Contingent Workforce Part II – The Company Dynamics

A previous article, “Contingent Workforce – Already Bigger Than You Think” covered in somewhat general terms the problems associated with the invisible body of workers that may in some cases outnumber those seen as full time employees. The easily traceable contractors and temporary employees are usually only a drop in the bucket when expenditures on consultants, outsourced functions and service providers are added to the mix. Ownership of people problems and performance is not a function of procurement or legal. Where is HR and why have they become so insulated from the problem?

A basic tenet in the process of “getting well” is to recognize that there is a sickness to be cured. There are a number of myths that lure us into complacency.

1. The Myth That Co-employment is Bad – Co-employment is defined as a contractual sharing of employer responsibilities between a contractor’s employer and its client. In a co-employment agreement workers are technically employed by two separate entities: the client employer, who controls their daily duties and the formal contractor’s employer, co-employer, who handles payroll and other personnel functions. The myth originated with certain cases where there was no third party employer and the contractual relationship was with the contractor alone.
2. The Myth of Arms Length Insulation – The use of a third party agency to hire and deploy workers does not automatically insulate companies from liability for taxes and benefits. It is all about taxation and the Federal Government’s lust for money. Somebody has to correctly classify workers and arrange for the collection of taxes from the contingent workforce. So old that it has gray whiskers, the old 20 Point Test put together by the IRS and Social Security can be applied to analyze and agonize over liability.

Contingency workers are not only here to stay it is now a trend used to grow companies in a cost effective and work efficient manner.

1. Advantages – The most immediate advantage is being able to add flexibility to the workforce without the pain of continuously hiring and firing for the short term. Not only does it fill the gaps in overall workforce strength it allows for bringing in specialty skills that are not present in the current organization. There are obviously cost savings related to technical training and long term compensation cost. Recent changes to healthcare laws are making the cost benefits of a contingent workforce even more relevant as an issue. One of the biggest advantages is cross-pollination of ideas by mingling employees with workers that have multi-company experience.
2. Disadvantages – There is always an issue of continuity of thought with a transient workforce. Steps must be taken to insure that institutional memory is not lost when a worker moves on. Traditionally, loyalty to the employer has been seen to be a disadvantage, but recent surveys show that a majority of full time company employees would change jobs if given the opportunity anyway. Short term training can be problematic as high turnover in the workforce creates a need for constantly churning through important regulations, policies and procedures.

There are also special needs that must be addressed with regard to incorporating transient workers into the business. Someone, hopefully HR, is responsible for making the life of these special workers better.

1. Avoid the Cinderella Complex – Treating any worker as a second class citizen will impact their performance, damage productivity and possibly damage the overall company culture. While this is wrong on many levels, after the ball when it is known that the slipper fits this worker may be needed to join the company on a more long term basis. This “try before you buy” is the ultimate shakedown cruise for choosing a new employee.
2. Recognize and Reward Talent – By including contingent workers in efforts toward team building the entire team is made more cohesive. Inclusion in company functions does not put the company at risk but in fact makes it more like family. Everybody wants to be given the essential knowledge to do their jobs well and recognition for their efforts. While they are officially outside of the scope of employee performance management systems, giving feedback is a gift that will be appreciated and rewarded with mutual feedback.

Accounting practices allow us to hide costs associated with the contingent workforce by creation of budgetary buckets and allowing different company officials to manage the buckets individually. Someone has to look at the total cost picture and advise the CEO of not only the current variances but also project long term fiscal responsibility. Engagement and culture are only words if there is not an investment in getting healthy and measuring progress. Is anybody in HR up to the challenge?

Also read:

• Contingent Workforce Part I – Already Bigger Than You Think
• Contingent Workforce Part II – The Company Dynamics (This)
• Contingent Workforce Part III – Employees and Job Seekers

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