How to control your contingent workforce spend

November 29, 2021

There are an estimated 1.1 billion self-employed workers around the world, and companies increasingly rely on members of this contingent workforce to flexibly meet business goals and maintain a competitive advantage.

But the complexities of managing a contingent workforce can lead to a lack of control over costs, performance, and quality, especially if hiring managers are using vendors and other procurement staff. Visibility is important to control and reduce costs, and to see where and how budgets are being spent.

In this article, we explain how a VMS, which is part of an Extended Workforce Platform, can give you this visibility and make the process of finding, hiring, and managing contingent workers easier and less costly.


The dangers of ad hoc contingent worker hiring

Companies that hire contingent workers on an ad hoc basis – potentially using multiple vendors to supply talent – are often flying in the dark. Without an Extended Workforce Platform, managers are probably not logging or analysing important price or risk information on contingent hires. A serious impact of this can be ‘rogue’ or extra-budgetary spending by individual departments, increasing costs.

If you don’t keep track of your contingent workforce, you won’t know if you are paying the most competitive temporary labour rates for your industry, geographical region/area/location, and company.

Furthermore, different managers may use a range of vendors to source contingent workers and not be aware of which vendors perform the best. This means you could be paying over the odds for poor quality. It is better to determine preferred vendors based on performance and prioritise spend with those vendors. This should allow you to negotiate better rates with your suppliers and maximise your buying power.

And could you be spending more than is necessary to fill a position or complete a project? Without comparing the cost of making the hire and the benefits of the end result there is no way of knowing. What about budget processes and procedures? Are invoices being processed in a timely and efficient way? If contingent workers are hired on an ad hoc basis, the answer is probably ‘no’.

If there is no strategy for contingent worker engagement, there’s the risk that workers are not being properly screened or trained, and your intellectual property could be compromised. Some contingent workers may even be regarded as employees by regulators if they have worked for the company for a long time, and government penalties for misclassifying workers and denying them their rights can be severe. Employment tax issues could also arise.


Improving visibility and reducing costs with a VMS

With staffing one of the single largest costs for companies, managers must keep track of all financial outlays for both full-time employees and contingent workers. An Extended Workforce Platform lets you carry out and organise all contingent hiring activities online. When you appoint new candidates, you can measure the spend on each vendor and the performance of each candidate. This provides immediate cost savings and gives you a better understanding of where and how effectively budgets are spent.

While you can –measure the performance of individual contingent workers and see the quality of candidates a vendor is sending your way – a VMS can also help manage a statement of work (SOW) programme, making sure it is good value for money.

Fixed-price SOWs set out work, activities, and KPIs required to successfully deliver a contract or project rather than the number of hours worked. With a VMS, you can quickly build and negotiate SOW prices with vendors or create a bidding process to control costs while achieving your goals. Using an Extended Workforce Platform during this process enhances visibility and increases your control over spending on services.

Without a VMS, there may be hidden costs. For instance, do contingent workers buy into your brand and go the extra mile to help you meet your business goals? A VMS will allow you to compare performance of different types of workers so you can identify which groups meet your standards.

There are also pass-through costs of complying with employment regulations. In the UK, for example, employees can request a detailed payslip. If procurement fails to comply, and the worker pursues and is successful in their claim to an employment tribunal, large fines can result. Improved visibility, provided by a VMS, can reduce your risk of non-compliance.

Control and manage costs with a VMS

A VMS gives you greater visibility of data and offers insight to help you manage budgets, control costs, and assure quality work.

If you want to find out more about VMSs, view our free guide. This explains how a VMS can help you manage and reduce spend on your contingent workforce.