Contingent Workforce Risks: The Top 6 [4 MIN READ]

Contingent workforce risks: The meteoric rise in usage of contingent workers, brings with it a number of organisational risks. And the implications of these risks rest with all parties to the contingent labour relationship: procurement, HR, hiring managers, the C-Suite and yes, even the Board.

Being actively aware of these risks will enable your organisation to take a number of critical steps before engaging contingent workers into your business. Like all things, the risks are by degrees. And there is a number that might surprise you.

Here, we’ve provided a list of the top 6 contingent workforce risks we’ve seen organisations in Australia experience, due to a lack of preparedness for introducing contingent labour into their workforce.

Bur first, take a look at this quick video about contingent workforce risk from Natalie James (ex Fairwork Ombudsman) at this year’s Emerging Workforce Summit:

 

 

The top 6 risks of taking on contingent workers, in no particular order, are:

1. Intellectual Property RiskS:

  • Without a set program in place to engage, manage, onboard and offboard contingent workers, the loss of IP, trade secrets, competitive data and more is very real
  • Restrictions on workers taking competitive contracts, NDA’s and other security protocols are all critical to secure your company’s vital information
  • Being lax, assumptive that ‘it won’t happen to us’ or simply unaware of how to securely manage information with contingent workers in your organisation is a major risk we’ve come across.

2. Security RiskS:

  • The evidence of risks in organisations without a strategic contingent workforce management program in place, show routine breaches in security standards. Here’s just some evidence of breaches…
    • 1 in 5 contingent workers used cloud apps like Dropbox or Google Docs to upload proprietary information without the knowledge of the IT department
    • Less than half of the contingent workers were informed of any application or data restrictions during their onboarding
    • 72% stated they were provided with admin privileges in the organisation’s IT system
    • 66% said they had access to corporate data within cloud apps AFTER they had completed their time in the organisation
    • Only 28% of workers said the organisation monitored their use of cloud apps for mission critical documents

3. Misclassification: Deemed Employee Status

  • Where a contingent worker has been with the organisation for an extended period of time, they’re typically treated like an employee and according to the law, could be deemed as such
  • It’s easy for this to happen: if the worker is so entrenched with your FTE’s, if they’re treated like an FTE, they are likely misclassified
  • This risk is huge: if uncovered, the government penalties can escalate quickly and have, in the past, brought down many organisations. As such, you need to get ALL your contingent workers established within the relevant contractual boundaries

4. Financial Risk

  • The financial risks come in multiple guises. There’s the obvious such as cost blow-outs from poor transparency and inconsistency from your agency suppliers and the margins they charge you
  • There’s also the financial risk where poor visibility of long-standing contractors in your business means you actually don’t know your financial burden (more on transparency below)
  • No regulation of rates for workers: the risk of over-paying for talent due to non-standardisation of rates across worker categories. This can happen for many reasons, including rogue hiring (see below), misclassification of worker (see above), and poor contingent worker management practices

5. Zero Screening Risk

  • If the contingent workers coming into your business are not adequately screened, assessed and in compliance with company standards, your business is at risk
  • Having the right processes in place to perform background checks, confirm information supplied by candidates including skills assessments, will help to mitigate the risk of a poor hiring decisions – regardless of skills or position

6. Zero Transparency Risk: The Risk of the Unknown

  • If you don’t know how many contingent workers are in your business, you’re running blind, and the risks that go with this scenario are many: financial, misclassification, IP and information loss, to name just a few
  • Rogue hiring – where, for example, a hiring manager in the business independently sources and hires contingent workers – can introduce contractors into your business that have not undergone requisite screening and quality control at the outset

BONUS RISK: Ad Hoc CONTINGENT WORKFORCE Management RISK

  • With no centralised strategy in place to manage contingent workers, you’re placing your business at risk of ALL risks listed here. It’s that simple.

 

Being educated about the various contingent workforce risks is your first step in the right direction. The information can be overwhelming, but the resources are many to help you get there.

And there’s CXC – it’s what we do. There are also fantastic seminars, like this one we’re hosting next week in Melbourne with the most recent ex-Fairwork Ombudsman, Natalie James, as well as Nick Duggal – Workplace Lawyer and Partner with Moray & Agnew, plus other industry experts.

Hosted by CXC and Deloitte, it’s a free breakfast seminar at Deloitte’s offices in Melbourne. Register here.

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