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Understanding Why The Contingent Workforce Is Now An Executive Imperative

Magnit

By Kevin Akeroyd

Today, the ability to hire and retain talent is top of mind in the C-suite, with more than three out every four executives saying it’s the most critical factor to achieving growth. As the focus on talent has increased, so has the use of the contingent workforce, with over 80% of executives reporting expansion in leveraging contingent, seasonal, intermittent or consultant employees.

Contingent workforce programs help manage these workers, but the tactical approach that’s historically been taken isn’t enough in today’s highly competitive, volatile market. Optimizing savings, speed and quality requires top-level involvement and endorsement of a more strategic perspective.

Here are four changes that are accelerating this elevation of the contingent workforce to executive leadership discussions:

1) The looming recession has increased focus on cost savings and workforce agility.

Many contingent workforce programs encompass hundreds of millions of dollars – even billions. Organizations can save two to five times more with an integrated approach to managing the extended workforce, but achieving these results without sacrificing worker quality requires aggressively pushing innovation and mandating program governance – reasons executive-level discussion is critical.

Further, the need to increase business agility to better weather any potential economic fallouts is also fueling greater attention to optimizing workforce flexibility. By making planning and enhancement of a mixed workforce a priority, executives can help jump-start an organization’s agile workforce transformation so it can more easily scale to address changing market demands.

2) The battle for talent is fiercer than ever.

According to a recent survey of board directors, increased competition for talent is the top trend impacting companies. Since contingent labor offers organizations a crucial “try before you buy” solution for building the talent pipeline and potentially converting quality workers to full- time employees, including it in workforce planning at the C-suite level is imperative.

This is even more true today with spend on mission-critical “professional staffing categories” – IT, healthcare, engineering, finance, etc. – growing by 70% from 2018 to 2022. Spend on these knowledge workers is more than double the spend on lower-skill commercial staffing workers, further eradicating the perception that the contingent workforce revolves around temporary workers enlisted to complete routine tasks. Increasingly, the skills, talents and benefits contingent workers bring are garnering executive attention as leaders strategize on the benefits packages, corporate cultural experiences and other operational perks that would help in hiring and retaining these workers.

3) Misclassification of independent workers is a growing challenge.

While the contingent workforce has always presented tax and benefit risks related to worker misclassification, these challenges have grown with the explosion of remote work, accelerated expansion into new geographies, increased emphasis on diversity and inclusion, and shifting policies around technology and data.

As a result, use of IC compliance services has significantly increased, from a three-year average of 54% in 2019 to 70% in 2022 according to SIA. The topic has grabbed the attention of growth-minded executives, with respondents to a PwC survey citing compliance and regulatory risk as the greatest threat to their company’s ability to grow.

4) Executives want more visibility and control.

What could be more relevant to executive leadership than having a full understanding of their workforce composition by geography, labor type, etc.? Close to 70% of business leaders want to address key gaps for greater coverage of the total workforce, but nearly 60% of organizations currently leave the non-employee workforce unaccounted for.

To address this gap, savvy leaders are increasingly realizing that their contingent labor programs need to be as data-driven as other areas of the business. That means empowering the organization to tap into the massive data ocean available while leveraging both cutting-edge technology (machine learning, predictive analytics, etc.) and human expertise to validate the data and ensure that it’s actionable.

Evolving the Business

As the workforce landscape evolves, this is now a high strategic priority at the senior executive level for organizations. It not only impacts CHROs and the human capital strategy they are responsible for, but also CFOs and beyond as it’s now a top four spend category, moving earnings per share. And, as the tech layer becomes more data-related, coupled with data regulation and the risk associated with employee data privacy, etc., it now impacts the CIO.

Ultimately, increasing the sophistication of a contingent workforce management program can drive tens of millions in cost savings, but accelerating this progression through the maturity curve requires executive involvement and endorsement. As such, leaders who act now — and strategically — to optimize the flexible workforce will be better positioned as the labor market continues evolving.

For more insights on contingent workforce management and how your organization can remain agile during times of economic uncertainty, download our ebook.