Back to Blog
Hiring an extended workforce can have a number of benefits for an organisation. For one thing, this approach injects flexibility into your operations, allowing you to react quickly to changing market conditions. It can also reduce workforce costs and give you access to specialised knowledge and expertise. But if you don’t have a solid contingent workforce management strategy in place, it’s hard to access these benefits. In fact, many organisations have no idea what their contingent workforce looks like — which leads to spiraling costs and complex engagement structures.
In this article, we’ll take you through everything you need to know to build an effective strategy for managing your contingent workforce in 2024.
What is a contingent workforce management strategy?
Contingent workforce management is the process of sourcing, hiring and managing an extended workforce. This group encompasses many different types of workers, including independent contractors, freelancers, gig workers, SOW contractors and temporary employees.
As you’d expect, each of these groups has different needs and expectations reguarding work. As a result, they often end up being managed separately by different teams — leaving organisations with no visibility over their contingent workforce.
Building a contingent workforce management strategy allows you to bring these different workers together under one programme, giving you full visibility. When done right, it can help you reduce costs, increase productivity and solidify your reputation as a top-quality employer for contingent workers.
The key components of managing a contingent workforce
Managing a contingent workforce is a complex business. Here are some of the many facets involved:
- Workforce planning: Your contingent workforce needs to work for you in the long term, not just today. A big part of contingent workforce management is planning ahead and ensuring you’ll always have the workers you need — without wasting money.
- Sourcing and procurement: Companies need proactive strategies to source and engage the best contingent talent. External direct sourcing providers can help ensure you’ll always have the people you need ready to be deployed.
- Employee value proposition (EVP): With contingent workers making up 30–50% of the workforce in some organisations, it’s vital that this group isn’t ignored when you put together your EVP. That means developing strategies to ensure contingent workers end up with a favourable view of your organisation — helping you to become an employer of choice for contingent talent.
- Onboarding and training: The first few days of a contingent worker’s engagement can have a big impact on their overall experience with your organisation. It’s important to set up comprehensive onboarding systems that prepare each worker to deliver top-quality work.
- Compliance and risk management: There are many risks associated with the contingent workforce, including employee misclassification and issues with taxes, labour law compliance and co-employment. Companies employing any number of non-employee workers need to be aware of the rules and regulations in their country to avoid putting their business at risk.
- Payroll and benefits administration: Paying contingent workers typically works differently from your regular payroll. Businesses need to ensure they have suitable systems in place to pay independent workers easily, accurately and efficiently.
- Relationship management: Employers give a lot of thought to things like company culture, management styles and employee engagement when it comes to their permanent workers but often neglect to do the same for their contingent workforce. Thinking carefully about how you engage with your workers can help you to develop a reputation as a top-quality employer.
- Offboarding and redeployment: A smooth offboarding process ensures that independent workers have a positive experience of your organisation, right to the end. The best contingent workforce management strategies include systems for redeploying workers to new projects, ensuring that the best workers are retained for longer.
- Analytics and reporting: You can’t properly manage your contingent workforce if you don’t understand it. That’s why reliable, accessible and easy-to-understand analytics and reporting are a must in 2024.
- Technology and systems: Companies that employ large contingent workforces typically use a range of different technologies and systems to manage them. For example, a vendor management system (VMS) can give you visibility over your workforce and the processes involved.
5 core challenges of contingent workforce management in 2024
Let’s get into some of the key challenges businesses face when it comes to putting together a contingent workforce management strategy — and how to overcome them.
- Understanding your contingent workforce
Contingent worker management programmes are often decentralised and confusing — and many organisations don’t have a clear view of their workforce.
Part of this is because the ‘contingent workforce’ is made up of many different types of workers who are all engaged and managed by different people. For example, freelancers may be managed by the team they’re working with, while SOW workers might be managed by the procurement team.
This leads to a siloed system where no one person has full visibility over the workforce. The first step in developing a comprehensive contingent workforce management strategy is learning what your workforce actually looks like.
Before you can move forward, you need to know:
- How many contingent workers you have overall
- What percentage of your workforce is made up of contingent workers
- The total cost of your contingent workforce
- What sourcing channels you’re using to find contingent workers
This is a long process that involves collaborating with many different parties, including HR, procurement, line managers and finance. But you can’t move on to developing your contingent workforce strategy until you’ve nailed this info down.
- Meeting evolving worker expectations
Over the last few years, we’ve heard a lot about the changing needs of the workforce. Today’s workers value flexibility, have a stronger focus on work-life balance and want to work for companies with purpose-driven cultures. These conversations are typically limited to the permanent workforce. But we shouldn’t neglect the needs of our contingent workers, which have also changed.
In fact, this is a big part of the reason that many people become independent workers in the first place: in a 2022 McKinsey survey, a quarter of the independent workers surveyed said that the need for flexibility and autonomy was the reason they chose this type of work.
So, what does this mean for your contingent workforce management strategy? Simply, that you should carefully consider what different types of workers need and expect from work, and build a management strategy with that in mind.
- Bridging knowledge gaps through succession planning
According to a 2022 McKinsey survey, 36% of all employed Americans consider themselves to be independent workers, compared to 27% in 2016. Another survey suggests that as much as 49% of the average company’s workforce is made up of external, extended workers.
This increasing use of temporary workers over permanent ones can represent a loss of organisational knowledge over time. After all, contingent workers are only with you temporarily, and they’ll take all the knowledge they’ve gathered with them when they move on.
Handling the effective transfer of knowledge needs to be a big part of your contingent workforce management plan. You can do this through structured knowledge transfer programmes, mentorships and continuous learning and development. It’s about creating a culture of growth and development for your internal and external workers.
- Optimising cost management
One of the biggest reasons that companies turn to contingent workers in the first place is to reduce their workforce costs.
But if you don’t have a solid contingent workforce management strategy, you may end up dealing with multiple middlemen and suppliers with no real oversight of your entire contingent workforce. When this happens, it’s easy for costs to spiral — many companies aren’t even aware of how much they’re spending on contingent workers.
If you want to optimise the cost of your contingent workforce programme, you first need to understand exactly what it looks like. You should also define an ‘owner’ who’s responsible for overseeing the entire programme, and creating standards and processes that prevent managers from hiring contingent workers outside of official channels.
It’s also important to remember that there’s always a balance to be struck between low costs and quality of talent. The important thing is that the contingent workers you engage are skilled and productive — even if they don’t necessarily come at the lowest cost.
- Ensuring compliance and mitigating legal risks
There are lots of different national and state-level laws and regulations that govern the contingent workforce — and they change frequently. This can be a lot to keep up with, especially if you’re hiring workers across several jurisdictions.
For example, one of the biggest risks to your business when hiring independent workers is employee misclassification. This is when businesses (intentionally or unintentionally) classify workers as independent contractors when they are really employees — and it can have a severe financial and reputational impact on your business.
At a minimum, consider consulting with legal experts when putting together your contingent workforce management strategy. But you may also want to think about working with an employer of record (EoR) provider with integrated compliance services — like CXC. These companies take on the administrative and legal burden of engaging workers, ensuring proper worker classification and reducing compliance risks. Some EoR providers also offer additional services, like sourcing and managing your workforce on your behalf.
Creating a strong workforce management strategy for 2024 and beyond
In 2024, it’s no longer enough to manage your contingent workforce on an ad hoc, casual basis. Nor is it appropriate to lump your extended workforce in with the rest of your staff, whose needs are very different.
The companies that get the most out of their contingent workforces in the years to come will be those that develop holistic, future-oriented and proactive strategies for managing them. It’s about taking a total talent approach that breaks down silos between permanent workers and different types of temporary labour, to create a productive workforce where everyone works to their strengths.
Need some help putting your contingent workforce management strategy together? That’s where we come in. We can deliver comprehensive solutions to help you source, engage and manage your contingent workforce — with no administrative headaches or compliance risks.
Want to find out more? Get in touch with our team to find out how we can help you.
