Minimising contingent workforce risk is a pillar of our strategic approach here at CXC. As a contingent workforce management business that’s been around for over 27 years, we’ve seen it all, when it comes to risk exposure:
- When organisations aren’t aware of or don’t understand all contingent workforce risk their business may be exposed to
- When organisations have taken a ‘hands-off’ approach to their contingent workforce management, and therefore have limited visibility of the quantity or function of these workers
- Worker misclassification: when contingent workers aren’t carefully managed, their ongoing involvement with the company can mean they may be a ‘deemed employee’ risk
- Security risks: from technology risks to the exposure of company IP, and sensitive or confidential information.
And this list is by no means comprehensive.
Today, I’ve taken an analytical eye to some of our past blog content regarding contingent workforce risks.
My goal here is to shine a light on the key risks you’re well advised to understand, to keep your business compliant in how you manage contingent workers. Or, to ensure you’re prepared if you’re about to take on contingent workers for the first time.
Contingent Workforce Management Programs: do they mitigate risk?
Contingent workforce management programs are the single most potent weapon you can engage to mitigate any and all contingent workforce risks.
The reason for this is simple: in the absence of a strategic management plan for these workers, your business will likely be exposed to financial, statutory and other significant penalties. All of which are avoidable with a management program in place.
As we outlined in this article these are the key risk-mitigating by-products of establishing a strategic contingent workforce program in your business:
- You will achieve best practice: and as you know, the achievement of best practice is powerful for any part of your business. But in relation to contingent workforce management, best practice in today’s world of data and digitisation means you can make better, more informed decisions about these workers.
- A program will uncover any ‘hidden’ contingent workers in your workforce population. The risks associated with hidden contingent workers are many. You’ll likely be over-paying these workers (as they’re unregulated). With little visibility, you can’t manage their performance or your return on investment in them. And, your business IP could be at risk; if you don’t know who is accessing what data, you can’t protect your business information loss.
- A contingent workforce management program will deliver workforce legislation compliance. The statutory requirements of organisations with contingent workers are typically complex and frequently changing. A strategic program, especially one managed by an expert third party, will provide a full interpretation of laws, and compliance for your business.
The top 6 contingent workforce risks
In this article, we highlighted the six key risks that we have seen across organisations of all shapes and sizes, associated with contingent labour. These risks can be far-reaching and potentially fatal. And they have implications for all parties to the contingent workforce relationship: procurement, HR, line managers, the C-Suite, even the Board.
The key risks which we covered in this article (link in the header, above), must be fundamental to the contingent workforce management program in your business. Be aware of them, understand them, so you can prevent them from becoming a reality.
Let’s now take a look into these risks:
- Intellectual Property Risks: when an organisation doesn’t have a structured contingent workforce program in place, the IP, trade secrets and any confidential data are at risk of exposure to non-employee workers. Not only must information be securely managed, but having structured onboarding, offboarding and management protocols in place for contingent workers, is vital.
- Security Risks: breaches in security standards can expose the organisation to significant threats. Not only the risk of IP exposure but malicious hacking and other cybersecurity threats. Having visibility of the apps, technologies and IT privileges available to contingent workers, will lessen the opportunity for external attacks on the business.
- Worker Misclassification: if a contingent worker has been in your business for an extended period, your treatment of them may reflect that of a regular full-time employee. Which is when the law may deem them misclassified. As a result, you may be up for significant statutory payments and penalties.
- Financial Risk: there are multiple ways your business can be at risk financially if your contingent workers aren’t managed properly. These risks include inconsistent and poorly managed worker rates; cost explosions from rogue hiring (where line managers take on the hiring of contingent workers, outside of the agreed company process); and a lack of visibility of workers will mean you don’t actually know the cost burden of contingent workers to your business.
- Poor Screening: this is the scenario where contingent workers are introduced into your business, without the requisite screenings afforded to permanent workers. The thinking from the organisation or line manager is often ‘they’re just there to get project XX completed… just get them on board’. It’s a dangerous approach, as quality control and adherence to company standards can be compromised.
- When the organisation has no centralised strategy for managing contingent workers, all of these risks have the potential to become reality.
The risks of remote working
In this article we analysed the findings shared in a CXC online event, where industry experts came together (via Zoom), to give us a clear picture of the contingent workforce risks associated with remote working. These risks are new in the context of COVID and the mandatory workplace changes we’ve experienced in 2020.
You can watch the replay of this event here.
For now, I’m going to cover off the contingent workforce risks when it comes to remote working:
- Workers are unlikely to go back to the pre-COVID ways of working, so management of contingent workers who are not in the office will require a robust, strategic framework
- The use of technology for communications purposes will prevail as we continue to come through the COVID crisis, and work remotely. Ensuring your contingent workers are delivering to plan via the use of these technologies, will be crucial in a remote working situation
- Ensuring the treatment and engagement of contingent workers as external parties will also be key. This will remove the risk of worker misclassification. Maintaining the distinction of how these workers are managed and engaged, versus employees, must be maintained in a remote working environment
- If contingent workers choose not to return to the office at all, employers need to respect these wishes and establish a WFH situation that enables them to do their job
- Work health and safety issues cannot be ignored. The organisation has an obligation to consult and communicate with workers regularly and to be accessible. A checklist of healthy workplace factors is advisable, so remote workers understand and apply all relevant health and safety guidelines
There’s plenty more for your business to be across when it comes to risk management and minimisation of the contingent workers on your team. Take a look at this synopsis from Deloitte. Or, head over to our blog, and you’ll find comprehensive and up-to-date insights.
As one of the world’s leading providers of contingent worker management solutions, CXC is well positioned to optimise all elements of your contingent workforce strategy. With operations in more than 50 countries across five continents and decades of experience, we can assist with every aspect of your program.
If you would like to find out more about how we can help please contact us here.