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Introduction to Contractor Management Outsourcing
Contractor management outsourcing (CMO) is the process undertaken by an organisation to outsource the engagement, management and payment of their non-employee workforce, to a specialist, external partner. The partner acts as the intermediary and management provider between the contractors and the host company who has engaged them.
Contractor management outsourcing offers a strategic competitive advantage to companies who:
- Need to scale their workforce up or down based on market conditions or seasonal fluctuations.
- Need specialist talent for major projects.
- Seek to avoid the administrative burden of managing workers who aren’t permanent employees.
Contractor management outsourcing means the entire process of hiring, managing and paying independent contract workers (who aren’t on your payroll) is compliantly managed by an external partner.
And with the rise of the gig economy over the past decade, businesses have shifted their thinking and their workforce planning, to be more flexible, adaptable and agile. So, they’re accessing short-term talent to solve critical business demands.
Today, the gig economy offers organisations the ability to:
- Lower overhead costs of full-time labour (including statutory obligations, healthcare, and taxes).
- Reduce overhead costs of running an office, as fewer permanent workers require less physical space.
- Hire highly skilled, specialist talent, not needed on a permanent basis.
- Bring short-term talent into the business with fresh ideas, perspectives and outlooks. This has the potential to invigorate teams, culture and output.
- … amongst other benefits.
The gig economy also brings complexity to the process of workforce management; a situation which has seen the demand for contractor management outsourcing escalate, as companies who engage contract workers seek to avoid the hassles of finding and engaging them, as well as the risks of non-compliance.
But is contractor management outsourcing right for your business? Today, we’re looking at the full picture of contractor management outsourcing, so you can determine if it’s the solution your business needs.
Evaluating Your Need for Contractor Management Outsourcing
Signs You Need Contractor Management Outsourcing
Contractor management is a complex, highly demanding process that can take up a significant amount of company time and resources. For a start…
- You need to ensure your contractors are qualified, eligible to work, and are suited to your business.
- You need to communicate with them regularly, in the right context and ensure their participation in your business reflects a contractor, not an employee.
- You need to understand the relevant workplace legislation and be acutely aware of what’s required for specific job types, and risk levels. And you need to remain abreast of legislation changes (which can happen frequently) and be able to interpret and apply those changes to your business, compliantly.
It can be tempting to manage your contractors in-house so you feel in control of the process, so you have oversight of the contract workers and so you can ensure they’re managed in line with your business processes.
But… this takes significant expertise, which you may not possess in-house. And, as a time-intensive process, you may need to redirect internal resources away from your core business.
If contractor management is becoming too time-consuming and diverting your focus from priority business tasks, or if you’re facing challenges understanding the relevant rules and regulations, it might be the right time to think about contractor management outsourcing.
Compliance and Legal Challenges
The legal and regulatory compliance issues associated with managing contract workers are complex and unique, no matter where your business is located, but especially so if you’re a multi-country operation. The major issues relating to contractor management compliance relates to:
- Keeping up to date with both local and international employment laws that oversee contract workers.
- Establishing internal policies and protocols to guarantee adherence to applicable labour laws, tax regulations, and other legal mandates.
- Comprehend and apply the complexities of international employment laws.
- Reducing the legal risks associated with global contingent workforce management by implementing cross-border compliance strategies.
There are also the risk-mitigation efforts your business needs to consider. These include:
- Perform detailed risk assessments to pinpoint potential risks associated with managing contract workers, encompassing legal, financial, and operational aspects.
- Classify risks by severity and probability and allocate resources accordingly.
- Create backup plans to minimise known risks, ensuring there are strategies in place to tackle unexpected obstacles.
- Set up precise protocols to manage emergencies, disruptions, or unforeseen events that could affect contingent workforce management.
Scaling Your Workforce Flexibly
Scaling your business via increased revenue and client acquisition is the common goal for most organisations. To achieve this successfully and seamlessly can be both daunting and challenging, especially if your full-time employees are at capacity, or require upskilling. This is where contingent workers are an absolute boon for growing organisations.
Being able to scale with the right skills, the right quantity of workers and the right timing, can be hard to facilitate in-house. Especially if you don’t have an established contract worker pipeline that you can tap into.
Also, if you plan to scale by engaging new contingent workers, but without the right internal know-how, you’ll inevitably encounter avoidable administrative headaches that can completely distract you from the very act of scaling. It ends up being a lose-lose situation.
If this sounds like your business, a CMO partner could be the growth lever you need to pull.
Benefits of Contractor Management Outsourcing
If you believe your business is ready to outsource the management of your contract workers, get ready for a wealth of strategic advantages and benefits. These include:
Cost-Savings and Efficiency
Cost-savings and improved process efficiencies are arguably the greatest benefits of outsourcing your contractor management. This is what you can expect:
- Rather than spending time on sourcing, interviewing, managing the hiring process, reviewing documentation, compliance checking, onboarding, payroll managing – and more – you can redirect your focus towards your core business priorities. How? Because ALL these steps in the engagement and management of contractors will be taken care of by your outsourcing partner.
- And to this end, by dedicating internal resources to strategic goals and core business, rather than the endless administrative tasks of managing contractors, you will enjoy better output from a well-managed, engaged contractor team.
- Contractor management outsourcing will allow you to start projects faster: while you focus on permanent workforce planning and strategic issues, your CMO partner will facilitate the additional contract labour you require for project execution.
- Most CMO providers will have a private talent pool for you to access. This means your ability to secure contract talent will be fast and efficient and, importantly, with trusted workers.
Access to Expertise and Improved Compliance
Misclassification and non-compliance are two of the greatest risks you face in taking on contingent workers if you choose to manage them in-house. But by accessing the right expertise and specialised knowledge of a CMO partner, you can mitigate these risks and enjoy a high-performing, quick-to-productivity contingent workforce. The key issues with compliance include:
- Understanding compliance legislation and the requisite documentation can be complicated and ever-changing, especially if you’re a multi-national operation. For an in-house team, a significant amount of time would be required to get up to speed, especially if the task is given to someone on top of their existing job.
- If you fall foul of local WHS laws, insurances and other statutory requirements, your business will be at considerable risk of financial penalty and reputational damage.
- Your CMO partner has the expert knowledge to understand, interpret and apply legislative rules within your contingent workforce program. And to ensure when legislation changes, your business remains compliant.
Making the Decision for Your Business
It’s important to assess whether your business needs a CMO partner before diving into evaluating the relevant market operatives. To this end, it’s vital that you undertake an internal audit on your current and future business plans, growth trajectories and the accompanying workforce planning requirements.
There are key questions you can ask your HR leadership and the broader business leadership to determine if a CMO partner is right for you. These include:
- Do you already use a significant number of contractors?
- Is this by department, or business-wide?
- Is this a permanent state, or seasonal/fluctuating?
- Are there lessons you can take from your existing contractor program?
- Are your workforce management costs continuing to increase?
- What are the causes?
- Again, is it departmental or business-wide?
- Does your business have the internal knowledge and expertise to mitigate the risks of in-house contractor management?
- Are you using multiple talent and technology vendors to manage your workforce – both contingent and permanent? Is it time to streamline?
If your internal assessment leads you seeking a CMO partner, make sure you talk to a proven, trusted industry specialist (like CXC). Choosing the right outsourcing partner is as important as deciding you need a CMO. By focusing on a quality, established solution with flexible technology and high-end customer service, you’re guaranteeing the success of your contingent workforce program.
At CXC, we understand the complexities and challenges of managing a contingent workforce in today’s dynamic business environment. As an industry leader in contractor management outsourcing, we offer tailored solutions that ensure compliance, enhance efficiency, and allow you to focus on what you do best. Contact us today to discover how we can support your business in navigating the gig economy with confidence and strategic advantage.
