Engaging the Global Contingent Contractor Workforce: Challenges and Opportunities

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As firms seek to enter new markets and global supply chains become increasingly complex, contingent workforce managers need to access qualified talent when and where they need it. This has lead many businesses to increasingly engage the global contingent contractor workforce, from utilizing foreign workers to support extended global operations and to tapping specialized remote project workers not readily available in their home markets.

Alongside this contingent boom, however, comes several challenges. From evergreen labor compliance and payment issues to data protection and intellectual property risks, contingent workforce managers have before them not a just a talent opportunity but also numerous potential problems they must plan for.

Just what are these challenges and opportunities? To learn more, we reached out to John Smith, managing director, Americas, at CXC Global, to discuss how his company has seen business’ approach to the global contingent contractor workforce change during its 25 years in business, as well as how to prepare for this brave new world.

Andrew Karpie: How do you define "global contingent contractor workforce?" What's the category made up of?

John Smith: As an increasing number of organizations extend their markets or conduct operations in foreign countries, they must deploy workers in those areas -- for example, oil exploration and security workers in Nigeria. Alternatively, an organization may engage a group of remote, project workers in another country.  An example of that could be a software development team in Poland. These tend to be non-permanent — that is, contingent — workers who are engaged by organizations for specific projects or even assignments of an indefinite length of time.

There are a variety of means these contingent workers may be engaged and deployed (e.g., through direct engagement, staffing and recruitment firms, even online gig platforms). Ultimately, however, these workers must be paid and administered under the legal system of the country they are working in — which is where CXC comes in.

AK: In terms of your company's customer base, what types of customers are served (e.g., locations, industries)? How has that been changing?

JS: We have been providing services to organizations around the world for 25 years now. We now operate in over 60 countries and maintain 30 in-country/region offices. As for the industries of the client we serve, earlier on many clients were in the telecommunications infrastructure development and then later oil and gas exploration and services. Over the past three years we have seen customer expansion in consumer products and services, consulting and financial services, entertainment and event management.

AK: What are your customer’s focal points when understanding and centralizing their global contingent contractor workforces? What are some of the reasons companies use global contingent contractor workers, and what benefits do they seek?

JS: As companies expand their use of global contingent labor, their challenges are adequately tracking and reporting on their workforce and ensuring that contingent worker engagements are compliant with local legal requirements.

Companies have been using contingent workers globally for years. But more recently there has been an uptick in worker misclassification investigations spearheaded by countries’ revenue departments. Therefore, many companies are now putting compliance with country standards at the forefront of their contingent talent engagement strategies.

The benefits of utilizing global contingent workers include the ability to expand and contract workforces when needed, as well as to get access to top-notch talent across the globe. The benefits are significant, but organizations are realizing that achieving these benefits requires local compliance.

AK: What are some of the challenges that companies face in using global contingent contractor workers? And what does a company like yours do to address and mitigate them?

JS: First is the challenge of dealing with local laws and regulations. Regulations for employees, freelance/gig/independent and self-employed workers are complex, vary by country and are always changing.

Another one is payments. Contractors in the past and today have been compensated via direct payment either by the organization engaging them, a third-party staffing intermediary or one of the many monetary exchange payment platforms. Governments and tax agencies around the world are focusing attention on the expanding use of contingent and gig/freelance/independent workers within the borders. Payments to workers in any fashion should be compliant with local employment laws. Governments are aware that payments via online payment platforms can avoid declaration within the local tax structures, and we think this will be another government audit focus and a new problem for organizations.

An important one that may be overlooked is data protection. A foreign non-employee who has access to a company’s data brings about another unique set of challenges. While many contingent workers sign and are bound to companies’ data protection policies, enforcement of these agreements can be very difficult in countries where the company has no legal entity but is engaging a contingent worker. Organizations must ensure work is always done within their firewalls, and they must specify and control how a worker has to store data on their personal computers. Work completed within an authorized technology platform also helps security concerns.

Analogous to data protection is IP protection. For example, organizations may be engaging foreign workers that will play a role in developing a new product or service. Allowing workers access to designs, client lists and the like open companies up to IP theft. Companies need specific governance and control measures to ensure their IP is protected.

AK: How do you think the current global political environment will affect how companies use the global contingent contractor workforce?

JS: Globalization is here to stay, but workforce-related restrictions or barriers may increase, thus increasing the tendency for organizations to engage workers where they are, in their home countries.

For example, countries establishing more restrictive work permit and visa qualification standards make organizations less likely to bring foreign workers into their own countries. Conversely, organizations may be less likely to send their own workers to do work in foreign countries because of tightening work permit and visa restrictions in foreign countries.

They may also be dissuaded from doing so by growing taxation of cross-border money transfers and increased audits. We have experienced some wire audits recently within our organization, as countries want to understand why recurring payments are continually made.

AK: So it’s a brave new world out there? Globalized markets and supply chains, but increasing restrictions and barriers to movement of labor, skills, expertise.

JS: In a sense, it is. But there are ways for organizations to effectively operate global businesses in this new environment. One way is using contingent workforce in other countries — it solves a lot of problems. But as we discussed, labor law and payroll compliance in the foreign country must be addressed.

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