The Big Unanswered Question When it Comes to Procurement and Contingent Labour…
Soon, contingent labour will be more than 50% of the workforce, and is set to become one of the biggest assets of the workforce. How can procurement secure its relationship with – and optimise the output of – non-employees?
The COVID-19 pandemic has heralded many changes in the workplace, including an enormous upswing in remote work and a rise in the use of contingent labour. Yet despite these fundamental changes, often procurement teams are none the wiser about what is happening in this category of spend. This is one of the major findings in our report in Out of the Shadows: Procurement’s Opportunity to Shine a Light on Contingent Labour report, in partnership with Beeline.
So what exactly is happening with this spend category now? Where does procurement stand, and what are the risks? If your organisation uses contingent labour (and let’s be honest, just about every organisation does), then you’ll need to consider the following:
The contingent workforce: the facts
Contingent workers are traditionally regarded as temporary, external employees who are usually engaged from outside the organisation and are not afforded the same entitlements as employees (such as leave, sick days, etc.). ‘Non-employee’ is another term for these positions – and these non-employee folk now occupy just about every job position, from IT and administrative roles, to back office BPOs, field workers, and consultants of every variety.
Procurement is no exception: there are plenty of contingent workers in our industry.
The sheer number of people working in this type of employment has risen so much that, according to research from Staffing Industry Analysts, companies worldwide spent US $4.5 trillion on the contingent workforce. More than 40% of the US workforce is now categorised as ‘contingent’ and by 2023, that number is expected to rise to more than half (52%). Companies now favour this type of engagement for short-term projects, urgent business needs, and for Statement of Work (SOW)-based consulting and service projects. Add to this the fact that in the current economic climate, contingent workers are a great way to help companies cut costs. As a category of spend, the contingent workforce is not only here to stay, but here to exponentially grow in size and importance over the next few years.
COVID-19 and the changing nature of work
Prior to the pandemic, there was already a swing towards contingent labour and remote work. Since 2020, however, many changes that we thought would take decades suddenly began happening almost overnight.
Because many members of the contingent workforce typically work offsite, some managers might have imagined that COVID-19 wouldn’t have been that interruptive. But the report suggests otherwise.
Our research revealed that many procurement executives did not have sufficient visibility, or knowledge of, their non-employees, nor were these service providers included in their company’s pandemic contingency plans. Specifically, procurement executives lacked essential information including, but not limited to, the location of non-employees, whether they had access to essential systems and the status of their projects.
Without this information, organisations are not only leaving their operations vulnerable to security risks, but are unable to benefit from the new hybridity of the workforce population, neglecting to maximise on employee productivity, and failing to control staffing costs overall.
Procurement being left out and the risks involved
The relationship between the procurement profession and their organisations’ contingent workforce is ripe with opportunity. Indeed, one of the major issues cited by the report is that procurement does not currently play a leading role (or sometimes, a role at all) in harnessing and managing this category of spend.
Too often, departments take on temporary workers through their own budgets, bypassing HR and procurement altogether. This leads to, among other things, uncontrolled labour engagement, a lack of contingent workforce strategy, and a maverick program of spend.
Bypassing procurement and HR is never good, but with contingent labour it’s especially risky. Hazards associated with this category of spend include the potential loss of intellectual property and data, risking financial penalties and lawsuits. Beyond this, there are the regulatory compliance risks that we all see in the news, based on disputes over what does and doesn’t constitute an employee (Read: Uber, Lyft and their ilk).
One thing is for sure: the contingent workforce is here to stay (and here to grow). So the big unanswered question when it comes to procurement and contingent labour is: how should procurement best support and manage this sector of the workforce? We answer this question and more in our Out of the Shadows: Procurement’s Opportunity to Shine a Light on Contingent Labour, produced with Beeline.
Access the report here.
