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Best Practices in Hiring the Contingent Workforce

By Ms. Elizabeth Rice, SPHR

As recent trends indicate, both employers and contract workers are finding a number of critical advantages to seasonal and project-based employment. Financially, companies have the potential to save money by hiring contract workers as needed, while contingent employees can maximize income by taking advantage of numerous opportunities for employment. In addition, companies hiring contingent workers for special projects are able to choose from a pool of skilled, experienced specialists to maximize project efficiency.

Despite these advantages, without proper management and tracking, contingent staffing can create large, unnecessary expenditures for businesses. According to Workforce Management, "A company that uses contingent workers but doesn't track them can find itself on shaky legal, financial, and security ground...without oversight, contingent staffing becomes a hidden cost to an organization." In order to take advantage of the benefits offered by this type of staffing, companies must be aware of the best policies and practices to implement when hiring contingent employees. IES recently interviewed Sean Rehder, the founder of ContingentWorkforce.org (CWO), about the latest trends and best practices in hiring contingent staff. Rehder, an experienced professional who worked in and managed the contingent workforce, created CWO as an industry resource for both contract workers and employers, to offer valuable insight into this growing industry.

Current state of the contingent workforce
According to Rehder, the term "contingent workforce" no longer indicates only contract workers. Instead, the contingent workforce is a broad community made up of all industry participants, from contingent employees (such as consultants and project workers) to the businesses using their services, as well as temporary staffing agencies, headhunters, consulting firms, and other third-party vendors.

Recently, the industry has experienced its most noticeable growth in IT divisions. "With the economy bouncing back, the use of contingent workers in this area has rebounded," Rehder says. "Out of this realm, we can also expect to see a rise in contingent employment for areas such as nursing, marketing, and increased use of seasonal workers within the retail industry."

Benefits of the contingent workforce
The advantages companies reap from using contingent workers can usually fall in one of two categories: financial savings, and talent management. "Hiring contingent employees helps companies to manage financial risks," Rehder points out. "Businesses using contract workers have fewer responsibilities and obligations to these non-core employees, a benefit that can be further enhanced by bringing in a third party employer of record to manage the hiring and payroll processes." In addition, employers are able to choose temporary workers from a pool of talented individuals. "The best and brightest are working as consultants," he says. The skill level of these employees can create cost savings by improving the speed and level of efficiency for a particular project.

Challenges in managing the contingent workforce
According to Rehder, the two biggest challenges in contingent workforce management are expense control and compliance with hiring laws. "A lot of companies are technical, but aren't savvy with spending" he says. "Instead, they incur unnecessary costs by using too many third party agencies for recruitment." Furthermore, businesses often lack the personnel and know-how to ensure all hiring of contingent employees is compliant with both company hiring practices and federal tax laws. "It's important to establish a company or staff who can organize compliance," Rehder says. "One viable option is hiring a third party payroll vendor to manage the administrative duties associated with hiring and compensation."

Tips for effective contingent workforce management
While the contingent workforce offers excellent potential for cost savings and increased productivity, achieving these requires careful planning and management. Rehder offers the following tips for employers seeking to create a team of contract workers:

• Create, implement, and enforce policies. Before hiring a contingent staff, companies must create clear policies on the use of these non-core employees, including hiring and management practices, and a designated budget for expenditures on contingent hiring. Creating a standard set of procedures for hiring managers will ensure efficient, practical use of contingent employees and reduce risk of legal liabilities associated with hiring them.

• Designate personnel to manage employees. "The worst thing a company can do when hiring a contingent workforce is to have an HR generalist manage the process" says Rehder. Establishing a very small, dedicated personnel to manage a contingent workforce program will help prevent unnecessary hiring, improve communication between employers and contract workers, and simplify the process of billing and compensation. "Billing from staffing and payrolling agencies and contractors should all be consolidated into one location" he advises. This will give employers a clearer picture of the expense and savings being generated by their contingent workforce.

• Work to build relationships with contingent staff. Building good relationships with contingent workers and making them feel like a part of the company is extremely important. "People can make or break your company," Rehder points out. "A core employee is there consistently, but when they leave, they leave for good. A consultant, however, will return as needed, so it's important to build a constructive, ongoing relationship with a contractor who knows your company and understands how it works."

• Track the cost and progress of your contingent workforce program. The best way to understand the value of your contingent workforce is to periodically evaluate its costs and benefits. Analyze expenditures associated with hiring contract workers, as well as potential savings, and refine company policies and procedures as needed.

About the author:
Ms. Elizabeth Rice, SPHR is the executive vice president of Innovative Employee Solutions® - a San Diego-based company specializing in payroll and HR administrative services for the contingent, non-core workforce. Ms. Rice has more than 20 years of experience in HR and executive management and is noted both regionally and nationally for her particular expertise in employee relations, women's workforce issues, and temporary employment. Ms. Rice can be contacted at erice@innovative-es.com

About ContingentWorkforce.org
CWO is an organization that promotes professional networking by building a close network of contacts and peers for Independent Contractors, Suppliers, Recruiters, people looking to build their careers, and also for the Customers that request their services. ContingentWorkforce.org believes networking is about creating a wide range of contacts that may lead to future work, referrals, resources, ideas, and information. The organization goes beyond being a convenient way to make contacts and get business leads: its goal is to build contacts who actively work together for one another's success. For more information, please visit: www.contingentworkforce.org.