Contingent Workforce Management Benchmark Report

Contingent Workforce Management Benchmark ReportPresented by Jenni Nelson, HCMS

Originally present at:

August 2013

Sponsored by:

Why a Contingent Workforce Management Benchmarking Survey?

According to the ABS, November 2012, there are:

11.5 Million workers in Australia of which 3.15 Million are either:

• Workers with no paid leave entitlements; or

• Independent Contractors

This represents 28% of the total workforce

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With paid leave

entitlements63%

Without paid leave

entitlements19%

Independent contractors

9%

Other business operators

9%

Forms of EmploymentNovember 2012

What does best practice in Contingent Workforce Management look like?

Presentation NameMonth – 201X

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Cost Management

• Visibility of overall spend• Consistent pay rates and margins • Reporting capability• Reduced administration costs

Risk Management

• Low risk engagement contracts• Compliance with OH&S, legislative and internal policies• Robust 3rd party suppliers

Productivity and Optimised Workforce Utilisation

• Measure time to productivity • % of contingent workers that meet stated goals and

objectives, and that fulfil their contract• Reuse of contractors for other assignments

Supply Chain Efficiency• Time to hire• Quality of hire• % of compliance to agreed processes

Who responded?

110 respondents, 53 completed

Top 5 industries:

• Government / Defence• Banking and Finance• HR Recruitment• Mining, Gas & Oil• Transport and Logistics

33% of companies with > $1billion turnover

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33%

32%

4%

5%

26%

Respondents by Job Classification

Human Resources Director / Manager

Recruitment Manager

Procurement Manager

Chief Financial Officer

Other

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FINDINGS

Key Themes

Contingent Workforce Management is:

• An emerging discipline• Mostly fragmented and inefficient• Typically, there is no one function accountable for it• The current activity is focusing mostly on cost and

efficiencies, with less focus on quality and competitive advantage

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Structures and Enablers


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• No one function is accountable for Contingent Workforce Management• Technology tends to be disparate • Without a comprehensive lens, organisations are exposing themselves to potential risks and higher costs

0%

5%

10%

15%

20%

25%

Technology

0%

10%

20%

30%

40%

50%

60%

70%

Structures

Reasons For Using Contingent Workers


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Top 3 reasons respondents use Contingent Workers:1. Short term projects and/or project centric work2. To replace a staff member on leave3. Greater Flexibility than permanent

Average tenure of contingent workers: Top 3 for each category


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• Many respondents do not know the average tenure of their Contingent Workers• Most respondents are using Contingent Workers for more than 7 months, across all labour categories• This runs contrary to the top 3 reasons for engaging Contingent Workers

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SUPPLY CHAIN EFFICIENCY

How contingent workers are recruited…


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• The supply chain for Contingent Workers tends to be governed to some extent• Some use of MSP and/or RPO, and high use of preferred supplier panels

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Professional Staff(e.g. Engineering,

Finance, HR)

Office/Admin Staff(e.g. Call Centre,Admin, CustomerService, Retail)

Technical & TradeStaff (e.g. Mechanics,

Electricians)

Industrial Labour(e.g. Drivers,

Cleaners, Hospitality)

Contingent staff directly sourced and hiredthrough referrals

Hiring Managers must go throughOutsourced Recruitment Provider

Hiring Managers deal directly with ANYrecruitment agencies of their choosing

Hiring Managers must go through a ManagedService Provider to engage with approvedagencies

Hiring Managers must go throughHR/Recruitment to engage with approvedagencies

Hiring Managers deal directly withAPPROVED recruitment agencies

Contingent staff sourced directly by theHR/Recruitment Team

Time to Fill


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It appears that time to fill data for contingent workers is somewhat tracked:

• 20% indicated they do not know Time to Fill for one or more labour category of contingent workers

• 92% indicated Time to Fill for one or more labour category of contingent workers

• 7% did not know Time to Fill for any labour category of contingent worker

If one of the top 3 reasons for using Contingent Workers is “Greater Flexibility”, then Time to Fill is Critical

How do you Measure Quality of Hire of Contingent Workers?

• Most organisations are measuring Quality of Hire at some level, but not necessarily formally or consistently

• Quality of Hire should be captured to measure the effectiveness of your supply chain

25% of respondents either don’t measure quality of hire, or don’t know how it is measured

• How do you know which sourcing channels are providing you the best contingent staff?

70% of respondents measure Quality of Hire through informal and/or formal feedback from Hiring Managers

20% of respondents use Hiring Manager Surveys to measure Quality of Hire

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Productivity and Optimised Workforce Utilisation

Tracking Productivity

• 31% do not know whether their Contingent Workers meet stated goals or objectives

• 21% do not manage Contingent Workforce performance

• 52% manage Contingent Workforce performance at the Business Unit Level based on documented procedures

• 65% of respondents reported that most of their contractors fulfil or complete their contracts. 15% of respondents don’t know.

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Contingent Workers’ Performance and Productivity is not tracked consistently• Opportunity to achieve greater workforce utilisation and productivity

Contingent workers: contract extensions


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• 42% of organisations extend more than 50% of their contingent workers beyond their first engagement

• Opportunity for Cost Savings through better governance and infrastructure around raising requisitions and extensions

15%

27%

16%

18%

11%

13%

What percentage of Contingent Workers are extended beyond their first

engagement?

75-100% 50-75% 25-50% 10-25% <10% Don't know

Inferences:

• Initial requirements are not properly estimated

• Line managers are taking the “path of least resistance” by extending existing contingent workers

• Some line managers may use contingent workers to avoid FTE constraints

• Risk increases in relation to employer / employee relationship issues, as tenure increases

Contingent Workforce Utilisation


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• 26% of respondents re-assign more than 75% of their contingent workers• Opportunity to improve contingent workforce utilisation

• Time to productivity is a significant benefit of re-assigning contractors

• To achieve greater re-use of contingent workers, organisations need better visibility of their contingent workers’ skills and availability

2%

24%

20%

9%

26%

19%

What percentage of CWs are Re-engaged for other assignments

within your organisation?

75-100% 50-75% 25-50% 10-25% <10% Don't know

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COST MANAGEMENT

Contingent Workforce Cost Tracking

• 53% have centralised reports of overall spend against budget (real-time and/or regular)

• Tighter reporting is the first step to achieving better cost management

• 36% of respondents do not know whether their Contingent Workforce Spend is within budget

• 25% did not know their total spend on their Contingent Workforce• Who in the organisation has overall accountability for Contingent

Workforce budget?

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Typically, cost tracking of contingent workforce spend is poor, representing opportunities for improved cost efficiencies

Contingent workforce pay management


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Organisations are starting to standardise contingent workforce pay rates, however there is still a long way to go.

The pay component, represents 80-100% of the rate and a large proportion of the overall cost opportunity

• Defining and implementing consistent pay rates based on skill types and levels, improves cost efficiencies.

65%Use pre-defined and consistent

Contingent Worker pay rate ranges for

at least one category of work

44%Reported “pay rates are negotiated

at time of hire” for at least one

category of work

13%Did not know how pay rates were

negotiated for Contingent Workers

in at least one category of work

Managing margins with 3rd party suppliers


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Negotiating margins with 3rd party suppliers of Contingent Workers appears to be somewhat ad hoc and inconsistent.

• For organisations looking for an ROI to implement an MSP, RPO and/or CMO model, improved margin control presents an opportunity to achieve cost efficiencies.

47%

25%

20%

Have negotiated consistent margins with 3rd

party providers, for at least one category of

work

Negotiate margins at time of hire, for at

least one category of work

Have no visibility into 3rd party margins,

for at least one category of work

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RISK MANAGEMENT

Frameworks for Engaging Contingent Workers

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The decision to utilise a contingent worker appears to be predominantly informal• Tighter controls through a formal decision framework will reduce risks associated

with employee/employer relationships

0%

10%

20%

30%

40%

50%

60%

The decision to engagea Contingent Worker is

made at offer stage,based on the needs ofthe preferred candidate

A formal decisionframework is used priorto commencement of

recruitment, to deem therole as Contingent or

Permanent

Most roles aredesignated as either

permanent or contingentprior to recruitment,

based on an informaldiscussion with key

stakeholders

Don't know Other

Typically, how does your organisation make decisions to engage contingent workers versus permanent employees?

Contingent workforce pay management


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• Organisations are using multiple types of contracts for engaging contingent workers• High use of direct contractors in all work categories, which is the greatest area of risk

0%

10%

20%

30%

40%

50%

60%

Professional Staff Office/Admin Staff Technical & TradeStaff

Industrial Labour

What types of engagement contracts do you use for engaging Contingent Workers?

Direct contract with individual

Fixed term employment

Direct contract with incorporated company(independent contractor)

Consultancy agreement (Statement of work)

Contract with via 3rd party intermediary (e.g.agency. RPO, MSP, CMO)

Managing margins with 3rd party suppliers


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35% of respondents reported that less than 50% of their contingent workers are engaged under their organisation's standard contracts• Non-standard engagement contracts represent risk exposure

Risks associated with non-standard contracts can include:

• Financial risk regarding entitlements such as superannuation or annual leave

• Payroll tax liabilities• Unpaid income tax• Workcover claims

35%

27%

6%

6%

13%

13%

What percentage of your Contingent Workers are engaged under your organisation's

standard contracts?

90-100% 75-90% 50-75% 25-50% <25% Don't know

Governance frameworks


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• 55% of respondents use their Contractual Framework (amongst other mechanisms) to ensure their 3rd party providers are meeting their financial, legislative and corporate governance requirements

• 17% reported having no framework in place

0%

10%

20%

30%

40%

50%

60%

Contractualframework

Reporting SLA Management Surveys Audits No framework inplace

Don't know Other

What governance frameworks are in place to ensure your 3rd PARTY PROVIDERS of Contingent Workers meet your organisation's Financial, Legislative and Corporate Governance Requirements?

Governance frameworks


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• 28% of respondents do not have centralised accountability to ensure worker entitlements and relevant taxes are paid regarding their contingent workforce. They rely on the business unit or 3rd party agencies to manage this.

• 8% don’t manage it at all

0%

10%

20%

30%

40%

50%

60%

Contractualframework

Reporting SLA Management Surveys Audits No framework inplace

Don't know Other

What governance frameworks are in place to ensure your 3rd PARTY PROVIDERS of Contingent Workers meet your organisation's Financial, Legislative and Corporate Governance Requirements?

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RECOMMENDATIONS

First steps: Visibility, Cost & Risk

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• Centralise accountability for Contingent Workforce management

• Identify all current Contingent Workers, their rates, length of tenure and nature of engagement contract

Visibility

• Implement centralised and regular reporting to track costs and other metrics

Cost

• Identify all ‘high risk’ engagement contracts (e.g. direct contractors; non-standard contracts)

• Identify long term Contingent Workers at risk of being deemed ‘employees’

• Develop a prioritised plan to mitigate risk

Risk

Solutions and Enablers:

Consulting: • Contingent Workforce Audit

Technology: • Vendor Management System

Contingent Workforce Management Providers:• Recruitment Process

Outsourcer; • Contractor Management

Outsourcer

THANK YOU FOR YOUR TIME!Presented by Jenni Nelson, HCMS

Originally present at:

August 2013

Sponsored by:

Contingent Workforce Management Benchmark Report

Data & Analytics

Transcript of Contingent Workforce Management Benchmark Report