If you’re looking to manage costs without losing the right talent here’s how to get the best of both worlds.

For many organisations, using flexible talent has become business as usual. According to Deloitte, 77 million workers in Europe, India, and the U.S. formally identify themselves as freelancers, and half of employers it surveyed reported a significant number of contractors in their workforce. Crunch estimates there are 4.5 million people who engage in some sort of gig or freelance work in 2020. Verdict estimates that human cloud revenue will climb 17% in 2020.

Flexible talent is growing at a faster rate than the permanent employee workforce. This trend means opportunities for companies to add more agility to their resourcing strategy, it opens up access to a growing talent pool and offers up significant cost savings. There are many advantages to expanding flexible talent usage, but at the same time, the rise of temp and flexible labour also imposes complexity and challenges for many employers.

For many organisations, flexible labour costs can be a small to significant part of their budget, depending on the size of their temporary workforce. Regardless of the size, many companies fail to adequately control their spend, leverage economies of scale, properly manage their supply chain and optimise processes for procuring talent. As a result, they don’t realise the potential for significant savings and efficiency gains even as the non-permanent portion of their labour costs rises. 

When examining costs associated with your contingent workforce, start by identifying your  direct and indirect costs.

Direct costs.

These are easily identified. The cost to deploy a temp worker is based on the hours worked during a specific period (whether daily, weekly or monthly). Candidates are often chosen by their hourly rates, and if all candidates are equal the lowest rate should be the cost incurred. But as most flexible staffing managers know, the quality of candidates is critical to the organisation since it can impact time to productivity, training costs, workforce morale and other factors. Other direct costs may be related to internal resources specifically dedicated to managing contingent resources and technologies such as vendor management systems as well as absenteeism, training, HR support and digital investments.

Indirect costs.

Spend outside of what is easily tracked can account for a significant portion of the contingent workforce budget. Dedicated managers can account for their time, but what about the hours spent by hiring managers, procurement, legal and other functions when acquiring talent? Vetting suppliers, prolonged hiring times, high turnover, informal training can all add up. Other indirect costs related to workforce administration, shift scheduling and prolonged fill times should be considered.

One important consideration that requires significant resource is regulatory compliance. Whether you dedicate internal expertise or rely on an external partner to check that your hiring practices adhere to local and national laws, don’t underestimate the amount of time and expertise required, especially as regulatory agencies increasingly impose rules on independent contracting. Also, communication with suppliers regarding compliance and other matters should be an important checklist item when expanding your contingent workforce.  

Businesses that proactively examine these expenditures will likely have more success identifying gaps and inconsistencies with their workforce management efforts, leading to cost savings and output gains. However, do they have the internal expertise to accomplish this effectively? And can they continuously undertake this analysis to support a sustained program?

Companies that can budget and devote resources are sure to accomplish this, but it takes commitment, change management and executive support to do so. Many organisations are self-sufficient in building a world-class contingent talent workforce, but be aware of the level of internal resources required.

The alternative is seeking out the services of an external partner who can lend expertise, implement process excellence and provide technology guidance. Randstad Inhouse Services can help companies quickly reach their desired state and spend practices, leading to compliant utilisation of flexible labour and cost minimisation. More importantly, an external partner has extensive experience with organisations like yours so a proven templated approach can be applied. This leads to predictable and desired results.

Should you embrace an external solution, begin with a baseline against which your contingent workforce costs are compared. This will help you develop clear metrics that can be used to structure a continuous improvement process that not only controls spend but also improves time to hire, candidate quality and overall outcomes.   

What model is best for your business? There are a number of options, including an inhouse service provider, a managed service program or payrolled offerings. Choosing the optimal one requires some investigation on your part but you may find providers offering insights on what you may or may not need. The important part to remember is that you undertake a thorough assessment and compare each solution point by point to determine the best fit.

Download our 7 step checklist that will help keep you on the right costing track.