A Look Back on the Contingent Workforce Industry Over the Last 25 Years

gig economy

Contingent workforce management solution provider PRO Unlimited is celebrating 25 years of being in business. The contingent workforce industry has changed a lot in the last two years, let alone the last two-and-a-half decades. Andrew Schultz, PRO Unlimited co-founder and chief executive officer, shared his insights with Spend Matters on how contingent workforce management has evolved over the years, as well as how the technology has adapted to respond to the rising demands of customers. Schultz also shares his takeaways watching the company grow and evolve since it began and discusses the trends he thinks will shape the future of the contingent workforce management area.

Spend Matters: How much has the contingent workforce management space changed in the past 25 years? And how has that impacted how PRO Unlimited operates and serves its customers?

Andrew Schultz: Some things have definitely changed and some things have definitely not. Regulatory compliance has continued to present companies with challenges on local, regional and global levels. There are a myriad of regulations that companies need to understand and navigate to avoid any type of misclassification while addressing specific labor laws worldwide. Specifically, within the U.S., the Internal Revenue Service, Department of Labor and labor attorneys are carefully watching how the contingent workforce is treated. It has been that way since we started the company 25 years ago. Today, it is still a major driver for companies utilizing a contingent workforce.

But, the primary area that has changed is the “workforce.” Today, contingent labor is comprised of more mission-critical and intelligent workers than ever before. The freelancer or contract worker is more integrated into the core strategic delivery roles within many organizations. Additionally, the scope of contingent labor programs have radically evolved and expanded to include much more than traditional staff augmentation/temp workers, that enterprises are now managing outsourced services, statement of work (SOW)-based project firms and self-sourced contractors.

SM: Looking back on the last 25 years, can you point to some of the major trends, shifts, etc., in the contingent workforce space that had the biggest impact on the market?

AS: Yes, there have been a number of contributing factors that have had a major impact on the market including: technology advances, regulatory compliance, economic challenges such as the Great Recession in 2008 — all of which motivate companies and individuals to seek “gig”-based employment models/arrangements. One of the largest impacts has been the emergence of a purely vendor-neutral model, which means there is absolutely no affiliation with a staffing firm as compared to a traditional model where the managed service provider (MSP) managing the spend is owned by a staffing firm, which presents a conflict of interest.

Lastly, advances in technology and social/pervasive networking capabilities have had a major impact on how companies are identifying, sourcing and tracking contingent labor. Technological advances have led to increased self-sourcing and on-the-go workforces. Today's "mobile workforce" is growing exponentially, and the need for an omnichannel experience for both managers and employees is critical. Empowering users with the ability to access and manage their program data from anywhere is more than just convenient — it drives the right behaviors and efficiencies and contributes to the overall effectiveness of the program.   

SM: How has the growing gig economy impacted PRO Unlimited as a business as well as its customers?

AS: There are a number of ways the gig economy has impacted PRO and its customers, specifically through adoption of our model. The gig economy has contributed to the increased demand for our third-party program. When it comes to contingent talent, there are some very real tax and compliance risks. In the U.S. alone, there are a spate of new tax and benefit laws on the books such as the Patient Protection and Affordable Care Act and paid sick leave laws. Additionally, there are a number of complex labor laws beyond the U.S. that are unique to each country and require understanding and navigation. Ultimately, organizations must realize the risks associated with each of these and how to manage their contingent workforce to mitigate them.

SM: What is the number one challenge your customers continue to face when it comes to managing a contingent workforce? How are they addressing this?

AS: Universally, the greatest challenge is winning the war for the best talent, while controlling risks and costs.

For example, one of our clients within the global healthcare industry previously used a staffing agency model in the capacity of a MSP to source and acquire contingent workers across many of its U.S. locations. However, it was difficult to convince their managers that a staffing firm was equipped to address their complex sourcing needs. As a result, they found a significant amount of contingent labor spend circumvented the managed services program, and it was very difficult to control rogue spending. They conducted an assessment of their contingent workforce management program and determined the best solution was a purely vendor-neutral and combined MSP and VMS partner. They realized this approach was critical to secure the best talent possible and satisfy their managers’ rigorous contingent labor requirements.

This is just one example of how a customer is overcoming the challenge. However, the real takeaway is the success of the purely vendor neutral model. There is also strong evidence that an integrated MSP/VMS model produces a more successful contingent labor program. When technology and service providers are completely aligned, they can achieve program stabilization sooner, communication challenges between separate providers are non-existent and critical business decisions can be made faster. This directly results in greater program efficiencies, better cost-control and a more clearly defined risk mitigation strategy.

SM: What are leading organizations doing today to properly manage contingent labor workforces?

AS: Identifying a tool and identifying a service. Winning companies have elected to outsource program management and technology to proven and capable firms as a most cost-effective and successful approach. However, the key is to ensure that clients select the right provider that has its roots and background in compliance. This model safeguards against rogue spend and risk while implementing consistent policies.

SM: How has the level of adoption of contingent labor management software solutions changed over the years? And what are the main drivers for these changes?

AS: All reports and those who have covered the space say the same thing: VMS adoption has increased. The main driver really boils down to one common theme: innovative product design. Over the past several years, the workforce has dramatically evolved in parallel with the technologies that support both a mobile and connected workforce. First, a VMS was web-enabled, then it became mobile and now, people can use their tablet or wearable to access information anytime, anywhere.

SM: What has it been like as the CEO of a company serving the contingent workforce space that has seen so much growth and change over the last 25 years? What have been the most interesting parts for you personally?

AS: For me, it’s been seeing how contingent workforce management has evolved to a high level decision with attention from so many different aspects of the company. It’s now highly strategic and many clients have staff dedicated to owning the contingent workforce program provider relationship. This was unheard of in our early years when our biggest challenge was finding someone to take ownership and champion our solution within a company.

SM: Looking ahead, what do you see as the main trends that will shape the contingent workforce management space in the future?

AS: I would say that within the next 10 years, there will be a 50/50 split between contingent and full-time workers. There will also be a spike in innovation and technological advances specifically around predictive analytics and artificial intelligence (AI). The technology supporting user experience, predictive analytics, data and AI will be integrated. Additionally, purely vendor-neutral providers with integrated VMS/MSP offerings will be the only solutions to survive in the broader marketplace. While smaller companies may still look to alternatives, this will be the only solution offering large companies the total support and sophistication they will require. Visibility and focus in this arena will be at the boardroom level as more and more Global 2000 companies understand the value drivers this area represents.

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