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Critical tips for managing contingent workers

Contingent workers save companies both time and money, so it's important to manage them in a win-win way. Here is what HR teams and employers can do to make sure that happens.

While HR leaders are busy building employee experience strategies, they may be leaving out a big percentage of today's workforce: contingent workers.

Managing contingent workers is critical for many organizations.

More than 40% of the U.S. workforce does contingent work, according to Deloitte's "2019 Global Human Capital Trends" report. Many of these are gig workers who supplement their income with freelance jobs, such as designing websites or driving for Uber. Other gig workers fulfill a company's short-term needs in jobs such as back office administrators or contractors who sign on for the duration of a project.

Contingent workers offer greater flexibility and cost savings. At the same time, managing contingent workers so they're incorporated into operations and company culture can be challenging, especially when compliance concerns can complicate efforts. Typically, line managers oversee contingent workers without HR's participation and use technology that just helps procurement take care of transactional processes, such as tracking hours and issuing checks.

"Logging time, reviewing pay, signing documents, reporting back and finding the next assignment are all usually handled through a digital communications device," said John Sumser, principal analyst at HRExaminer, an industry consulting firm outside San Francisco.

The technology-heavy communication can neglect the human elements, and more companies and HR technology vendors realize this.

HR and procurement are coming together for both the planning and operational aspects of managing contingent workers, said Arun Srinivasan, general manager of SAP Fieldglass, a vendor management system provider based in Chicago. The two functions balance each other, with HR offering expertise in workforce planning, recruiting and retention, while procurement provides experience in cost-control, savings and efficiency.

"What applies culturally for full-time employees also applies to external workers," he said. "[Today] the importance of culture and experience is absolutely influencing procurement and how companies engage all forms of external workers."

Contingent workers vs. employees

With this constant mixing of employees and contingent workers, it's important to make these workers feel like part of the fold.

Managers and HR leaders need to decide how to involve contingent workers in the company culture, while understanding they are inherently different from full-time employees, said Mike Boro, a New York-based partner in PwC's Workplace of the Future practice.

"The difficulty lies in creating a united workforce but still being able to make the distinction between employees and nonemployees," Boro said.

Legal concerns make this trickier, since labor laws often assume clear differences between different types of workers.

"One of the main tests that comes into play in almost every state is, 'Hey, is this contingent worker employee-ish?'" said Aaron Colby, partner in law firm Davis Wright Tremaine's employment services practice in Los Angeles.

Many employers take pains to make distinctions clear when it comes to company culture.

For example, at some companies, contingent workers aren't invited to off-site picnics, though they'll be asked to join in-office events, Boro said.

Such distinctions must be clear behind the scenes as well, Colby said.

For example, technology that automatically determines what contractors are paid may put a company at risk in states that define contingent workers as those setting their own rates.

It can also look like "bad evidence" when contingent workers and full-timers with similar responsibilities are compared side-by-side in an HR database. The system a company uses to manage contingent workers should address whatever the legal risk points are in its jurisdiction, Colby said.

However, all workers need access to the tools and systems their roles require, Boro said. In most cases, the tools nonemployees use are no different from what employees use, though they may operate under different permissions.

"The key is to use your judgment," he said. "In some cases, access to a shared drive may be essential, while access to the HR and benefits homepage wouldn't be."

A bridge for gig workers

Given the competition for workers, many employers may feel like they have no choice but to strike the best balance possible between cautious compliance and a positive experience.

As a result, more procurement departments are taking a more holistic view of managing contingent workers, Srinivasan said.

"We're seeing a move away from focusing solely on cost to one where cost, quality, efficiency and compliance are all being looked at in balance to answer, 'What is the right way to get work done?'" he said.

That shift is an important recognition of the workforce's new realities, Boro said. Even low-level positions can affect an organization's efforts to develop a more attractive culture, he said. For example, cafeteria workers may not be employed by the company, but their work affects its overall environment.

"Procurement needs to examine the full picture, looking at who the worker is, what services they provide and set controls and cultural boundaries based on that."

Such an arrangement will both better serve workers and prevent mistakes in classifying workers as contingent or noncontingent, Boro said.

Among the companies taking such an expanded view of managing contingent workers is the telecommunications company Swisscom, based in Zurich, Switzerland. It's in the process of designing a system that will allow all managers and employees to take advantage of a unified workflow, even when different platforms are involved.

As a result, the system will include strategic planning for internal resources and external resources, as well as specified points in each project where managers will search for both full-time and contingent talent through a unified workflow, said Beat Zurbuchen, a supply chain project manager developing the system's requirements at Swisscom.

The system will take a similar approach to communicating with both full-time and contingent workers, he said.

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