What are the risks of engaging contingent workers?

The rise of organisations using contingent workers presents a set of potential challenges and risks if their engagement and management are not handled properly.

At our recent Emerging Workforce Summit, a number of industry speakers covered this very topic, including the most recent former Fair Work Ombudsman, Natalie James. You can review the discussions about risk from the EWS right here.

Today we touch on this subject again, as the risks of engaging contingent workers is a constant source of concern, inquiry and conversation for us with our clients, industry peers and professional networks.

Why?

Because any organisational leadership team that isn’t hiding under a rock appreciates the strategic value contingent workers offer organisations of any size, complexity or industry. The reasons for this are many: rising labour costs, the need for agility amid changing market conditions and increasing demand from workers to undertake contract work, to name a few.

The problem is, faced with potential risks and the unknown, concerns arise within HR, procurement, C-suite and hiring manager circles. It stands to reason.

As such, I’ve provided a list of the potential risks facing organisations who have contingent labour in their workforce, and our approach to mitigating these risks. Ultimately, introducing contingent workers into your business isn’t a high-risk move; it’s forward-thinking and a strategic advantage if handled with precision and compliance.

Here are some of the risks of engaging contingent workers you need to be aware of:

  • A failure by large organisations to address changes in compliance laws: These are the organisations that practice ‘how we’ve always done it compliance’ in respect to managing contingent workers, and usually end up in hot water.
  • Employee misclassification: In a blended workforce – one containing both permanent and contract workers – this is a real risk if the worker has been in the organisation for some time, if it’s difficult to delineate this worker’s activity from that of employees or, if the worker is so integrated that they could be deemed an ‘employee’. There are significant penalties associated with worker misclassification – sanctions and fines from the government, which can be crippling for an organisation.
  • Sham contracting: akin to misclassification of a worker, this is the scenario where an employer is embroiled in an endemic misclassification scenario, where their contingent workers are discovered to actually be employees.
  • Poor communication with contractors at the onboarding stage: Where there are no clear boundaries around their role, capacity, and how they are to work with permanent employees and the broader business. Critically, if the contingent worker isn’t engaged as part of the workforce population in a systematic process, but rather they’re introduced by random hiring managers, the business faces multiple risks (listed here).
  • Loss of intellectual property, trade secrets, organisational knowledge and spilt company information: With a poor management system in place, you’re risking more than statutory non-compliance – the very foundation of your business could be at risk.

How can you minimise exposure to these risks? Here’s a start…

  • Establish a process for managing compliance: A standard process for engagement (from sourcing to offboarding) will enable you to better track compliance measures throughout the contingent worker’s tenure. For the ultimate in compliance management, all business-wide, role-specific and location-specific measures will be automated so that your compliance standards are at the utmost across your entire contingent workforce. And this is where technology plays a role…
  • Deploy vendor-neutral technology (like Beeline or Fieldglass – CXC’s partners in compliance management): A central hosting environment for the contingent workforce lifecycle will not only help to reduce risk, but it will also prove to be an incredible cost and time-saving measure, and provide valuable contingent workforce data.
  • Ensure contractors are required to sign NDA agreements: Ensure your legal team are across the entire contractual arrangement.
  • Keep abreast of updates on workplace laws: Check with the Fair Work Ombudsman website for changes and compliance stipulations.
  • Make sure you set defined parameters for contingent workers: So contractors’ roles don’t become ‘grey areas’, make sure you set expectations from the beginning.
  • Engage a partner (like CXC) to manage your contingent worker population: CXC is the biggest sole provider of contingent workforce management services in Australasia and mitigates all risks to client organisations.

 

As one of the world’s top suppliers of contingent worker management solutions, CXC is perfectly positioned to optimise all elements of your contingent workforce strategy. With operations in more than 50 countries across 5 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 with your contingent workforce solutions please contact us here.

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