Why Does Your Company Need To Understand Contingent & Temporary Labour Spend?
Contingent workforce can add great value to your organisation by providing flexibility, bridging a skills gap, and also potential lower costs associated with life and health insurances and other benefits that permanent employees receive. However, if you're not careful, it can cost your business more than you think. In fact, labour will invariably be your most expensive indirect procurement spend category. To get the most return on your investment, you must exercise control over your spending.
Analyzing your contingent labour costs and how they are used can be seriously beneficial.
What exactly is a "Contingent Workforce"?
Outsourced, non-permanent workers known as Independent Contractors, contract workers, freelancers, gig workers, consultants, temporary workers, or remote workers make up the contingent workforce. They are hired by a company on a short-term, long-term, or project-by-project basis.
Hidden & Unexpected Costs
Do you know how much contingent labour costs you? Have you considered the costs associated with this category? It's critical to remember that it's not just about how much you're paying contractors per hour or the markup/margin fee you're paying your staffing agency. If you don't keep track of the hidden costs associated with using contingent labour, they can quickly add up and have a negative impact on your bottom line if you don't have control over them.
Compliance, costs of processing multiple invoices, productivity, added value (or not) to the business and risk management are examples of hidden costs.
Using contingent workers can come with several risks, and if your company's risk management is inadequate and you do not comply with the specific regulations that apply to contingent workers, you may be subjected to costly fines, penalties, and legal costs that could severely harm your profits and brand.
To ensure success, human resource and procurement teams frequently work together to manage contingent workforces. Human Resources is concerned about talent opportunities, while Procurement is concerned about cost and compliance, resulting in an increased level of complexity in managing their traditional and contingent workforces as separate entities, resulting in fragmented processes, inconsistent hiring practices, and additional costs.
If neither department understands the other's needs or connects their priorities, they will be unable to work toward their common goal of filling skill gaps by hiring the best, most cost-effective workers.
Furthermore, because contingent workers aren't screened using the same assessment criteria as full-time employees, they may lack the soft skills or cultural fit factors that a traditional hiring strategy would uncover during the screening and qualification process. As a result of this situation, the company is vulnerable to noncompliance because some contingent workers may not have the right to work in the UK or may provide false documentation that the staffing agency or HR may miss during recruitment.
How a contingent management solution can help
A contingent labour management solution, such as a neutral vendor managed service will provide you with the visibility you need to analyse and reduce the costs associated with using a contingent workforce. Workforce management services and software programmes can help you set authorization limits and freezes, analyse trends, and much more, in addition to tracking labour to look at your spending. You can save money by managing the entire contingent labour cycle, from procurement to payment, and all the steps in between.
Many businesses that invest in contingent workforce management save up to 15% or more on their labour costs, which can easily amount to millions of pounds. You can save a lot of money while also ensuring compliance by using neutral vendor managed services.
With a neutral vendor managed service provider, you can leverage your agency spend with an MSP to ensure costs are competitive and avoid the need to regularly review agency mark-ups (MSP).
A MSP can also advise on opportunities such as reducing tenure on margins and payrolling workers to save even more money.
Get in touch! We can help.
Datum RPO can help you to manage your agency providers, ensuring that the workers they provide are legally compliant, as well as deliver significant cost savings.
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