Can a Total Workforce Management System Help with Contingent Workers?
Yes. In fact, the whole point of contingent workers requires they be handled very differently from your employees, which calls for implementing a total workforce management system.
For those companies with no contingent workers, or just a small number, this includes you too. The proportion of the overall workforce classified as a contingent worker, that is an independent contractor or staffing agency hire, is growing. According to the 2017 Freelancing in America report, 36% of the employed workforce are independent workers, which continues the upward trend of independent and gig workers year over year. Another study by Deloitte from 2016 found that 51% of global executives intended to increase their own hiring of independent workers over the next three to five years. That means every company needs to plan its workforce management system to grow to accommodate this burgeoning pool of workers.
Mismanaging contingent workers will be costly
You’re already using payroll, and time and attendance modules to deal with the multitude of compliance issues applicable to employees. However, contingent workers have their own, very separate, set of legal compliance issues. The first rule of using contingent workers is that they cannot be treated like employees.
It doesn’t matter that the independent worker’s contract explicitly states the worker isn’t an employee of a company. If the contractor is treated as such, both the state and the contractor could make the legal case of actual employment, opening up the company to compliance costs owed to the state and costly health care and benefits now due to the “employee.”
Trying to feed contingent worker time and attendance data from their time clock swipe to the same payroll backend that manages employee payroll is risky. The same goes for how HR and the HR system manage their on- and off-boarding, and how managers handle their scheduling and time off.
On one hand, employee and contingent worker data needs to be handled differently so you don’t risk stripping contingent workers of that status and opening your company up to significant liability. On the other hand, you want integrated data so HR, payroll, scheduling and management can track, understand true costs, and maximize the performance of the entire workforce.
A total workforce management system is the best option for letting you separately manage contingent worker and employee data, while also giving you the power to run cross-data analytics to gain needed insights on how to best manage both.
Where a total workforce management solution helps you manage contingent workers
Let’s start with their hiring. While an HR management module may hold employee contracts, the negotiation and management of an independent work contract may instead be developed, tracked and stored through a vendor management module. Some WFM systems may have internal vendor management modules specifically designed for staffing agency and independent work contracts. If so, the WFM solution should be able to integrate with an external vendor management application.
This system separation also controls the process for letting them go. While a WFM solution will enforce the required steps and documentation needed to fire an employee, most contingent work contracts have simpler, quicker separation provisions that must be followed instead.
A total WFM solution that keeps employee and contingent workers separate will also be able to deliver the right onboarding process for each group. You don’t want to accidentally provide benefits selection paperwork to a contingent worker.
Talent management modules that know who a contingent worker is and can tap into past performance data can make recommendations on which independent contractors to contact in the future as different needs arise.
Then, there’s time tracking and payroll. Contingent workers are typically paid at different rates than employees, and from each other. They may also be paid based on different criteria. While employees may get paid breaks and lunches, contract workers may not. You need to track all those punches in and out for both groups, but the back-end system has to know to handle them differently. The same goes for withholdings, which contract workers won’t have.
Indeed, contingent workers aren’t receiving “paychecks” at all. A WFM system can accommodate the invoicing and payment terms processing required to pay contingent workers. In cases where the workers are formally employees of a staffing agency, the hiring company processes and pays a lump sum invoice to the staffing agency. In both cases, the hiring company needs to track time worked and other deliverables to reconcile contingent worker invoices with its own information about what’s owed.
A total workforce management solution protects companies
The WFM system that can both separate the data and management processes for employees and contingent workers, while providing avenues to report and analyze on an integrated data set behind the scenes, protects companies in two ways.
First, it protects companies from treating contingent workers like employees and from mistakenly running afoul of the various contractual and compliance requirements at play. Second, it protects their bottom line by helping them track and benchmark performance and costs, so companies can ensure they’re managing their mixed workforce to maximum benefit.
Using contingent workers provides companies with the staffing capacity and a flexibility too enticing and cost-effective to ignore. From law firms hiring contract attorneys to manufacturers hiring line workers through a staffing agency, they all need the tools to manage these workers properly.
What strategies has your company developed when hiring contingent workers?
While ATS is passionate about time and attendance and excited to support organizations navigate workforce dynamics around timekeeping, we recommend you reach out to your regional and/or local HR chapter for more information on common workplace advice and procedures.