Having worked in the recruitment and staffing industry for over 13 years implementing, developing and fine tuning outsourcing solutions, Shane Little has seen the trend towards engaging contingent labour first hand.
This week, Trevor Vas talked to Shane, Operations Director for Hays Talent Solutions in ANZ on what clients are looking to achieve by implementing a contingent strategy, the benefits of workforce visibility, the use of online talent platforms, and what the future may bring.
Implementing A New Contingent Solution
What New Clients Are Looking To Achieve
The first thing client’s are trying to achieve is to give themselves better visibility over their contingent workforce. Many of the clients we talk to at the moment know that they have sizeable populations of non-permanent workers, but they aren’t too sure how long they’ve been in the organisation; they aren’t too sure where and what site they are employed on; and they’re not too sure if they’re paying over or under market rates for those people. It usually starts as a visibility discussion, and the benefits they will get off the back of that visibility is usually a significant reduction in the risks associated.
After You’ve Reduced Contingent Risks, What Else Is There To Gain?
Once they’ve got the visibility of their workforce, and they’ve reduced the risks associated, typically the conversation becomes efficiencies and cost reductions as can be associated with the contingent workforce. Some of the clients we see move to that conversation quite quickly – we’re talking within 6 months of a solution going live. With some of them, cost reduction doesn’t really become a driving force for 12 or even longer, depending on the makeup of the organisation.
Worst Case Scenario
There are many associated with not knowing who your contingent workers are, where they’re working, and how long they’ve been working for. Some of them are cost related, but the ones that get our clients out of bed in the morning or stops them sleeping at night are the worst case scenarios that could happen where a worker is fatally injured or seriously injured on a particular site for a client and upon investigation they find that they didn’t know that person was there, they haven’t gone through the right induction process, the right levels of compliance and background checks haven’t been completed because that person was a contingent worker. You can only manage the conversations and the publicity that that would bring off the back of it.
Another risk we’ve seen highlighted in the marketplace over the last couple of years are around contractor classifications, where organisations are engaging a large number of independent contractors, and are working under the assumption that these people are payroll tax exempt, or are paying the correct levels of payroll tax themselves. Then low and behold they end up in a difficult conversation in relation to the non payment of payroll tax. There have been one or two organisations in the Australian marketplace levied with significant back payments and fines.
Benefits At Year One Of A Contingent Strategy
Rate Of Compliance
The single biggest win for a client at year one is the rate compliance they achieve as a result of getting complete visibility over their temporary workforce. Most organisations now a days have a level of control in place with their temporary workforce, be that a panel arrangement or an agreed set of service providers. What they don’t realise is that over time, the compliance to the contracts in terms of rates and tenure reductions just falls away. The responsibilities is on their suppliers to provide that contractual compliance, and we know from experience that that drops off over time
In year one, and sometimes in quarter one you’ll see organizations get an immediate benefit from that because straight away they can see their entire workforce, they can see how long they’ve been engaged, they can see how to manage the compliance to the rates and to the tenure reductions as soon as the service goes live. That can be a very pleasant surprise to a majority of clients from day one.
Online Talent Platforms
We are seeing a trend towards this globally, it’s certainly a big conversation point with some of our global clients and in relation to our business in the US. We’re seeing it as a method of engagement for independent contractors or non permanent workers.
In Australia we hear the term, I’m yet to see it somebody use it as a proactive method of engagement for people in Australia yet. I think there is a lot of nervousness around the model and how it would work when you take into consideration some of the legislation in Australia around engaging an independent contractor.
Contingent Workforce – Past, Present and Future
Organisations who traditionally have had a higher contingent use are project focused organisations. We see it very prevalent in the resource sector, in the construction sector and the engineering space and then within the IT area, where workers are engaged for a defined period of time associated with the completion of a project. That’s where traditionally we’ve seen a higher percentages of contingent workforce exist.
Interestingly is that some of our less traditional clients in terms of high contingent workforce have it now as a strategic objective, and they’re looking at building their percentages of contingent workers from less than 2% to maybe 5-8% . These are organisations who are historically very permanent oriented in the landscape of their workforce.
Prediction – Kevin Wheeler predicts a 50% contingent workforce in the year 2020
I’ve heard that figure talked about and heard Kevin talk on this topic as well. I think that would be a rapid acceleration of where we are now to get there within a 5 year timeframe. Some sizeable organisations in Australia are still operating with less than 5% of their workforce, some less than ever 2-3% being contingent or non permanent. I think there will be certain pockets of the industry that may get to a 50% workforce, but I think the landscape would have to dramatically change in 5 years to get there by 2020.
But, who knows? Things have changed very fast over the last 4 or 5 years. If I were a betting man I wouldn’t be saying we’ll be getting to 50% in the Australian employment market by 2020.
Shane Little will be facilitating the world cafe session at #CWF15 in Sydney on 22-23 September. This session provides an open forum for delegates to have their say, share their ideas and gain practical understanding on a diverse range of topics related to implementing, managing and improving their contingent workforce strategy. Register your ticket for the event here.
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