In this, the first of 3-part series, we’re taking a look at a critical issue facing most organisations who engage contingent workers: their hidden contingent workforce.
What’s that? They’re the workers your business is paying for, that go largely unnoticed by management. Often, they’ve been in the business for a long time, and so seem ‘part of the furniture’. Or, they’ve flown under the HR/Procurement/FC radar, they’re the product of ‘rogue hiring’ or they’re a misallocated cost.
It’s a common revelation for most organisations we work with: upon commencing an audit of their workforce, we uncover a raft of talent, that are simply unaccounted for. And the shock, as you can imagine, is typically extreme.
This 3-part series will cover the key issues around the hidden contingent workforce. These are:
- The negative by-products of unaccounted contingent workers
- Examples of how organisations have uncovered these workers
- Solutions to resolve the issues of hidden contingent workers
- Strategies to prevent re-offending & the path forward
The Negative Impacts of Hidden Contingent Workers
Before we delve into the shock of uncovering a hidden contingent workforce, and the potential impacts on a business, let’s first look at the scenarios in which these circumstances come to pass. Here are some that we’ve been exposed to:
- Line managers are under pressure to boost productivity and output, on increasingly tight resources. Short-term investment in talent is often the answer, so directly-hired workers are brought in, and paid for in departmental budgets
- IT are working on a major project and need workers for specific roles, over a specific timeframe. These workers are found directly via professional networks and referrals. HR doesn’t play a role
- Marketing need copywriting resources prior to a brand refresh. A freelancer is brought in to do the immediate work, and stays on thereafter to deliver work outside the original brand scope. His invoice is approved by the Marketing Manager
- Finance decides to bring in several interns for a six-month period leading up to reporting season. They’re paid minimal salary, and have minimal documentation. Some stay on for over 12 months. In HR’s eyes, they’re undocumented
- The PMO brings in 3 data analysts mid-way through a significant systems project. They’re located offsite, and remain in the business post go-live
- A Facilities Manager in Sydney appoints three temporary workers to relocate the staff in the Hong Kong office. They’re paid locally, well beyond the project timeframe
- A last-minute project gets off the ground, and there’s a scramble for talent. The hiring manager engages a staffing vendor to secure contract talent immediately. They pay way above market rate
These are relatable scenarios because they’re real.
So… what happens in this situation? This is what: a host of avoidable scenarios, all of which don’t exist in isolation. Hence, a few positive actions, will have a positive knock-on effect.
Read on…. (but be warned, it’s not pretty).
- You can’t forecast with clarity: as demand fluctuates in many organisations, sometimes seasonally, sometimes due to a business windfall, if you’re not prepared for these fluctuations, you’ll likely revert to staffing providers to fill your needs, last minute. Your costs blow out, leaving forecasting heavily inaccurate and cost-burdened
- You pay more than you need to: whether that be due to the last-minute nature of your approach to finding short-term talent, or because you’ve always hired this way, you’re not across fair market rates. Better visibility of your workers, and their rates, will potentially save your business significantly
- You’re at risk: this is possibly the most detrimental effect of all. If you’ve got talent on your ‘books’ of which there’s limited or zero visibility, you’re most likely breaching ATO rules around worker classification, co-employment, deemed employee status or a number of other contract hiring tax office stipulations. The impact could be financially devastating..
- Not all contractors are equal: by this we mean, poor visibility of your contingent workers can lead to real inconsistencies in pay rates, across contract worker categories. It makes no sense to pay any variance (huge or not) for the same worker type
With getting close to 40% of workers in big business classified as ‘contingent’ you can see why these situations arise. And as organisations farewell retiring baby boomers, along with their expertise and IP, they scramble to fill talent gaps.
As a final note, be aware that ‘contingent workers’ aren’t simply highly-paid, IT contractors (as is the oft-claimed reputation). Here’s a list of the types of contingent workers that could be in your business:
- Temp worker
- Independent contractor
- Statement of Work contractor
- Part-time employees
Next week, we’ll take a look at examples of how organisations have uncovered a hidden contingent workforce in their business.
If you’ve found contingent workers in your business that you were unaware of, please let us know in the comments below. Or… if you have any queries, simply comment below.
CLICK HERE to go to part 2 of this series….