How to hire contingent workers around the globe — and stay in compliance
The world is getting smaller every day, helped along by technologies that allow us to connect to people, activities and companies around the globe. Businesses are able to incorporate workers from anywhere, sometimes as seamlessly as if they were next door. While communicating with workers may be simpler, engaging them for work and staying in compliance can be a complicated matter.
Many companies are adopting a flexible approach to the way they want to source, engage and manage their contingent workforces domestically in the U.S. and across the globe. With the advancements of today’s technologies, contingent workers can be sourced from anywhere around the world.
However, those same companies often struggle to deal with the complicated issues surrounding worker classification, including vetting and compliance for a global contingent workforce.
To find out how companies can successfully navigate these tricky issues, we spoke with John Smith, managing director, Americas, at CXC Global. He has over 20 years in the contingent workforce industry with the last 15 years specializing in global workforce compliance. CXC is an HR outsourcing and contingent workforce management company with 27 years of experience providing solutions in more than 50 countries.
Spend Matters: Over the past nearly three decades, CXC has successfully evolved with the needs of the contingent labor market. How do you see the contingent labor market changing now?
John Smith: As companies continue to move toward utilizing a blended contingent workforce, talent acquisition platforms are becoming the most prevalent channels used right now. Companies are slowly migrating from the traditional MSP model and its vendor pools, realizing that they can identify their own contingent talent, which can be classified as independent contractors or employed, from platforms like Upwork, TopTal and Freelancer.com. You also have companies that are looking to create the private talent clouds or source from public-talent communities. Companies contract with public cloud companies like TalentNet and eTeam to find available workers, or they can create internal talent pools that are populated by invited contractors. We’re really seeing a shift to the public and the private talent cloud right now as organizations realize that the traditional MSP model is facing competition.
Spend Matters: Recent research from a number of sources, including Deloitte and Harvard Business Review, suggest that in a few short years, about half of the workforce will be contingent. Are companies ready for that dramatic shift?
John Smith: That’s an interesting question we hear quite often. We’ve all seen the data telling us that 50% of workers in the U.S. will be contingent at some point before 2025 or so. Businesses will be ready because they’re part of what I see as a larger cultural shift. People want to control where they work and who they work for, and today’s technology enables this. Workers today aren’t looking for that traditional full-time, long-term positions anymore. And younger workers aren’t interested in 10- or 12-hour days, sitting at a desk all day. They want to work wherever work can be done, and technology enables that.
Spend Matters: And with the cultural shift, are workers able to exert more influence and bring about changes more readily than they have in the past? What, specifically, are companies doing? It seems like this shift is actually harder for the companies than it is for the workers.
John Smith: Absolutely. I think with the emergence of so many talent acquisition platforms, workers have the capability to promote themselves on multiple platforms, so they have more control over their professional destiny. Everything is automated, so they can easily decide what companies they can engage. Workers can also jump into a global work environment. We are seeing more international contractors working from their countries for companies in another country.
I think companies today are realizing that to attract, and more importantly retain, the best contingent labor, they need to be flexible. They have to establish programs that give workers some of the freedoms they’re looking for while still meeting the needs of the corporation.
I’ve seen firsthand from our clients, in the U.S. and globally, that companies are attempting to offer contingent workers benefits as close to as possible to what their full-time workers have without crossing that line of contingent worker being considered full time. Some are offering extended time off and health benefits. As long as workers are logged into the company’s virtual private network, they can be anywhere. This allows companies to make sure work is being done; they can track when and for how long workers are engaged with projects.
Spend Matters: One shift that’s being recognized in the industry is a move from externally managed to internally managed contingent labor programs. With your client base, how much of this are you seeing?
John Smith: Right now, about 25% of the companies that we manage on a domestic and global basis have self-managed programs. Some had MSPs in place or sent out an RFP and decided the external options weren’t attractive for them any longer. Companies want more control, fewer delays and guaranteed compliance. Often in the MSP environment, there are gatekeepers or barriers that slow down the process.
When companies self-manage, they can integrate talent platforms and VMS technologies that allow them to remove the barriers and delays. Companies control their vendor populations and talent pools directly. So many aspects of program management can be handled through a VMS, and those providers work directly with companies to individualize platforms, some of which can now facilitate payments.
Let me be clear, though. MSPs are not going away. They serve a specific niche and are adapting, bringing more technology into their solutions.
Spend Matters: Are there companies that are using hybrid models, with some internal control and some use of an MSP? And how are they making that change — do they tend to move slowly or just go all in?
John Smith: We definitely see companies using the hybrid approach, which is a program managed using some combination of self-managed and outsourced components. That happens often when you have a contingent workforce department in a corporation that is willing to evolve and go where the technology can take them. These HR and procurement leaders tend to be aware of research and trends, follow industry analysts and thought leaders, then use that information to bring change to their companies
Some clients want different services and solutions depending on business unit or country. What might be the right solution in the U.S. might not be easily adoptable globally, so unbundling contingent labor management can be the best path forward. Other companies separate their programs by labor type. For example, light industrial might be better-served by an MSP because of high turnover, while mid-level administrative and financial are in a hybrid model, and IT is completely in-house.
Spend Matters: As the industry changes, the bridge between HR-managed and procurement-managed programs is crossed more often. How has this change improved the program management process?
John Smith: The two departments view contingent workers in different ways, and bringing the departments together makes for a better overall experience. Procurement sees contingent labor as a major cost center for organization, so procurement is now very heavily involved, but you need that HR expertise. People are not a commodity that can be treated like buying a singular product. It can be very complicated, so you need that HR understanding.
Procurement is focused on the company’s goals and strategies, where the company is looking to go with products and solutions. HR is focused on talent attraction, retention and benefits, keeping an eye on immediate and future talent needs. CEOs, CFOs and CTOs are looking for uniformity across departments to ensure the company’s needs are being met because labor is such a large part of their costs.
There are certainly instances where there is disconnection or the program is decentralized, but even that is changing rather quickly. In most RFPs I see, both departments are involved in some way. In the end, you deal with HR on a daily basis and report analytics to procurement on a quarterly basis.
Spend Matters: A major part of any decision around managing contingent labor revolves around the selection of technology. How can companies choose the best technology that provides cost savings and meets multiple program management needs?
John Smith: The big thing here is to determine how adaptable the technology is to the company’s needs. No two companies are alike so they will never be identical in their usage. Will a technology tool meet the needs of engineers and financial services? And will it allow users to access multiple streams of data and talent? In some cases, adopting multiple technologies becomes the better option.
Spend Matters: Most companies using contingent labor and talent communities have some degree of worry around compliance and the risk that it generates. What do companies need to do to make sure they’re in full compliance? Are there differences for U.S. and global firms?
John Smith: Engaging talent has moved beyond being a domestic, U.S.-based issue — all sorts of companies, domestic and global, are using global outsourcing channels and talent pools. Most of them don’t have the capacity to vet employees working and living in multiple states or even countries, so many companies outsource that function.
They’re looking for partners like CXC to come in and do all of the necessary compliance, worker classification and background screening before prospects are added to a talent pool. They want to be sure all other legal requirements are met, which can include worker payment, payment of taxes and compliance with all local, regional and federal regulations. Insurance requirements vary globally too. In the U.S., worker’s compensation has to be considered. Globally, professional indemnity general liability is more common. Companies want to be sure they will never face worker misclassification problems, which can come with heavy fines and penalties.
There is a real concern, too, for worker satisfaction. When compliance is met, workers have better experiences and want to remain in talent pools for future assignments. They also give positive reviews for other workers, creating a positive brand image.
Spend Matters: What are the benefits for companies that may look globally to fill needs as opposed to those that have a smaller scope?
John Smith: Workers around the world are far more educated today than they were in years past. Online education has allowed people to obtain accredited university degrees that could never have been accessed before. So now you have an educated workforce around the world that’s being educated either in their own country through an online program, so they have a global education and a local cultural understanding.
Spend Matters: Are there instances where a U.S.-based company does specific work, but geographically they find the skilled workers they need in another country? Do U.S.-based companies have an advantage globally in attracting workers?
John Smith: Absolutely. Without a doubt. If you look at engineering, specifically software engineering, Eastern Europe is a very popular location for those skilled workers. In customer service, companies look to English-speaking countries like the Philippines, India, Ireland, Australia and New Zealand. We’re also seeing an interest in Latin America. They have the education and language skills and are in the same time zone, so no one is working overnight hours.
The whole world is every company’s community now. With the expanded availability of education and skills paired with enhancements in internet and other communication technologies, workers can be anywhere. The U.S. does have an advantage because workers want to work for U.S. companies. If they can have a Fortune 1000 company on their resumes, then they’re more marketable. Many of the biggest technological advancements — the Googles, eBays, PayPals and Amazons — are coming from the United States. People want to be associated with these global brands.
Spend Matters: So how does CXC fit into all of this? What’s the importance of your company and the global solutions and services it offers?
John Smith: CXC has amassed substantial in-depth knowledge over our 27 years. We understand and deliver compliance in nearly every corner of the world through our countries and regional footprints. As more and more companies are self-managing their programs or using a hybrid approach, they want that compliance guardian to help navigate their global journey. And that’s where CXC sees itself — we are that compliance guardian, helping companies ensure that wherever they are engaging workers, compliance is thorough and accurate.
We’re also shifting to helping companies manage their talent in private and public pools. CXC is not a recruiter, but we do provide support by making sure that people in the pool have been vetted so that when a hiring manager wants to utilize somebody in the pool, that worker is in compliance, has been cleared and is ready to go. We’re doing this through our CXC Comply product, which allows workers to be fully vetted and validated, speeding up the time-to-fill process and increasing access to talent. It’s more cost-sensitive and moves workers into jobs in a timelier manner.
CXC can also act as the employer of record in-country if they need to be employed, or we can act as their agent of record if they are independent or self-employed. We can also validate their contractor status and business insurances by partnering with background verification companies around the world.
CXC sees itself as a global HR outsourcing company that helps companies successfully use and manage their contingent labor. More and more, companies are deciding what processes they want to own and what processes they want to outsource because they often don’t have the expertise to run a complete program. Having a true global footprint servicing over 50 countries with offices in 30 cities and over 150 team members worldwide allows CXC to immerse ourselves in the local cultures. Our teams know and understand the employment and compliance requirements firsthand and provide our clients and contractors local and immediate access.