Sevenstep Blog

A Contingent Workforce Checklist: Priorities for Unlocking New Potential

By Anamarie DeVito, Vice President, MSP Client Services, Sevenstep

Contingent workers, contractors and consultants are more critical than ever in driving business success

Their presence in the world of work is not new, but today’s extended workforce of non-employee talent is playing an increasingly strategic role in shaping the way companies navigate a changing business landscape. Why? Consider the facts:

• The extended workforce is large. One late 2022 report placed the broad non-employee workforce (the gig economy) at 36% of the workforce in the US. Another study projects that the contingent workforce will expand by 34% in 2024 and another 25% in 2025. In the UK, while permanent hire recruiting has decreased in early 2024, non-employee staffing remains more steady, indicating continued use of flexible workers.
• It is skilled. Today's contractors include workers who embrace flexible work as a career choice and often bring hard-to-find skills to the table. In the UK, for example, 31% of managed contingent workers are in IT functions.
• It is in demand. Competition for talent is high, which impacts time and costs. Forty percent of HR leaders in a 2023 report say hiring temporary workers will be a major challenge as they look ahead.

While utilization of non-employee talent has grown, expectations for impact also rose. Tapping into the extended workforce is a core business priority as leaders look for new approaches to getting work done in an environment where the supply of available talent is tight. Past weaknesses such as siloed decisions, inconsistent rates, and unmanaged compliance risks are no longer acceptable.

So, what does it take to drive an impactful strategy? The following checklist explores practical answers through statements that speak to the fundamentals for success. There is no single formula for success, but the fundamentals highlight a path that can help any organization unlock the potential of this vital force in the world of work today.

1. "Our approach to rates and costs reflects our priorities and market data."
2. "We access talent through a robust network of suppliers and channels."
3. "We apply data and analytics to inform our extended workforce decisions."
4. "We take an active approach to managing compliance."
5. "We manage our supplier network to align with our goals.”
6. “We deliver a positive experience for hiring managers and contractors.”
7. “We augment our supplier network through direct sourcing for challenging workforce needs.”
8. “We apply a total talent approach that considers all permanent and flexible worker options for the work to be done.”

1. “Our approach to costs reflects our priorities and market data.”

• Wages for full-time workers rose more than 6% between 2021 and 2022 and 4.4% in 2023, with a projected increase of 4.0% in 2024. These steady increases that will also influence flexible worker bill rates.
• Ad-hoc decisions on how much to pay contingent workers can result in low rates that fail to deliver talent or excessive rates and budget overruns.

Without data-driven intelligence, organizations are guessing at what to pay workers.

Implications:

Securing the right resource to get work done requires a careful approach to costs. That approach begins with consistent rates for similar workers across the enterprise, with variations based on local market demands or business priorities. Those rates depend on intelligence derived from current internal and market data – otherwise, the organization is simply guessing what to pay its workers.

Priorities:

Gain a detailed view of what you are paying. For years, organizations tolerated ad hoc bill rate decisions by managers across the enterprise, resulting in inconsistent pay for the same work. A managed services provider (MSP) solution supported by a vendor management system (VMS) provides visibility to ensure consistent rates across the entire contingent workforce.

Apply analytics to determine optimal rates specific to skill and location. Market data from external sources is brought to life through expert interpretation and predictive analytics from an advanced MSP provider. The result provides an accurate picture of current bill rates for informed cost decisions.

Empower your suppliers to deliver maximum returns. In the past, companies often dictated how much their contingent workforce suppliers could profit on a placement. Modern best practices lean toward a bill rate structure that allows suppliers to set their markups and deliver the most competitive results while allowing companies to manage their contingent worker costs effectively.

Demand data-driven intelligence from an MSP partner. Traditionally, MSP solutions promised savings through a consistent, efficient process that puts all contingent workforce suppliers into a single program and cost structure. Today, consistency is not enough. The MSP must provide intelligence to make those costs competitive, and that requires workforce expertise and a robust data and analytics function.

2. “We access talent through a robust network of suppliers and channels.”

• The limited supply of workers for critical projects or roles is not a procurement or HR problem. It is a business problem.
• As of December 2023, the US Bureau of Labor Statistics reported 0.7 unemployed persons per job vacancy, indicating a continued tight market, even as the supply shortage eases somewhat from previous years’ highs.
• Compounding the limited talent supply, many organizations struggle to utilize the many channels available for connecting with talent.
• Reliance on one supplier, one region or strategy further limits access to talent and reduces the available supply of workers.

Talent remains scarce, as the ratio of available workers to job openings at at a consistently low 0.7:1.

Implications:

Limited access to talent creates a ripple effect on the business. Assignments may remain unfilled as the organization struggles to secure the right talent. Talent quality may suffer as organizations draw from too few options, resulting in early quits before assignment completion. Ultimately, work slows or stops, projects stall and the business suffers. Solving these issues means expanding networks, improving visibility, and refining expectations.

Priorities:

Refine and nurture your supplier network to meet your needs. Get intentional about managing performance for delivery and quality of talent across the supplier network. As needs change and gaps arise, expand or streamline your supplier network to ensure that top recruiting expertise is available for the skills you seek.

Revisit assignment requirements. Unnecessary job requirements for a flexible worker can limit your supply of available talent. Focus on skills directly related to the outcome needed, and empower recruiting or MSP partners to work with hiring managers to optimize the demands.

Give hiring managers choices that draw from all available options. Is the right resource for the work outside a hiring manager’s limited view of known suppliers? Is the person in a different location? Can the company bring direct sourcing support when the supplier network cannot deliver? Addressing these questions brings the full potential of the flexible workforce to bear when addressing new work demands.

3. “We apply data and analytics to inform our extended workforce decisions.”

• Guesswork and hunches cannot sustain an impactful strategy in a rapidly evolving contingent workforce environment. Data-based decisions with predictive analytics are essential to managing delivery, costs, performance, and process improvement.
• One report found that only 11% of talent decision makers are confident in their data and analytics capabilities, and only 19% rate their competitive intelligence as excellent.
• 62% of the contingent workforce is not accounted for in critical decisions on budget and planning.
• Simply accessing data is not enough. The challenge for organizations is to apply predictive analytics to distill a flood of information into actionable intelligence.

Only 11% of talent decision makers are confident in their data and analytics capabilities.

Implications:

Data should inform nearly every aspect of contingent workforce strategy, but companies struggle to utilize VMS platforms, internal systems and market data to create actionable intelligence. Recent advances in AI are solving these issues and delivering a new dimension of visibility and intelligence to inform workforce decisions. Organizations that ignore or delay their use of new technologies do so at their peril, as competitors quickly adopt tools to make smarter decisions.

Priorities:

Bring varying sources of data into a common view. Many data sources inform workforce decisions, including VMS, internal systems, and external market sources. Today’s technology can help organizations access that wide variety of information and integrate it into every decision in a way that was impossible in the past.

Utilize predictive analytics to deliver context and meaning. Now that organizations have access to extended workforce data, what can they do with it? The answer is quite a lot. If you are not demanding predictive analytics—the ability to provide context to available information and estimate future demands and impacts from your data—then you are not using technology to its full potential.

Build data-driven intelligence into the decision-making process. With access to data and the tools to be predictive, organizations can act confidently in a complex and uncertain market. A talent solutions expert or an internal resource can support a decision-making process that ensures data informs strategies by hiring managers, leadership and suppliers.

4. “We take an active approach to managing compliance.”

• Assuming that contracts and performance expectations are being monitored and managed is risky at best.
• 75% of HR professionals have cited concerns regarding external workforce legal issues, with potential co-employment as an example.
• Supporting compliance and managing risk requires a consistent process paired with visibility into all data associated with the contingent workforce.

When multiple hiring managers work in silos…the enterprise has little control over compliance.

Implications:

When multiple hiring managers work in silos to utilize different suppliers for contingent workers, the enterprise has little control over compliance. As a result, performance suffers, leading to regulatory compliance issues such as co-employment (where the company finds itself responsible for obligations associated with pay and HR). When an organization’s extended workforce strategy grows, additional issues such as Independent Contractor compliance and worker classification also grow in importance.

Priorities:

Set a standard governance process for contractual compliance. A centralized approach to governance is a key value that an MSP partner can bring to the table, helping boost compliance, support performance, and limit co-employment risk. A payrolling function by the MSP, where the solutions partner handles all compensation and HR issues, helps to manage compliance risks further.

Monitor your contingent workforce function to identify gaps and changes. The data and reporting function behind your contingent workforce process can help document compliance. There is no single formula for ensuring 100% compliance, particularly as rules and needs change over time. With that in mind, a dedicated resource for monitoring and review is essential in keeping ahead of changing demands.

5. “We manage our supplier network to optimize performance and align with our goals.”

• The network of staffing agencies supplying your organization can make or break your contingent workforce strategy.
• Managing performance in that network requires clear expectations, continuous communication, transparency of opportunities and costs, and the chance for the supplier to grow and succeed.
• More than 70% of surveyed talent decision makers have consolidated their network to focus on top-performing suppliers, and 56% are exploring the addition of new suppliers.

Participating suppliers at all levels deliver better when they know the rules of engagement, and an MSP can bring new suppliers to the network or consolidate the supplier base when needed.

Implications:

Managing the supplier network is difficult using internal resources and a VMS alone. An MSP partner is uniquely qualified for the task by managing communication, tracking performance, and delivering on diversity goals and other initiatives. In addition, the MSP can bring new suppliers to the network when needed or consolidate the supplier base for faster delivery and higher quality talent.

Priorities:

Partner with a supplier management resource. Even with visibility into data and activity across the network, an organization should not take on supplier management alone. A proactive supplier management strategy requires a resource with bandwidth and expertise to understand and act on recurring needs, specific challenges and opportunities as they arise.

Make transparency and communication a top concern. When a supplier becomes disengaged, performance suffers. The agency may not prioritize your requisitions. They may be less accommodating on rates and delivery times. Even on a tiered network with preferred suppliers, participating organizations at all levels will better deliver when they know the rules of engagement and are informed on opportunities and issues.

Give your suppliers a chance to put their best foot forward. Are your demands getting in the way of your supplier capabilities? From overly demanding requirements, inflexibility on bill rates and markups, and unrealistic expectations, barriers to supplier performance can result in slower delivery, higher overall costs, or mismatched talent. A contingent workforce partner is uniquely positioned to identify and address the pitfalls.

6. “We create a positive experience for hiring managers and contractors.”

• Ultimately, the success of a contingent workforce strategy depends on the hiring managers whose buy-in and adoption keep the function moving and the workers who deliver the final results.
• “Rogue spend” occurs when managers engage flexible talent and suppliers outside the enterprise process or MSP program, driving up costs and risks. Hiring manager satisfaction, driven by an easy process and proven value, is key to preventing unmanaged spend.
• A positive experience by the contingent worker can determine the work’s success (project completion) and the organization’s ability to fulfill future talent needs.

Contingent workers expect a consumer-like experience regarding clarity, ease of use, and speed of communication.

Implications:

Flexible workers and hiring managers have differing perspectives, but both share several concerns that shape their experience. These concerns include the desire for a straightforward interaction process with the company, visibility into options and activity, and a sense of partnership with the organization.

Priorities:

Give hiring managers the data and support they need. Do hiring managers know where to turn for information on current workers or available talent? Do they feel confident in asking questions and providing input? Are their decisions supported by data? Addressing these questions typically requires the support of a dedicated contingent workforce partner with the expertise to build a trusting relationship with the hiring manager.

Give workers a transparent consumer-like experience. Do workers have the information they need for their current assignments or advance knowledge of upcoming opportunities after their completion date? Do they know where they stand with pay and HR issues? Do they know where to turn for support? Increasingly, workers expect a consumer-like experience regarding clarity, ease of use, and speed of communication. Addressing these demands requires a technology capability and human support that puts people first.

Measure sentiment and drive continuous improvement. Worker and hiring manager feedback should be integral to the contingent workforce function. Repeatable surveys deliver scores to identify gaps, and open-ended feedback can reveal ways to improve the overall experience. In all cases, measurement and improvement require resources with the knowledge and bandwidth to manage the process.

7. “We augment our supplier network with direct sourcing for challenging talent needs.”

• Traditionally, organizations have not recruited contingent workers but instead relied on their staffing suppliers to deliver that talent.
• Recent advances in MSP have given companies another option for securing talent when suppliers cannot deliver: direct sourcing.
• Through direct sourcing, companies secure flexible talent directly from the market, recruiting under their own brand rather than through the agency supplier. In addition to boosting access to talent, direct sourcing also yields cost savings for the enterprise. Typically, direct sourcing is executed through an MSP partner that brings recruiting expertise to the relationship.
• After its emergence over the years preceding the pandemic, direct sourcing had become established or part of planning for 84% of organizations by 2022.

Direct sourcing with an MSP brings many recruitment process outsourcing (RPO)
best practices to bear.

Implications:

Direct sourcing fills the gap when the supplier network is not ideal for particular contingent hiring challenges. Notably, the function is adept at addressing roles with limited frequency (requiring quick scalability for unique demands), skills outside of the suppliers’ core capabilities, or needs best achieved by leveraging the organization’s employer brand. The agility afforded by a direct sourcing partner can prove valuable for navigating uncertain business demands and changing markets.

Priorities:

Be strategic in filling extended workforce gaps. A direct sourcing partner does not replace the organization’s supplier network but instead augments capabilities where current suppliers cannot efficiently fill assignments.

Bring employee recruiting best practices to non-employee engagement. Direct sourcing brings many recruitment process outsourcing (RPO) best practices to bear. Leveraging your company’s employer brand, building talent pools, and utilizing technology for better sourcing and engagement are just a few benefits of a recruitment-first approach.

Engage an MSP with a proven recruiting capability. A direct sourcing effort requires the expertise of a proven RPO function to deliver hard-to-find talent quickly and effectively. While many advanced MSP providers can offer direct sourcing, companies should determine whether a prospective solutions provider is best suited to recruit the direct-sourced talent they need.

8. “We apply a total talent approach that considers all potential resources for the work to be done.”

• To expand their options for engaging workers, companies are rethinking the boundaries that predefine resource needs as permanent or contingent talent.
• By considering contingent workers and permanent employees as potential resources, a total talent strategy expands access to the entire supply of available workers.
• A 2022 survey found that only 17% of companies had a total talent solution today, but 52% expected to explore such a solution over the next two years.

By opening the door to a total talent approach, companies reduce the risks associated with high costs and extended vacancies while increasing their agility in unpredictable markets.

Implications:

Until recently, companies struggled to put total talent into practice. Thanks to technological advances, bringing permanent hire candidates and potential contractors into a common talent framework is now possible. The contingent workforce function can lead the evolution of a company’s total talent strategy, particularly if the MSP partner brings technology and expertise to the relationship.

Priorities:

Identify pain points and focus on realistic strategies. Start with clear goals and executive sponsorship, enabled by a talent solution partner with contingent workforce and talent acquisition resources. Urgency can aid in adoption. By focusing on problem areas, such as IT recruiting in a problematic location as an example, organizations can bring hiring managers and leadership on board for a solution to a known business problem.

Technology makes the difference. In a total talent environment, the hiring manager may access data from all potential resources, or the talent advisor may access the entire field of options and share informed choices and recommendations based on that data. In either case, the solutions partner typically brings the technology to the relationship and provides the expertise to interpret the information.

Start the journey now. Even as historically tight talent markets begin to ease, the people needed for the most challenging work will remain in high demand. By opening the door to a total talent approach, companies reduce the risks associated with high costs and extended vacancies while increasing their agility in unpredictable markets. With the right resources in place, the journey can begin today.

Position Your Contingent Workforce as a Competitive Advantage

Today's market for talent includes rapid changes in conditions, from periods of high demand to times of economic uncertainty where hiring may slow.

In either case, the flexible workforce provides the talent quality and agility to weather a changing marketplace. A strategic approach to managing that workforce can position an organization to engage vital workers quickly and effectively while competitors continue to struggle.

Our experience serving MSP and RPO clients has shown that attention to the fundamentals and a commitment to innovation will always separate the leaders in the world of work. No organization will master all the elements, but moving in the right direction can deliver the talent advantage that makes an impact. Success is not about strategies for procurement or HR; it is about making business work.

Take Control of Your Workforce Challenges Learn the latest trends in the talent and business landscape that could affect your workforce strategy.