What should employers do to gain the full value of their independent workers?

It’s becoming a mantra in the contingent labor world — in less than a decade, half of the U.S. workforce will be independent workers. A study said more than 30% of the global workforce works in a non-employee capacity and almost 40% of workers under 35 have some sort of “side hustle” in addition to a full-time gig.

But what should employers do to ensure these workers are being appropriately hired and utilized while companies gain the full value of their independent workforce? A study, “The Alternative Workforce: Not So Alternative Anymore,” issued by The Society for Human Resources HR + People Strategy network, assesses where companies are and what they need to do to improve the value of their independent workforce.

The study, which was done last year before the coronavirus disruption, takes a broad view of independent workers, including everyone from day workers to consultants who may be hired for months or even years because of their professional experience. Interestingly, most of these workers are not managed by the human resources department, but that is changing as companies adopt more strategic management of independents.

When the authors started looking at the data, they found “a fundamental misalignment between many leading practices that organizations use for their permanent employees” and independents. The study looked at 17 practices in use for independent workers that fall into three categories:

  • integration and alignment
  • talent acquisition and onboarding
  • management, growth and development

Plan to merge collaboration and onboarding

Integration and alignment practices are defined as “akin to the table stakes in a game of poker.” Every company needs a plan to integrate independent workers, all of which should include a strategic communication plan that incorporates collaboration and onboarding components. Unfortunately, the study found not one company met that goal. About 65% of companies have a collaboration plan while 60% have onboarding plans.

At most companies, there isn’t a clear understanding of how many independent workers are working at any time. About 68% of the time, they aren’t incorporated into budgeting, planning and forecasting. High-performing companies could make quicker decisions, have the correct skill sets in their workforces and more effectively use their resources.

These companies are also better at using technology, most often vendor management systems (VMS), to help them track and manage independent workers. A VMS or other tools provide data that can be applied strategically, making program management effective and efficient. The study showed companies either “getting it” or “not caring at all” about the data. The study said, “56% have no real data at all and 86% have limited data of very little use.”

Changing from quick fix to a long-term strategy

Finding the right talent is another challenge.

The study found that better performance on talent acquisition is the only predictor of better innovation and agility. Interviews with HR and business leaders uncovered that while recruiting goals can be similar, the processes have to be different.

Another key factor is creating a culture that views independent workers as important as permanent workers to a company’s success.

There is a long history of independents being seen as a quick fix or temporary solution, and most companies still view independents in this manner.

Not surprisingly, companies that approach these matters strategically fare better. They understand that independent workers allow for a more flexible, highly skilled, more productive and cost-efficient workforce.

High-performing companies understand that like permanent employees, independent workers need opportunities to grow and develop. The study found few companies “offer very little in the way of traditional growth and development opportunities.” There was one exception: Smaller companies ($5 million or less) provided more opportunities, possibly because they have more flexibility and are bound by fewer strict business processes.

There can be legitimate legal, cultural and financial issues when using independent workers, the study found.

Compliance, classification and other laws pose risk that must be managed, and the study suggests that companies team up with staffing or compliance companies to remove the risk (and stress).

There is no doubt that the workforce is changing, and companies need to evolve in ways that will better accommodate and value of their independent workers.

Another emerging mantra might hold the key — a shift from a tactical to a strategic approach, supported by technology, can make all of the difference when companies update their talent management models.

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First Voice

  1. Colin Serrel:

    As someone whose company makes significant use of contract/independents many of your points are well taken, particularly around tracking, budgeting and onboarding. Where I’m struggling though are your recommendations around growth/development and to a lesser extent integration.

    On the first point, why should I be expected to offer growth and development to my independents? Firstly I would expect the independent’s parent company to be responsible for this (or the independent themselves if they are self employed). Secondly at some level this will incur a cost to me to provide (either directly in training or indirectly by having the development requirement impact factors related solely to execution of the work). And since – to be blunt – I am only using contract workers for fixed to variable cost substitution or unique skills – why would I choose to provide it?

    With regard to integration, this is a DOL/IRS compliance minefield. Labor laws around classification of contractor vs employee have only become tighter and more dangerous to attempt to circumnavigate. More factors are being looked at in more depth than before (or in the case of the IRS, fewer factors but with more teeth) and any practice that seeks to treat the contractor more as an employee will make walking the minefield even more dangerous.

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