion of the global workforce. According to a 2012 Aberdeen Group research study, nearly 26% of the average company’s workers are considered contingent. Even though these flexible workforce members make up such a significant portion of a companies total workforce, businesses often struggle to take advantage of the flexibility and cost savings associated with the contingent workforce.
Managing a contingent workforce requires more than just procurement sourcing and purchasing the contingent workforce services. The whole process starts with the project or hiring manger requesting a resource and continuing through procurement, on-boarding, time and material tracking, payment processing and eventually off-boarding the worker.
Business need control and visibility into their contingent workforce, all the way from the job requisition through payment. Being able to select your workforce provider by submitting the job requisitions to specified suppliers and screen candidates is necessary. Once the supplier is identified, controlling the on-boarding (and eventually off-boarding ) of workers is necessary, after all you just don’t want people just to show up. At least they must go through the safety training..
For those larger projects and service requirements you most likely will be required to manage Statements of Work (SOW). Some projects just require one SOW, others can require multiple SOW’s and require you to manage overarching projects with a budget that contains multiple SOWs, job postings and request for Information, proposals, and quotations. Being able to manage long-term outsourced service agreements, ensuring the right project resources are used and necessary budgetary and security controls are maintained is also necessary.
Once you have the contingent workforce, it just does stop there. They also (just like your permanent workforce) have to work in a safe environment. Thus they must be included in your compliance program. that can mitigate the risk of having all these temporary workers on-site. You have to be able to vetting these workers, track their certifications, and skills, , track on- and off-boarding activities, monitor transactions and other activities for documentation and auditing purposes.
A large percentage of the workforce in the Chemical Industry falls into the contingent workforce category.
Dow Chemical Co. in Midland, Mich., uses contingent workers for massive plant-building projects. “Our business is cyclical, with multiyear cycles of peaks and troughs,” explains Mark Bachman, global director of Dow’s HR Center of Expertise. Up to 25 percent of Dow’s 43,000 employees are contingent workers. “We use contingent workers across all staff functions, but primarily in manufacturing, engineering and office staff,” he says. – HR Magazine
Yet the contingent workforce is very valuable. from the same article in HR Magazine
“Our contract workforce represents a unique skill set, a talent pool that is difficult to find,” says Dow’s Bachman. “For instance, on the Gulf Coast we are in competition with the oil companies for engineering talent. Our vendor offers us a way to channel the talent, especially for chemical engineers.”
Recent projections by the Bureau of Labor Statistics indicates that the contingent workforce will be among the fastest growing workforce segments, with a projected increase of 23 percent from 2010 to 2020. This represents an additional 631,300 jobs, to eventually reach a total of 3.3 million contingent workers. Add to that, that real output in the management, scientific, and technical consulting services industry is projected to rise by $76.1 billion, a 3.8-percent annual increase, to reach $242.9 billion by 2020, and you can see that the contingent workforce represent a significant amount of labor, value, and expense.
To address the management of the contingent workforce SAP has acquired a company called Fieldglass an industry-leading Vendor Management System (VMS) that manages the flexible workforce (contingent workforce). The announcement can be found in Forbes, Bloomberg, and Information Week, and many other publications.
Implementation of the Fieldglass solution often results in cost savings of 15-20% though:
- Centralized bill rate management: up to 6% savings
- Volume discounts: 2-3% savings
- Early payment discounts: 1-2% savings
- Overtime discounts: 1-2% savings
- Replacement of contractors with FTEs: 0.5-1% savings
- Streamlining payment processes: 2-3% savings
- Supplier contract management: 4-6% savings
So how are you managing your contingent workforce? Do you have a formal way of manage this growing segment of your workforce?