The Future of Contingent Labour – Read Part 2 of Our New Research

We’re excited to announce the publication of the second half of the Spend Matters/Comensura research paper -- Contingent Labour Review: Key Procurement Priorities. Part Two -- Tomorrow’s Market and How To Manage It, is now available to download free here.

The paper combines input from contingent labour supply specialists, Comensura, and Spend Matters analysis. This was informed by a series of interviews with senior procurement officers who are major users of temporary workers, to mine their knowledge and opinion of spend within this important category.

Part one looked at the market structure, maturity levels within it and made recommendations for senior procurement executives. In part 2, we look much more into the future for the contingent labour market, and make recommendations for procurement professionals so that they can get the most out of the considerable expenditure many of them are making (and will probably continue to make) in this area. In this extract from the paper, we look at how category managers should address the challenges.  (Comments from our interviewees are given in quotation marks).

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How Should Category Managers Address the Challenges?

Given these challenges and opportunities, how are procurement teams and category managers looking to manage their contingent labour spend better and create value for their organisations? The low-hanging fruit has been plucked for many firms; agency margins may have been reduced to a level where there is little further scope for using aggregation or leverage any further.

Stakeholders are also becoming more demanding, which is putting pressure on procurement and indeed HR departments. For example, any system provided to assist in this area will be expected by end users and budget holders to be as easy to use as the electronic commerce-type platforms they use in their private lives. Our discussion suggests there are four main areas of interest that category managers are considering to address the challenges and opportunities:

  1. Tools and techniques

Category managers use a variety of techniques to manage the category. Understanding the current picture is a vital starting point – using analytics tools to get a real understanding of spend down to a fairly detailed level. “We are looking for long-standing contractors who should in many cases be transitioned to permanent status.”

Preferred supplier lists (PSL) are widely used - some sort of pre-approved range of agencies that the budget holder is “allowed” to use. This can certainly add value for those users. “We aim to make the users’ lives easier, we tell them they won’t have to worry about contracts, fees, regulatory issues etc.” Whilst this is not a bad place to start if procurement is coming to this category for the first time, it rarely generates major commercial benefits. As we have seen, even if the PSL is agreed with margins that offer an apparent saving over previous practice, so much of the total cost of contingent labour is in the individual fee rates, so without affecting those, savings will be limited. More sophisticated buyers generally look to reduce the number of agencies and develop closer relationships to drive that wider value, or go down the MSP route discussed in Part 1.

  1. Stakeholder and compliance management

Compliance is a significant issue for category managers. Without considerable attention, end users and budget holders will gravitate towards agencies that they like, or can supply hard-to-find people, even if they are outside any preferred list. Indeed, managing compliance has been one of the big drivers towards greater use of MSPs in recent years. “We have 40 suppliers on our preferred supplier list yet compliance is still a huge issue.”

The tension here can come from procurement being driven by cost reduction, which is generally not the top priority for the budget holder. “Maverick buying can be driven by users who genuinely can’t get what they need from our preferred suppliers.” Luckily, we saw evidence that, certainly amongst our interviewees, procurement executives are grasping this need to understand and reflect the real requirements of the user base. “If I just went in on a cost-reduction angle, I wouldn’t get buy-in from stakeholders. We’re not interested in a race to the bottom on margin or overall rates.”

… Compliance also relates to the regulatory environment, which is complex and critical. That relates to issues around the right to work for individuals, certifications in sensitive areas (such as working with children) and employment status. “We must stay on top of legislation, with the help of our agencies – we want to avoid being deemed the employer of our temporary staff.”

Download the paper here and read about the two other key interest areas.  

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