Workforce Categorization

More and more organizations are beginning to rely on flexible workforces as a complement to their full-time, permanent employees. This trend has roots in a variety of factors, including economic uncertainty, skill shortages and individuals choosing to enter the workforce through alternative methods. With the prevalence of flexible workforces expected to continue to rise, so too will expenditures related to this segment of the workforce. Therefore, it is important for businesses to maximize their investments and avoid paying too much for the different types of labor they require.

One of the best ways to manage flexible workforce spend is to choose the appropriate method to acquire and price each category of flexible labor. The methods to acquire and price contingent and project-based labor are different. Generally, organizations acquire contingent labor, also known as contractors, from a supplier through a time-and-materials contract that sets a fixed rate per labor hour. In contrast, organizations tend to buy project-based labor, often referred to as consultants, from a supplier through a statement of work contract. Statement of work contracts have fixed project pricing and payment is issued when the consultants successfully complete defined deliverables or milestones. It is the service provider’s responsibility to use sufficient resources to create the deliverables in the time allotted.

Thus, in order to choose the right type of contract and pricing, it is imperative that organizations have full visibility into their workforce. In addition, they need to understand the different categories of their flexible workforce and when it makes sense to engage with a service provider for each category.