Businesses today aim to maintain a competitive edge in the volatile global market. As resources are the most significant investment of all firms, effectively managing them will help improve profitability and sustainability.
In project-based organizations, maximizing billable resource utilization becomes even more important as it brings in the desired revenue and helps improve overall profitability. However, challenges like unplanned attrition, skill gaps, etc., can add to the organization’s bottom line and have a detrimental effect on project delivery.
It is where a contingent workforce can help overcome these resource constraints. They are cost-effective and come with diverse expertise to fill skill gaps.
Oxfords’ survey reveals, “83% of executives worldwide are set to increase the use of contingent resources in the next 3 years.”
However, a contingent workforce will truly benefit a company only when managed effectively and efficiently by implementing resource management.
This article highlights the benefits of contingent workforce management and elucidates its best practices. But first, let’s define:
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What Is Contingent Workforce Management?
A contingent workforce is a pool of temporary resources that a company hires on an ad-hoc basis to fulfill a project’s skill demands. Examples of contingent workers are freelancers, contractors, casual workers, etc.
Contingent workforce management is the process of finding, hiring, and managing these contingent workers for your organization. An effective contingent workforce management strategy is highly advantageous for every enterprise.
The following section explains how.
Why Is Contingent Workforce Management Important?
By managing contingent resources efficiently, you can reap a number of benefits, including reduced resource costs, successful project delivery, and more.
Below are the most prominent ones.
2.1 Helps form the right resource mix for a project
Hiring permanent resources to fulfill one-off skill demands for short durations may unnecessarily add to a company’s bottom line once those projects get completed. Effective contingent workforce management helps fill these short-term or unforeseen skill gaps in your workforce. It also helps decide which type of resource to select for various tasks in a short-term project and form the best profitable and suitable resource mix.
2.2 Ensures optimal workforce utilization
As contingent workers charge an organization on an hourly basis and are hired for a specific purpose, leveraging their potential to a maximum is necessary. Contingent workforce management facilitates tracking utilization levels of every on-demand resource. It helps ensure that everyone is utilized against their 100% capacity to maximize profitability.
2.3 Enables you to meet niche skill requirements
As niche skills are generally scarce and expensive, it is practically challenging for enterprises to maintain a permanent workforce with niche skills in every sector. Effective contingent workforce management helps identify the on-demand workers with requisite niche expertise and fulfill project demands.
2.4 Reduces hiring/overhead costs
Contingent workforce management doesn’t include a formal onboarding procedure, unlike for permanent employees, thereby saving hiring costs. Further, as a contingent workforce is often well-equipped with the required skill sets, it helps the company save training costs. Moreover, the organization doesn’t need to provide employee benefits, certain work equipment or infrastructure, etc., thereby reducing overhead costs.
2.5 Can help build an effective hiring strategy
Contingent workers can be a great addition to the organization’s talent pool. Since they are hired on a project basis, forming a hiring strategy involves building a talent pipeline of freelancers, contractors, etc. Sometimes an on-demand resource can also transit to a regular employee based on their performance. It is more noticeable in cases where an enterprise lacks critical skills in its resource pool or is looking to venture into a new vertical with minimum hiring investment.
Best Practices for Contingent Workforce Management
Though a contingent workforce management framework can differ from company to company, here are a few general strategies you can follow.
3.1 Ensure compliance with contingent workforce laws
While managing contingent resources, every firm should ensure to comply with contingent labor laws. Despite these laws being different country-wise, you can follow a few practices to comply with some general ones. For instance, ensuring that a contingent worker’s actual utilization doesn’t exceed the daily working hours as decided in the agreement is essential.
Besides, it is vital to pay the minimum amount to every contingent worker as per the labor laws applicable in that country. Additionally, to avoid legal penalties, you should adhere to contingent worker classification guidelines for taxation purposes and segregate contingent workers into independent, freelancers, sole traders, etc.
3.2 Promote collaboration between contingent workforce and permanent employees
Though on-demand resources are not long-term, treating them fairly is important. Providing a conducive and inclusive work environment where contingent workers don’t feel isolated can help. The management should also form a team having a fair mix of both permanent and contingent workers for every project.
It will help boost collaboration and strengthen bonds between both types of resources. Moreover, it also enables permanent and contingent workers to exchange their knowledge and learn from each other. Good reviews of the working conditions at your firm pave the way for contracts with more staffing agencies and freelancers to get the right talent.
3.3 Maintain a centralized repository of your contingent workers’ profiles
The absence of centralization of contingent resources’ details may make their profiles’ assessment challenging. Resultantly, a matrix organization may find it hard to identify and select appropriate resources for every project, thereby making cross-functional collaboration for a project an arduous job.
Therefore, the management should maintain a central repository of all the contingent workers’ profiles, including details like education, skills, competency level, experience, cost, etc. Using a resource management tool, managers can maintain and update all the resources’ details in one place. Besides, advanced filter options also make it easy to search resources by project type, location, department, etc., and narrow down the search for the right ones.
3.4 Maintain a performance record for future references
Keeping track of the contingent workers hired so far and their performance record is imperative for an organization. This record can include details like achievements, special contributions, and USPs that helped you accomplish your past endeavors.
If you compile the track of all the contingent resources, it gives you a better idea of those worth considering for pipeline projects. It helps the manager start new projects faster as the time to search vendors and negotiate with them goes down, expediting the new projects’ initiation.
3.5 Hire contingent resources from empaneled vendors only
Supplying on-demand resources is mainly the role of staffing agencies. But not every contingent staff vendor will perform equally or meet your requirements. Moreover, finding and negotiating every time with new vendors and staffing agencies can also be arduous and time-consuming.
To avoid this, the management can assess the contract format, service charges, success rate, etc., of different contingent staffing agencies in advance. Then, it will help them finalize and compile the list of best-fit empaneled suppliers. That way, when there is a new project requirement, managers can contact these empaneled vendors to procure contingent staff effectively.
3.6 Use the right tools to manage your workforce
Leveraging a good resource management tool can help managers forecast demands for niche skills for pipeline projects ahead of time. They can analyze the current capacity and determine the skills that they need to hire temporarily. Furthermore, the real-time updates the tool provides make it easy to assess the permanent employees’ workload, utilization levels, etc., and facilitate data-driven hiring decisions accordingly.
For example, you require a resource with a certain skill for a new project beginning next month but find similar-skilled resources’ schedules fully packed for two months. So, you can make a hiring decision for appropriate contingent workers well in advance. Besides, using forecast-vs-actual time reports, you can track your contingent workforce’s actual time to complete the tasks against the estimation. In case of any variance, managers can take course-corrective measures and ensure on-time project completion.
Contingent workforce management is undeniably a flexible and cost-effective alternative to the traditional workforce and helps future-proof your organization against market volatility.
So, it’s time you implemented an effective contingent workforce management strategy and paired it with an advanced resource management solution. This way, you can align your business with the ever-changing workforce dynamics and future-proof it.