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Contingent: The Flexible Workforce Conference - Contingent Workforce Management Benchmark Report


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Jenni Nelson presents at the 2013 Flexible Workforce Conference in Sydney. Jenni is a Principal Consultant at HCMS and delivered the Contingent Workforce Management Benchmark Report. Find out more about ATC Events and our conferences at

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Contingent: The Flexible Workforce Conference - Contingent Workforce Management Benchmark Report

  1. 1. Contingent Workforce Management Benchmark Report August 2013 Presented by Jenni Nelson, HCMS Sponsored by: © This information is the property of ATC Events and may not be reproduced or used without attribution
  2. 2. Why a Contingent Workforce Management Benchmarking Survey? According to the ABS, November 2012, there are: •11.5 Million workers in Australia of which 3.15 Million are either: – Workers with no paid leave entitlements; or – Independent Contractors •This represents 28% of the total workforce Source: Forms of Employment, April 2013, ABS of 8% 2 l e tota kforc r wo
  3. 3. What does best practice in Contingent Workforce Management look like? Supply Chain Efficiency Supply Chain Efficiency Productivity and Optimised Productivity and Optimised Workforce Utilisation Workforce Utilisation Cost Management Cost Management Risk Management Risk Management • • • Time to hire Quality of hire % of compliance to agreed processes • • • Measure time to productivity % of contingent workers that meet stated goals and objectives, and that fulfil their contract Reuse of contractors for other assignments • • • • Visibility of overall spend Consistent pay rates and margins Reporting capability Reduced administration costs • • Low risk engagement contracts Compliance with OH&S, legislative and internal policies Robust 3rd party suppliers •
  4. 4. Who responded? • • 110 respondents, 53 completed Top 5 industries: – – – – – • Government / Defence Banking and Finance HR Recruitment Mining, Gas & Oil Transport and Logistics 33% of companies with >$1billion turnover
  5. 5. FINDINGS
  6. 6. Key Themes Contingent Workforce Management is: •An emerging discipline •Mostly fragmented and inefficient •Typically, there is no one function accountable for it •The current activity is focusing mostly on cost and efficiencies, with less focus on quality and competitive advantage
  7. 7. Structures and Enablers • No one function is accountable for Contingent Workforce Management • Technology tends to be disparate  Without a comprehensive lens, organisations are exposing themselves to potential risks and higher costs
  8. 8. Reasons For Using Contingent Workers Top 3 reasons respondents use Contingent Workers: Short term projects and/or project centric work To replace a staff member on leave Greater Flexibility than permanent
  9. 9. Average Tenure of Contingent Workers: Top 3 for each category Findings: •Many respondents do not know the average tenure of their Contingent Workers •Most respondents are using Contingent Workers for more than 7 months, across all labour categories This runs contrary to the top 3 reasons for engaging Contingent Workers
  11. 11. How Contingent Workers are Recruited • • The supply chain for Contingent Workers tends to be governed to some extent Some use of MSP and/or RPO, and high use of preferred supplier panels
  12. 12. Time to Fill It appears that Time to Fill data for Contingent Workers is somewhat tracked: If one of the top 3 reasons for using Contingent Workers is “Greater Flexibility”, then Time to Fill is Critical • • • 20% indicated they do not know Time to Fill for one or more labour category of contingent workers 92% indicated Time to Fill for one or more labour category of contingent workers 7% did not know Time to Fill for any labour category of contingent worker
  13. 13. How do you Measure Quality of Hire of Contingent Workers? • Most organisations are measuring Quality of Hire at some level, but not necessarily formally or consistently  Quality of Hire should be captured to measure the effectiveness of your supply chain
  15. 15. Tracking Productivity Contingent Workers’ Performance and Productivity is not tracked consistently Opportunity to achieve greater workforce utilisation and productivity
  16. 16. Contingent Workers: Contract Extensions 42% of organisations extend more than 50% of their contingent workers beyond their first engagement Opportunity for Cost Savings through better governance and infrastructure around raising requisitions and extensions Inferences: Initial requirements are not properly estimated Line managers are taking the “path of least resistance” by extending existing contingent workers Some line managers may use contingent workers to avoid FTE constraints Risk increases in relation to employer / employee relationship issues, as tenure increases
  17. 17. Contingent Workforce Utilisation 26% of respondents re-assign more than 75% of their contingent workers Opportunity to improve contingent workforce utilisation  Time to productivity is a significant benefit of reassigning contractors  To achieve greater re-use of contingent workers, organisations need better visibility of their contingent workers’ skills and availability
  19. 19. Contingent Workforce Cost Tracking Typically, cost tracking of contingent workforce spend is poor, representing opportunities for improved cost efficiencies
  20. 20. Contingent Workforce Pay Management Organisations are starting to standardise contingent workforce pay rates, however there is still a long way to go. 65% 65% 44% 44% 13% 13% Use pre-defined and consistent Contingent Worker pay rate ranges for at least one category of work Reported “pay rates are negotiated at time of hire” for at least one category of work Did not know how pay rates were negotiated for Contingent Workers in at least one category of work The pay component, represents 80-100% of the rate and a large proportion of the overall cost opportunity Defining and implementing consistent pay rates based on skill types and levels, improves cost efficiencies.
  21. 21. Managing Margins with 3rd Party Suppliers Negotiating margins with 3rd party suppliers of Contingent Workers appears to be somewhat ad hoc and inconsistent. 47% 47% 25% 25% 20% 20% • Have negotiated consistent margins with 3rd party providers, for at least one category of work Negotiate margins at time of hire, for at least one category of work Have no visibility into 3rd party margins, for at least one category of work For organisations looking for an ROI to implement an MSP, RPO and/or CMO model, improved margin control presents an opportunity to achieve cost efficiencies.
  23. 23. Decision Frameworks for Engaging Contingent Workers The decision to utilise a Contingent Worker appears to be predominantly informal Tighter controls through a formal decision framework will reduce risks associated with employee/employer relationships
  24. 24. Nature of Engagement Contracts • • Organisations are using multiple types of contracts for engaging contingent workers There is high use of Direct Contractors in all work categories, which is the greatest area of risk
  25. 25. Compliance Risk: Non-Standard Contracts 35% of respondents reported that less than 50% of their contingent workers are engaged under their organisation's standard contracts Non-standard engagement contracts represent risk exposure Risks associated with non-standard contracts can include: •Financial risk regarding entitlements such as superannuation or annual leave •Payroll tax liabilities •Unpaid income tax •Workcover claims
  26. 26. Governance Frameworks • • 55% of respondents use their Contractual Framework (amongst other mechanisms) to ensure their 3rd party providers are meeting their financial, legislative and corporate governance requirements 17% reported having no framework in place
  27. 27. Managing Financial and Legal Obligations • • 28% of respondents do not have centralised accountability to ensure worker entitlements and relevant taxes are paid regarding their contingent workforce. They rely on the business unit or 3 rd party agencies to manage this. 8% don’t manage it at all.
  29. 29. First Steps: Visibility, then Cost and Risk Prioritisation • • Visibility Visibility Centralise accountability for Contingent Workforce management Identify all current Contingent Workers, their rates, length of tenure and nature of engagement contract Solutions and Enablers: Consulting: •Contingent Workforce Audit Technology: •Vendor Management System Cost• Cost • Risk• Risk • Implement centralised and regular reporting to track costs and other metrics Identify all ‘high risk’ engagement contracts (e.g. direct contractors; nonstandard contracts) Identify long term Contingent Workers at risk of being deemed ‘employees’ Develop a prioritised plan to mitigate risk Contingent Workforce Management Providers: •Recruitment Process Outsourcer; •Contractor Management Outsourcer
  30. 30. THANK YOU FOR YOUR TIME © This information is the property of ATC Events and may not be reproduced or used without attribution