Managing contingent labour in the supply chain
The global workforce is changing. Up to a third of workers in Western Europe are not employed on a full- or part-time basis, but instead are contractors, freelancers, temps, agency workers, outside vendors working on projects, or other types of contingent workers. And contingent or non-employee workers are expected to rise to 45 percent by 2017.
This massive shift from traditional permanent employment to greater use of contingent labour presents significant management challenges to organisations. While 92 percent of all enterprises say non-employees are important to their overall business strategy, other industry statistics are worrisome. For example, up to 60 percent of the contingent labour workforce goes unaccounted for in financial planning, forecasting and budgeting, according to Ardent Partners.
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A growing group of contingent workers deliver project-based services, also known as Statement of Work (SOW) services. Spending with this group of workers is over 10 times that of temporary labour. The SOW workforce is associated with a project, along with key deliverables, a timeline, the terms and conditions of the contract, pricing and milestones.
SOW labour is typically not hired by HR departments, but procured at departmental or project level. They are also paid in very different ways than temporary labour; for instance, based on hourly/daily rates or per project fees, and their services can fall under different taxation rules and rates and be governed by different national and regional regulations.
Recent industry analyst findings indicate that 76 percent of companies are not adequately managing and controlling SOW services. Furthermore, much of these workforce costs are ‘hidden’ and not accountable, affecting how organisations manage their supply chain and impacting the bottom line.
To start to address this issue, there needs to be a shift in culture and managerial approach to gain control of SOW costs and integrate it into the contingent workforce programme. This includes dealing with cross-border regulations, procurement, billing and supplier analysis.
Manfred Vogels is VP for Business Development, EMEA at IQNavigator.