Economists have long noted the rise of the so-called “gig economy.” More workers are using short-term contracts and other forms of employment to provide additional income to supplement or replace permanent jobs – think Uber, AirBnB. But more and more companies in a variety of industries are also bringing on high-skilled contingent labour for white collar positions in a number of impactful business functions like Technology, Procurement and Supply Chain. Some analysts project that contractors will comprise 50% of the workforce of Fortune 100 companies by 2020.
So what exactly are companies using contingent staff for? It’s not so much to replace permanent workers, as some people have alleged. It’s generally to avoid a labour surplus. If there’s only so much work to do for a specific project, it more sense to hire a contractor for a set term than it does to hire a permanent employee and then try to “make work” for them when the project is over. But there are a variety of other business cases that corporate leaders are making for contingent staffing, recognizing it as a strategic and cost-effective tool in their hiring arsenal.
When might it be a good idea to look at bringing on contingent staff? We put together this list, with a special focus on our recruitment area of Procurement and Supply Chain. We start from the less strategic, more common reasons for hiring contingent staff, and move into the situations that the most innovative business leaders around are adopting today:
Less strategic reasons:
1. Leave Coverages – e.g. Maternity Leave:
This is the classic situation. When many people think “contract” they still think about hiring people to cover maternity leaves or other temporary 6 or 12 month absences. And while contingent staff are still the best way to fill a job when someone goes on temporary leave, that’s not all they’re for, as you’ll see ahead!
2. Work Backlogs:
Many companies’ Procurement functions face growing backlogs – they’ve issued a number of RFPs and the number of responses is higher than expected, or they’re looking to evaluate their suppliers through new Requests for Proposal. Sometimes it’s just that there’s a lot of extra work to get through, and in those cases companies look to hire contingent staff to help clear the backlog, to get back to looking at future projects and avoid getting mired in past work.
3. Cost Savings:
It’s obvious that a contingent staffer with a fixed contract costs less than a permanent employee – in onboarding costs, as well as long-term costs. While contingent staffers often cost higher hourly, deciding to trade some stability for higher wages up front, you as an employer can save on taxes, benefits, training and vacation pay in a way that leaves extra money in your organization’s pocket.
More Strategic Reasons:
4. Hiring directly – not through HR:
Human Resources departments are often tasked with keeping payroll costs as low as possible. This adds an extra layer of budgetary approval to the process when you need to hire, and can make the process more difficult. A number of Directors and Executives have approached us to help them find contingent staff because independent contractors’ pay comes out of their departmental budget, allowing them to skip the often circuitous process of hiring on Perm.
5. Hiring faster:
Sometimes you need a job done now. Turnaround time for hiring independent contractors is often faster than for permanent employment because, as mentioned above, you get to skip the more circuitous parts of the hiring process – and you’re able to bring on consultants who need little time to get up to speed and get to work improving your Supply Chain or Procurement function.
Highly Strategic Reasons:
6. Business Implementations and Transformation:
This is a huge opportunity that companies are beginning to wake up to, especially in the world of Procurement and Supply Chain. Often independent contractors and consultants are best positioned to affect change within a business, for example establishing a Procurement Centre of Excellence or transforming a purchasing department from a transactional to more strategic approach. It can be hard for Permanent employees in Procurement to get buy-in for big-picture change internally, and often a business contractor can get buy-in that a perm employee cannot. These consultants specialize in affecting change, so once the transformation is complete they move onto other contracts, and you reap the cost savings.
7. New Product Launches:
New product launches are one of the hardest things to nail in Supply Chain. The opportunity for supplier disruptions, manufacturing, inventory, and quality control problems is huge – and your existing Supply Chain staff are busy managing the effective production and transportation of existing products. So for new product launches, hiring Supply Chain consultants on a contingent basis can be the best strategic call. Because they’re contingent, you can channel your resources into hiring senior, highly-strategic people without worrying about long-term impact on the bottom line. You can find someone who has existing relationships with niche suppliers, who can find opportunities for cost savings while delivering high quality results on-time, to help set up the product pipeline in a way that your existing team can maintain once your Supply Chain guru’s contract is over.
We hope this advice has been useful for figuring out whether contingent staffing works for you and your organization. We’re happy to hear from you if you’re looking for more information! Leave a comment below.