Contingent Labour – Delivering a Higher-Quality Workforce Through Structured Procurement

With businesses competing within a market characterised by skill shortages and economic uncertainty, international procurement consultancy, 4C Associates’ Mike Lander explores opportunities related to contingent labour.

Striking the right balance between permanent and temporary workforces has long been a challenge for the globe’s leading organisations. However, it is an issue which has been increasingly pushed to the fore as more and more businesses look to contingent labour as a means to guard against risk and uncertainty.

The number of self-employed people in Britain hit record highs in the past years and is expected to continue rising. Recent estimates suggest 30% of the workforce will be self-employed by 2030. These developments pose new and exciting challenges for procurement and HR and highlight the importance of designing effective long-term strategies to manage this workforce.

A changing workforce

At 4C Associates, we have seen an increasing number of businesses, of various sizes, looking to better understand and utilise their temporary labour. The solution for many is to implement a transformational contingent workforce management strategy. This is typically driven by a number of key factors.

The most obvious is that for many businesses contingent workers represent one of the largest areas of spend. It is not uncommon for temporary labour to take up 5% to 10% of a major company’s third-party spend.  In a recent survey carried out by 4C Associates, 88% of respondents stated cost reductions as their most pressing concern in relation to contingent labour.

In addition, for many of businesses 15% to 30% of company’s total headcount is non-permanent labour and critical to operations. While these figures are often reason enough to warrant further analysis, there are other considerations.

According to the latest Employer Skills Survey (ESS) the proportion of vacancies unfilled because of a lack of candidates with the right skills, experience or qualifications has grown from 16% to 22% in three years. This skill shortage, combined with increased demands for more flexibility in the workplace from employees and a landscape which shuns loyalty to a single employer, are creating further challenges.

Add to this changing regulations, the risk of screening failures and associated contract management issues and it’s no surprise that effective management of contingent labour is a priority for many leading businesses. In fact, a 4C survey found improving compliance amongst temporary labour, ranked second in terms of priorities for the coming business year.

A structured process

Given the magnitude of the changes taking place in the labour market, unifying procurement and HR and developing a common strategy is of essential importance. Ensuring both parties effectively collaborate helps improve the quality of the temporary workforce, as well as improve governance processes at lower cost.

In this context, we have created a range of proprietary analytical tools to help clients identify opportunities. In parallel, 4C has collaborated on projects across a number of ATS, VMS and AP systems and uncovered significant gains. This is particularly true in terms of worker and agency rate card analytics and their implications for strategic workforce planning.

An opportunity not to be missed

There is no doubt that temporary workers will continue to be a means for leading businesses to thrive, whilst remaining flexible enough to deal with changing economic circumstances. However, the market for contingent labour is changing rapidly and both procurement and HR need to be prepared for this. The increased volume and importance of temporary workers is reason alone to implement new ways of thinking. Add to this skill shortages and shifting requirements and it is clear that a collaborative and structured procurement process is essential.

Businesses which fail to react, or react too late, will not only miss out on the numerous opportunities present in the area, but risk falling behind their competitors. There is no doubt that the coming years will offer plenty of challenges for procurement, however, thinking ahead and employing the right tools and processes can lead to substantial rewards right now.

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