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2 0 1 6 I N R E V I E W :THE CONTINGENT LABOR MARKET

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As the US Bureau of Labor recently reported, around 40% of the current workforce consists of contingent workers. In fact, 18% of the average company’s workforce is contingent. At PeopleTicker, we analyze the landscape of hiring and employment and rely on data to tell the story. We then take it one step further by comparing that data to vetted, real-time sourced data from real people in real jobs all over the world.

The past year has introduced amazing strides in creating the workforce we see today. From mobile apps to freelancing entrepreneurs, the next few years will undoubtedly bring about unprecedented challenges and standards.

As with most organizations around this time, we’re looking back at our 2016 discoveries. There have been many lessons to learn and techniques to apply, so let’s dive in!

40.4% of the workforce is now made up of contingent workers and it breaks down like this:

INTRODUCTION

16.2% are standard hourly contingent workers

12.9% are independent contractors (who provide a service or product and find their own customers)

3.5% are hourly contingent on call workers

3.3% are self-employed workers (shop/restaurant owners, etc)

3.0% are contracted workers

1.3% are hourly through agencies

16.2%

12.9%

3.5%

3.3%

3.0%

1.3%

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TABLE OF CONTENTS

The Contingent Workforce: What’s Trending 4

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Navigating Contingent Labor Hiring

Minimizing the Cost of Hiring Contingent

Fairly Compensating Contingent Workers

The Management Your Contingent Workforce Needs to Thrive

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We can all agree that the war for talent is real. The candidate driven market is pushing organizations to offer an ever growing list of demands including better compensation, benefits, perks, development programs and so on. Luckily, not every change will be a drain on your budget or managing teams. Consider these trends when planning for a contingent labor force in 2017:

Technology is Powering Accelerated Growth

New technologies are a major factor in the expansion of the contingent workforce. From increased mobility to easier approaches to communication, workers are far more capable of providing the same, if not more, productivity without even leaving their home. While new doors are opening for workers, companies can enjoy some benefits as well. Vendor management systems, freelance management systems and managed service providers are seeing upgrades, easing the work of hiring and procurement professionals everywhere. Not to mention, 62% of procurement professionals report seeing technology as their biggest opportunity for cost savings.

Those savings can come from better time management thanks to new tools or even from the overhead of a teleworking workforce, as the average real estate savings for a full-time telework employee is $10,000 per employee per year.

Workers Value Career Mobility and Diversity

The mobility we tend to let rule our procurement minded departments generally has to do with the mobile market and worker, however, workers want mobility in the way of a more diverse team and work experience. Many fear this is breeding a fear of commitment, but the benefit is a team of employees who think ahead in terms of their career. They have desires to bulk up multiple skills and also gain experience putting them into practice.

A contingent laborer has often worked in multiple industries and companies, offering a level of expertise only matched by someone with a diverse background. Diverse teams have been found to outperform non-diverse teams by 35%.

THE CONTINGENT WORKFORCE: WHAT’S TRENDING

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Direct Sourcing is Growing Among Companies

More and more organizations are internalizing their search for contingent workers, instead of going through suppliers. Traditionally, companies would seek the help of staffing agencies for temporary and other contingent laborers, but a growth in technology and a thriving contingent networking environment has allowed organizations to build their own talent pipeline. Even more, the social environment created by these contingent networking opportunities allow the workers themselves to inspire development.

Matchmaking is Making Hiring More Strategic

More and more tools are focusing on guiding organizations to a better hire, even for the contingent worker. The hope is that with a more well-rounded view of the individual, employers can better select a person who will fit the position and culture, reducing turnover and efficiency risks. Companies lose $550 billion each year to employees who do not fit the job or position.

60% 60% of workers believe that social media helps promote creativity and innovation.

Companies lose $550 billion each year to employees who do not fit the job or position.

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HR professionals agree hiring contingent laborers requires careful attention to the budget. Saving money is possibly the largest goal when planning the sourcing, recruitment and hiring of your employees, which is exactly why it is pivotal to understand the bill rates of your staffing agency.

Some industries, like STEM, are in high demand and can be competitive. Staffing firms might increase the markup in order to recruit talent which then increases the overall cost to your company. The details of the cost of one particular hire may not be laid out by your staffing agency, so understanding what goes into a bill rate will help in price matching and negotiating.

Want to more effectively negotiate your staffing agency’s bill rate? Check out these 7 questions to get the rate you and your workers deserve.

Here’s how your bill rate breaks down:

Recruiting and Sourcing: all the work an agency will perform to identify the right candidate, including skills assessment and determining availability

Talent Evaluations: any testing that determines the candidate will actually perform to the standards asked for by your company.

Selection Process: Interviews, resume and reference reviews.

Assignment Duration: The length of time the candidate will be employed affects the markup. Longer assignments often result in more competitive bill rates.

Safety Measures: Worker’s compensation insurance and other measures needed for high risk environments.

Benefit Coverage: Though not typically benefit rich, temporary staffing agencies do sometimes offer extras like healthcare insurance and paid time off.

NAVIGATING CONTINGENT LABOR HIRING

Terms to Know

Bill Rate: The combination of the pay rate and markup. This is the total your company will pay for the employee and recruiting services.

Pay Rate: The amount paid to the worker by the staffing firm. This should be the largest portion of the bill rate and doesn’t include any service charges. Pay rate will play the biggest role in retention, resource quality and time to fill.

Markup: The percentage that is added to the pay rate. This number varies based on state labor taxes, benefits costs (worker’s compensation, health insurance, etc) and the service charge for finding and placing the worker. Since this is based on a percentage of the pay rate, the cost can vary based on the worker’s experience, skill sets, of employment, industry standard, volume of employment need, so on.

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Contingent workers are synonymous with cost savings. Employers are discovering that hiring contingent adds a competitive and innovative edge by bridging skills gaps while presenting cost savings. Of course, to see an actual return, the right contingent management strategy has to be in place.

MINIMIZING THE COST OF HIRING CONTINGENT

Strategize Your Sourcing

As with hiring for a permanent employee, it’s important that your team establishes a clear plan of the type of person needed to fit the role. That includes the type of skills and experience needed, but also the guidelines for the most effective Statement of Work (SOW). Your company will probably have distinct needs of your contingent worker and that means you will need to decide what you will require of their employment. It might be something as simple as weekly meetings in office or daily deliverable updates.

No matter how talented your potential contingent hire might be, the business side of talent acquisition cannot be overlooked. Whatever your company chooses, remember the worker may push back to meet their own expectations. Communication will go a long way in understanding how both you and your company can thrive together.

Make Organization a Priority

From hiring and onboarding, to exit interview, documentation is pivotal. It is important to understand that creating a contingent workforce within an organization saves time and money in employment options and opportunity, not in paperwork.

The internal filing process, digital or physical, should in no way be considered obvious, but should instead be thoroughly discussed and explained to the team. Even the most coordinated company can overlook something as simple as organization of documents and agreements. This is where an MSP is beneficial, especially to those companies who have a large contingent workforce or are new to managing one.

Communication will go a long way in understanding how both you and your company can thrive together.

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Leverage Performance Data

Today’s talent management programs encourage performance data and analytics. These tools help them to better understand how their current employees are excelling, where there is potential for growth and what management techniques could deliver even more productivity. Performance data can often reveal patterns in retention and satisfaction, which will aid in more educated sourcing and recruiting.

Consider a Managed Services Provider

Hiring contingent workers can be complex and often involve legalities and specialized agreements. An MSP will understand these nuances, streamline the hiring process and manage the statement of work. MSPs can assess the current workforce and performance program to discover holes and potential issues that could potentially hinder success. These organizations simplify the current and future approach to contingent labor management, including finding cost saving measures and providing strategic oversight in the event of an unforeseen issue.

As any company with a budget, it’s in your best interest to understand the details of the MSP or contingent staffing firm your company utilizes. Do not hesitate to research the local contingent workforce industry, negotiate terms and price match. These providers are working for you, not vice versa.

Do not hesitate to research the local contingent workforce industry, negotiate terms and price match.

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Pay is an essential motivator in the contingent hiring process, but only up to a certain point. Which is why making compensation decisions isn’t the only thing CPOs and HROs need to evaluate. While we know contingent workers want to earn a comfortable living wage, we also know that they’ve chosen temporary work to satisfy their idea of what work is all about. Contingent work gives people more schedule flexibility, the option to work remotely and even the promise of avoiding a monotonous career.

FAIRLY COMPENSATING CONTINGENT WORKERS

Insufficient Sponsorship

A whopping 87% of millennials said professional development and career growth opportunities are very important to them. And it’s inaccurate to assume contingent workers don’t seek growth in their career. After all, they don’t want to bounce around to different job after different job and never increase their value as a contingent worker at the next company.

Inconsistent Sponsorship

Job stability affects contingent workers too. When they take a temporary position for a certain amount of time, they’re opening themselves up to a lot of change. They may know it comes with the territory, but learning their job is in jeopardy with little notice or before their contract ends is still hard to swallow. This is especially true if it is due to your poor workforce planning. If word gets out one too many times that contingent positions are unstable at your organization, your contingent employer brand will take a hit.

TIP: Take time to create career paths for contingent workers. Work with recruiters to ensure recruitment messaging doesn’t portray the temporary worker as someone meant to fill a hole. Instead, showcase how someone can evolve in the role and what can be learned within the job so they can apply it to their skillset and the skillset they hope to build.

TIP: Company structures and systems change frequently. Before hiring a team of contingent workers, be sure to set up detailed planning that safely covers each employee’s contract. Explain when and how you will lengthen a contract if you believe there’s a chance at needing the employee longer than expected. Being a stable force and having a strong reputation as a supportive sponsor of contingent workers is critical.

According to the book Agile Talent, the top five complaints contingent workers made about their temporary workplace was:

Insufficient and inconsistent sponsorship

Slow decision-making

Complex organization structure

Internal staff not working hard enough

Difficulty to assess senior leaders

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Internal Staff Not Working Hard Enough

When you spend 40-50 hours a week with a group of people, those dynamics become very important. Being the new guy or gal is common to the contingent worker, often means a bright-eyed, bushy-tailed employee excited to tackle their new job. Unfortunately, if the team they’re hired to help doesn’t share the same passion or, worse, simply isn’t welcoming, there’s a good chance productivity and excitement will wane. Every employee, permanent or temporary, wants to have a support system at work and feel like work is shared equally for the most part.

Complex Organizational Structure

The structure of your workforce defines the personality and culture of your workplace and yours can make or break the engagement of any employee. Like any employee, the contingent worker wants to mesh with the personality or your organization. Did you know that the turnover rate at companies with a rich company culture is only 13.9%?

TIP: Have an onboarding and training program in place specifically for contingent workers. It’s important they receive the same warm welcome and directional support any other employee can expect. From supervisor and manager to colleague, the culture or support can really encourage or disengage temporary or hourly workers. Make it a point to check in with these individuals often, especially in the beginning, so you can be sure their needs are met.

TIP: Think about your company’s purpose and passion. Is this communicated in the contingent hiring process? Also ensure that your company’s values are reflected in everything you do, be it volunteer opportunities or company outings.

These Questions will Forecast your Talent Needs

• What skills does my current team possess?

• What skill shortages are there in my organization?

• Are there seasons of skill change? (i.e. the 4th quarter requires more specialized accounting or strategic development than any others.)

• Are there seasons of economic change (i.e. summer months see a decrease in business income, which mean more creative selling push in the spring months?)

• What period of time is better for innovation and experimentation?

From these questions, devise a 12-month plan just as all other financial investments are addressed. This should include what projects will take place, how long they will be necessary and what will constitute completion. Set aside the slower times for innovation and creativity so the idea making will thrive and not drain internal staff.

Check out these 5 Steps for building a competitive compensation plan.

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Hiring the person with the most experience and the shiniest resume doesn’t automatically translate to the most effective hire in any industry. Part of a hire’s success depends on an employee’s synergy within the company and its culture. Sometimes the approach to performance management will affect job satisfaction. While some of those elements are out of your control, there are portions of management that should never be in question and are in part, your job to help train and manage toward success.

From misunderstandings to varying personalities, different skill levels and paperwork, managing humans is exhausting. Conflict and contract is simply a byproduct of being a human in business. Of course, ever-adaptable, people have developed numerous techniques to proactively manage these issues, one of the biggest being the development of a human resources department.

As an HR professional, the proper management of contingent workers is important to so many parts of your job. Think: satisfaction of permanent employees, contractual obligations, budgetary constraints, productivity progress, etc. That is why you should play a role in their success. An investment in management training for your staff will result in better productivity for your staff and happier contingent workers; a benefit that can double depending on your increased reliance on this procurement line item.

THE MANAGEMENT YOUR CONTINGENT WORKFORCE NEEDS TO THRIVE

Honor Your Contract

Be sure the SOW is clearly defined and followed by your managers and supervisors. If there is a timeframe for the contract. If there are remote working arrangements, then be crystal clear on when in-office meetings will be scheduled and how travel will be addressed. There are many small contingencies that cannot go forgotten and if an agreement is made, it is up to you and your management team to meet them. The cost of a displeased contingent worker extends past productivity and turnover and often reaches directly to their contingent network.

Explain the Contract with Tenured and Permanent Staff

While most of the contract is legalese and unnecessary for communicating with most employees, it is important management staff is in tune with the details. This will protect both your organization and the contingent worker. Don’t forget to share the basic overview with the contingent workers’ new colleagues. The more communication you provide to your current staff, the more they will understand changes to their routine.

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Think of Contingent Employees as Employees

Fragmentation of temporary or contingent laborers usually begins at the approach. Companies see their workforce as those who are employed and offer the skills necessary on a continual basis, and those who are contracted and bring specialized talent on a case by case basis. Change that by considering their contract as the only difference between this employee and the next. Be sure they are a part of most, if not all, employment programs, from skill development to referral.

Learn the Worker’s Name

Take the time to know the people supporting your business, no matter how long their contract or how many hours they’re scheduled to work. Employees want to feel connected to their leadership and 54% of employees who feel like they can approach their managers with any question are highly engaged. While you might not have the opportunity to learn a lot, you can definitely nail their first name, which is a small, but impactful detail that will make further communication easier.

Actually SAY “Thank You!”

Who knew employee appreciation could be as simple as noticing and mentioning a job well done? While this should be a universal tool used by any and every leadership team, it is especially true in the case of a contingent worker who is just getting to know their coworkers and management in the midst of some of the busiest times.

The contingent workforce, and management of it, may be a somewhat new skill for the HR professional. You’re used to long-term goals, managing to the employee’s professional development and creating a balance between employer and employee that benefits both. The great thing about contingent labor is many of those things (despite the shorter nature of the work) are still important. This is why procurement needs HR to be a critical part of this process. The contingent workforce is only getting larger and as it does, smart HR professionals must look to be the talent managers of the future. Managing both your FTE workforce as well as your contingent labor from a cost, time, productivity and efficiency standpoint will grow your skillset and impact your bottom line.

But more importantly, you will be managing people, which is what you do best. We hope this guide has given you some insight into how to balance the needs of your workforce, both contingent and FTE. Our goal is to make it easier to do that. In fact, that’s what PeopleTicker was built on; whether you’re achieving hard savings on labor costs, avoiding time and money-draining inefficiencies, or renegotiating vendor markups, PeopleTicker administers real value for your business.