Different systems, without consolidation
Bifurcated talent management systems are part of the problem. Many organizations have a traditional human resources function that looks after talent acquisition and the management of direct hires, with technology that supports their workflow.
The contingent workforce, on the other hand, can be run by HR, finance, procurement or sometimes directly by the business, and each function has its own technologies and workflow.
“As a result, there is usually no consolidated view integrating internal and external talent. Different systems are looking at different processes and different talent pools,” says Kahn.
Although businesses avoid some fixed costs associated with traditional hires, Kahn points out that contingent workers can be expensive in the longer term. “The additional costs associated with going through an agency, for example, can amount to as much as 30% of a temporary worker’s annual salary,” she says. “When a business has thousands of contingent workers at any given time, we are talking about substantial sums.”
Also, many businesses need contingent workers to travel and work in multiple jurisdictions — in some cases where they may not have a legal entity. This poses tax issues around permanent establishment.
How to unlock more potential
The sheer scale and growth of the contingent workforce is causing organizations to focus on how best to utilize this resource. However, Steadman is concerned that most corporations are still dealing with it incrementally, by simply adding people to an existing contingent workforce, rather than looking forward to find new solutions.
“Companies are not gaining optimum value from contingent employees,” Steadman says. “Many lack the ability to match accurately their need for talent with the availability of talent.
“This, in turn, impacts their overall level of operational performance and their speed to market, and will directly impact their profitability because companies need to really understand labor costs — and labor’s ability to add value to the business.”
Steadman believes that over time more companies will move toward a total workforce approach that integrates direct hires and contingent workers in a consolidated operating model, with a common technology platform.
“We know that companies are at various stages on this journey,” he says. “This new talent paradigm will allow us to fill in the details — and help companies understand and manage this vital resource.”