Contingent Workforce Management Best Practices: 10 Tips for Success

Explore essential strategies to optimize your management of contingent workers and boost your organizational flexibility.

What is the Contingent Workforce?

The contingent workforce is composed of individuals who provide services to a company but are not entirely full-time workers on its formal payroll. Unlike traditional employees, contingent workers, including freelancers, independent contractors, consultants, and temporary workers, are typically engaged non-permanently for specific projects or timeframes, offering the company a flexible staffing solution to optimize specifically when needed.

This workforce structure has grown in recent years due to the need for flexibility and agility in the dynamic business environment. In industries that face fluctuating demands, the need for specialized skills or project-based work, contingent workers provide immediate benefits such as short-term commitment that stays within the project scope and overhead cost reduction as contingent workers do not require the same pay as permanent staff. Contingent workers additionally allow companies to tap into specialized skills and expertise as needed without the long-term commitments associated with full-time employees.

By integrating a contingent workforce into business practices, companies gain the strategic advantage of promptly scaling their workforce up or down based on market demands. This ensures efficient allocation of resources, empowering business leaders to make informed decisions and avoid unnecessary spending on surplus workers. 

What is Contingent Workforce Management?

Contingent workforce management is the management of the contingent workforce. It consists of a manager's activities to comprehensively oversee the process of sourcing, selecting, engaging, and administering contingent workers to perform successfully for a company. It involves strategic planning to ensure that the temporary workforce aligns with the business goals and operational requirements.

Effective management covers the entire lifecycle of contingent worker engagement, from identifying staffing needs to on-boarding, performance monitoring, compliance with legal requirements, and off-boarding. To manage these workers efficiently and mitigate associated risks, a coordinated effort across different departments, including human resources, procurement, and finance, is required.

Challenges Faced in Contingent Workforce Management

Managing the contingent workforce, like any other management process, is a long-term endeavor that presents a set of challenges. Over time, the task of overseeing the entire contingent workforce, with its extensive network of workers, piles of paperwork for qualifications and credits, and high overhead costs, can be daunting. These challenges, if not addressed with sustainable solutions and long-term planning, can hinder the effectiveness of the contingent workforce.

Some key challenges experienced in the contingent workforce include:

• Compliance and legal issues
• Managing a diverse workforce 
• tracking and reporting 
• Cost management 
• Quality control 
• Security and confidentiality 

Managers must find efficient solutions to assist in these contingent workforce challenges. A solution such as a Vendor Management System (VMS) is becoming the leading solution for addressing contingent workforce challenges. Read further below to see how a VMS helps solve these inefficiencies.

The Benefits of A Contingent Workforce

Although the contingent workforce does present certain challenges for managers and workers, properly optimizing this strategy offers numerous advantages that completely alter how the workforce operates. Minimizing the reliance on full-time employees offers the following advantages:

Access to specialized skills: Companies gain access to a larger, more diverse talent pool of workers with the expertise for specific projects or needs. This allows managers to refine their recruitment to select only the best workers for the job directly. 

Cost savings: Optimizing contingent workers reduces overhead expenses associated with full-time employment, such as benefits and taxes. Companies will only compensate workers for the specific tasks they need, allowing for flexibility in their engagement, whether for five hours or two months and ending the contract when their services are no longer required.

Scalability: Businesses can quickly scale their workforce up or down based on the labor market demands. This reduces the number of workers working on tasks that are not needed and allows managers to only compensate for required work. For example, during seasonal changes, businesses can manage labor needs during peak seasons without commitment.

Responding to Industry Trends: Agile workforce planning allows companies to respond to market changes and new trends that may impact their business procedures. This includes changes other than the demand for workers. 

Project-Based Needs: Companies can hire specialists for short-term projects, ensuring they have the right skills, experience and qualifications to perform the job without utilizing full-time employees. 

Reduce Overhead Costs: By relying on the contingent workforce, companies can minimize costs associated with long-term employment such as benefits or other overhead costs. 

These are just a few benefits the contingent workforce offers companies today. Additional benefits include:

• Flexibility.
• Reduced hiring risks.
• Increased speed of hiring.
• Enhanced productivity and new perspectives.

Educate yourself on how the contingent workforce will change your business process in unimaginable ways.

10 Best Practices for a Successful Contingent Workforce

Managing a contingent workforce effectively requires adherence to best practices that ensure your business is working strategically while continuing to align with its long-term objectives.  If optimized correctly, the contingent workforce will improve operational efficiency and productivity while reducing costs and ensuring compliance.

We recommend managers follow these best practices to guarantee a successful contingent workforce:

Precise Workforce Planning

Start by developing a strategic plan that includes short- and long-term goals for the contingent workforce. This plan will play a key role in establishing the minimum skills, expertise, and qualifications required by your company. It will also ensure that only candidates who meet these requirements are considered, thereby maintaining the quality of your workforce.  Next, forecast demand conditions to ensure management knows the correct number of workers that will be hired.

Clear Definition of Roles and Expectations

Now that the minimum qualifications have been identified define the roles, responsibilities, and expectations of the contingent workforce to align both workers and management with the objectives to be achieved. Provide a written, detailed description of expectations to ensure there is no discrepancy in what needs to be accomplished during the project. Communicate these expectations continuously and clearly to avoid misunderstandings.

Streamlined On-boarding Process

Develop a standardized on-boarding process that quickly integrates the contingent workers onto the team. This can be optimized through the help of a technological solution, such as a VMS, to ensure that the process is straightforward and seamless for both workers and management. Provide workers with the necessary training, tools and resources to help them become productive as soon as possible.

Ensure Legal Compliance

Remaining informed about changing labor laws and regulations that impact the contingent workforce is crucial for ensuring compliance and mitigating risks. As the landscape of qualifications and credentials evolves, it is imperative to keep all workers updated on essential certifications and recertifications. Continuous monitoring and adaptation to regulatory shifts will help maintain a smooth and efficient operation of the contingent workforce within the bounds of the law. 

Fostering a Positive Work Environment

Fostering an inclusive and supportive work environment that seamlessly integrates the contingent workforce and permanent employees is critical for business success. By ensuring all staff members feel valued and essential to the business, managers lay the foundation for increased productivity and efficiency. Treating contingent workers with the same respect and recognition as full-time employees, acknowledging their contributions, and promoting teamwork are key elements in creating a harmonious work environment.

Open Communication Channels

Maintain transparent communication channels to keep contingent workers updated on changes and engaged in the process. Utilize existing communication systems or similar platforms to promote inclusivity within the workforce. These channels, by facilitating feedback, ensure issues are addressed promptly and transparently, making the workforce feel heard and valued. By establishing this open line of communication, discrepancies can be minimized, allowing management and the workforce to understand their expectations and responsibilities clearly.

Plan for Flexibility and Scalability 

If you plan on growing your business in the future at any scale, developing a contingency plan to address fluctuations in workload and staffing needs is critical. Ensure your strategy can accommodate changes in the workforce and the varying number of workers required to meet the demands of your expanding business. By having a flexible plan in place, you can seamlessly adjust to market changes, unexpected events, or seasonal shifts, ensuring that you can efficiently scale your contingent workforce up or down as needed without compromising on productivity or quality. 

Optimize Technology Platforms

Technology is crucial to optimizing the contingent workforce process in any industry today. Technology solutions such as a VMS offer the ability to streamline tedious administrative tasks that are often the root cause of inefficiencies in the first place. These solutions reduce manual error while enhancing efficiency and maintaining compliance with changing market demands. A VMS takes over critical administrative roles such as candidate onboarding and selection, performance evaluations, time-sheet analytics,  payment and billing.

Integration into Company Culture

Promote the integration of workers into the company culture through orientation sessions and team-building activities. This encourages participation, which allows contingent workers to learn about the company, its values, mission, and goals and to align their efforts to match those of the business. Communicate the company culture regularly to initiate a strong sense of belonging.

Evaluate Performance Metrics Regularly

Regular evaluation of performance metrics is crucial to managing a successful contingent workforce strategy. Businesses can gain valuable insights into areas that require improvement by conducting thorough research and gathering feedback from various stakeholders such as employees, contingent workers, managers, and customers. By analyzing key performance indicators and benchmarking against set goals, organizations can ensure that their contingent workforce is aligned with the company's objectives and contributes effectively to the business's success.

How a VMS Optimizes the Contingent Workforce

A Vendor Management System (VMS) is a software platform that facilitates the end-to-end process of managing a contingent workforce. This system is pivotal in optimizing contingent workforce management by streamlining procurement, simplifying administration, and providing visibility into contingent worker activities.

With a VMS, in place, managers can automate many of the manual processes associated with contingent workers, such as sourcing, contract management, time tracking, and invoicing. This solution increases efficiency, compliance with industry regulations, and enhanced decision-making through data analytics and reporting features.

Read more blogs to further broaden your knowledge on how a VMS enhances contingent workforce management.