The Future of Contingent Work

The fourth industrial revolution has arrived and with its arrival, we are faced with a multitude of new technologies.  The explosion of online talent platforms will seem to pale in comparison when looking at AI and how it is going to transform the world of work, how work is done, how talent is engaged and managed.

Having been invited to be part of the HR.com advisory board, CXC are pleased to share results from the recent State of the Free Agent Nation and Contingent Workforce 2020 Survey.

Artificial intelligence and assessment technology seen as important to the future

When asked about which technologies will become more important to managing the contingent workforce over the next three years, respondents most commonly point to artificial intelligence (AI), cited by 41%. Other HR.com studies have also shown that AI plays, and is likely to play, a major role in the talent acquisition function.

Assessment technology (39%) is also expected to play a major role. This may be because many practitioners think the potential for an ongoing rise in contingent workers will cause a more profound need for screening. With assessment technologies, organizations can evaluate skills and cultural fit at the point of hire as well as post-hire.

One-third say security-focused technologies will be useful (34%). Consider, for example, a contingent software engineer who needs to access systems with confidential information. A third also report tracking technologies will become more important. Such technology may apply to remote workers or those using vehicles on a daily basis.

Companies most commonly employ contingent workers to reduce costs and boost skill levels

Companies use contingent workers for a variety of reasons. The most commonly cited reason is to reduce costs (42%), followed by the need to boost skill levels (37%). One reason for this may be tight labor markets leading to skills shortages. Sometimes companies need the addition of certain skills for short periods. On the other hand, about one-quarter (27%) use contingent workers to vet potential full-time employees.

Agility is also a major factor. Thirty-five percent use contingent workers to boost agility and help them maintain a nimble business model. Such workers can especially help companies that have unpredictable or seasonal workloads and need to manage peaks and valleys in their business. Agility is, of course, often associated with speed, and 23% say they use contingents to increase the speed of the hiring process.

Other reasons for employing contingent workers are to handle special projects assignments or fill short-term vacancies, such as those due to medical and family leave.

Companies involve HR and line managers to a high or very high degree 60% of the time

When hiring contingent employees, companies generally need to pay attention to a host of legal, financial and human capital considerations, yet HR and line of business managers are not highly involved in  such decisions 40% of the time. Most of the time, however, they are involved to at least a moderate degree.

HR is more likely to be very highly involved with such hiring decisions than line managers, but line managers are slightly more likely than HR to be involved to at least a moderate degree (82% vs. 78%).

Sometimes organizations rely on procurement or purchasing departments to help make contingent hires, but this survey suggests that it is the exception rather than the rule. Procurement/purchasing departments are only highly involved in 18% of organizations. This can be interpreted two ways. On one hand, HR and the line know their markets best and should own most of the hiring process. On the other hand, procurement may have more experience negotiating contracts. Moreover, when procurement oversees vendor relationships across the company, there is the potential for better pricing.

Speed and agility appear to be the common characteristics of providers of contingent labor

Based on their responses to the previous question about their most useful sources of contingent staffing, participants revealed their perceptions about the key benefits of those sources. Three-quarters agree or strongly agree that their top source helps them fill positions faster. Fifty-nine percent say that their top source can redeploy the individuals they want when needed. The fact that these two characteristics are most widely cited suggests that speed and agility are most highly valued.

Fewer say their sources of contingent workers provide cost effective solutions relative to hiring full-time staff (54%), offer highly skilled talent on-demand (50%), and provide excellent data/analytics (20%). This suggests that many third-party providers value speed and agility before lower cost or skills.

Organizations use a variety of sources while acquiring contingent workers

Generally speaking, companies turn to third-parties when they do not have the in-house expertise, time, or technology to source contingent hires on their own. HR professionals most often turn to staffing (45%) and temp agencies (39%) for these services. Staffing agencies will sometimes specialize in certain industries and temp agencies sometimes specialize by job function.

A little over one-third of organizations use recruitment process outsourcing service providers (34%). Companies may engage in relationships with RPO firms when they need to hire high volumes of workers (e.g., call centers), and may find it expensive or cumbersome to maintain enough in-house recruiting expertise.

We found that large companies (1,000 or more employees) tend to use RPO more, 50% versus 39% for mid-size organizations and 25% for small organizations.  One-quarter of HR professionals also use online talent or freelancing platforms (25%). This is particularly true when companies are sourcing contingent hires internally or when an organization wants to reach out directly to a candidate instead of using a third-party.

There is no consensus on which sources are most useful for acquiring contingent workers

he source most widely considered useful is staffing agencies (26%), followed by temp agencies and talent platforms, both at 18%. The reported value of staffing and temp agencies makes sense. After all, these services are the traditional sources of contingent workers, are most widely used, have long-term relationships with contingent candidates and employers, can leverage industry expertise, and are practiced at the screening stage for contingent workers.

What is a little more surprising is that just as many respondents cited talent platforms as temp agencies. Most of these platforms have only been around for a decade or so, thus the utility cited here suggests they have carved out a successful niche in today’s labor marketplace.

The “other” category, cited by 20%, is composed mostly of respondents who think their company’s internal sourcing channels are most useful. As organizations use social media and other sources to develop networks and external pools of talent, internal sourcing becomes more feasible.

Companies evaluate a variety of criteria before engaging with a third-party

Prior to beginning a relationship with a third-party sourcing provider, companies assess a variety of criteria. The most commonly cited criteria are rates and fees (59%) and quality of personnel (57%). These are the only two criteria cited by more than half. Other top criteria include industry specialization (45%), ease of use (40%), and reputation (39%).

Fewer (35%) look for speed of contingent candidate acquisition or screening and selection processes. This is interesting because speed is what employers are most likely to get out of their providers, whereas they are less likely to say they get some qualities they want even more, such as cost effectiveness and high levels of skills.

Most believe the contingent workforce will continue to grow

More than two-thirds of HR professionals believe that, in general, the contingent workforce will continue to grow in coming years, whereas few (6%) believe the concept is over-hyped.

This does not mean, however, that there will not be complications in the future. Indeed, about a third of HR professionals think that regulators are going to need to step in and manage the contingent workforce more. Today’s labor regulations delineate the classification of full-time worker from a contingent worker. As companies work harder to collectively hire, engage, manage and reward full-time and contingent workers, some companies may struggle with state and local labor laws and regulations. In such cases, it is generally wise to defer concerns to internal or external legal counsel.

In general, HR professionals seem more likely to hold positive rather than negative views of contingent work. Whereas 45% say that the contingent workforce is good because it offers people more choice, just 17% say it will drive down wages or that it will “lead to a dystopian nightmare” (5%).

For more results and related infographics, visit hr.com.   Contact us directly to talk more about your contingent workforce strategy locally in the U.S. or globally.

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