Contingent vs. Full Time: Achieving the Magical Mix

Posted by Tom Joseph on June 29, 2011

How many full-time employees do we need? How many contractors? Doing what jobs where?

These may seem like basic questions. But answering them is surprisingly difficult for most organizations and underscores HR leaders’ challenge to help better manage talent overall and the contingent workforce in particular.

It’s a growing challenge. The use of contingent workers has increased dramatically over the last decade as companies strive to fill critical jobs, control labor costs, adapt to changing market needs and support evolving business strategies. This trend is expected to continue and even accelerate as Baby Boomers retire and the gap widens between the demand for skilled workers and the available supply. Most organizations may have no choice but to incorporate contingent workers as part of their overall business strategy.

The current regulatory environment is another challenge. The federal government has stepped up its focus and funding to enforce rules about classifying workers as independent contractors or employees, and the cost of misclassification can be significant, including fines, penalties and back taxes. Co-employment issues can also result in legal action that is both costly and damaging to a company’s reputation and public image.

So, companies are dealing with a larger contingent workforce than ever before along with increasing external risk. Internal roadblocks can also be a problem. In many companies, the use of contingent workers has been loosely managed. A common scenario: A business leader has a specific project under a tight deadline that calls for someone with specific skills. She calls a vendor she’s worked with before, and procures the contractor she needs. No one checks to see if the talent might be available internally, or gives much thought to whether the job calls for a full-time employee and should be posted externally. The project gets done, but at what cost? Contingent workers often become embedded in the organization, and it can be difficult to tell them apart from full-time employees — except the costs of using a contingent worker in this way are much greater, both in dollars and in the risks I’ve noted.

Many organizations have difficulty managing the spending associated with contingent workers. Many have trouble even knowing how many contingent workers they have. Even when companies have an idea of what mix of contract vs. full-time employees is appropriate, based on their experience and past usage, the corresponding systems and processes haven’t been built in to monitor that usage or hold hiring managers (or anyone else) accountable for meeting those targets.

A real opportunity exists for HR to take on a driving role in contingent workforce management. Though it’s more than an “HR problem,” also involving the C-Suite, Procurement, Legal, IT and hiring managers, HR is the logical choice to take the lead in building an integrated workforce approach.

Our upcoming Dbriefs HR Executive Series webcast, Buy, Build, or Borrow — HR’s Role in Driving Contingent Workforce Management, gives a closer look at the issue and practical advice about getting started. I hope you’ll join me there to continue the discussion.

Tom Joseph Tom Joseph is a senior manager with Deloitte Consulting LLP’s Human Capital practice. Tom has over 11 years experience with Deloitte and is currently serving as a HR and M&A Integration Leader.

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