Introduction
There’s been a big buzz around the latest US Labor Report this week. The number of job openings posted by employers was lower than forecasted and commentators have seen this as an indication that the jobs market is slowing, and the economy is moving towards a downturn. Depending on your political persuasion, that downturn is a natural slowdown following an uplift after the pandemic – or it heralds the beginnings of recession. The role of the contingent workforce is becoming increasingly relevant in this discussion as businesses might rely more on temporary and contract workers to adapt to shifting economic conditions.
Why so much focus on the labor report?
As organisations get ready to grow, trends in the job market have been in the spotlight throughout 2024. Challenges around skills shortages, talent supply and absenteeism have left many people asking whether the labour market is as prepared for growth as it should be. The danger is that a limited pool of talent is holding an already-sluggish economy back.
Nor is this debate limited to the US. The UK government’s most recent workplace survey found that nearly a quarter (23 per cent) of workplaces had at least one job vacancy, while one in ten reported a job vacancy due to a skills shortage. A recent parliamentary report, for example, found that the UK did not have enough skilled workers to develop its major infrastructure projects.
Where does the contingent workforce fit in?
For most organisations, the answer to skill shortages and challenges around the availability of talent, is to grow their contingent workforce. The contingent workforce provides the flexibility to support organisational growth in the short-term without committing to increased people costs in the longer-term.
Being a part of the contingent workforce suits many workers, too. As opportunities for remote, global working increase, more professional workers are choosing to freelance, operate as contractors, or build their own consulting services.
Estimates for growth of contingent workers globally:
» 2023: Global contingent workforce participation: 53% increase
» 2024: Global contingent workforce participation: 34% increase
» 2025: Global contingent workforce participation: 25% increase
» 2026: Global contingent workforce participation: 20% increase
A less visible workforce
While the contingent workforce offers opportunity in a difficult climate, it also brings challenges. A less visible workforce is harder to track and manage, and there needs to be more vigilance around workers’ rights and treatment. As businesses demand more initiatives from governments to help drive growth, governments are also faced with the challenge of ensuring that there is enough regulation to protect an emerging generation of contingent workers. It is a difficult balance – because too much regulation may slow growth down.
Governments in the UK and in the US are endeavouring to find this balance. A new Employment Rights Bill in the UK proposes several changes that directly affect the contingent workforce, not least the proposals to end zero hours contracts (a key factor in the growth of the gig economy) and an end to ‘hire and fire’ practices.
There has also been new legislation in 2024 in the US to solve issues around misclassification that ‘deprives workers of basic rights and protections’. According to data from The Economic Policy Institute, people who are misclassified as independent contractors can earn $16,700 less a year in income and benefits than they would have as an employee.
How can you stay ahead with a contingent workforce?
Organisations need to be able to reach, attract and engage with the talent they need to drive growth, while at the same time staying compliant with an ever-changing field of new legislation around workers’ rights and the contingent workforce. The burden of regulation and administration can slow down hiring, slow down growth and leave employers vulnerable to volatile market conditions.
This wider context is acting as a key driver in encouraging more and more organisations to engage with a Managed Service Provider. A Managed Service Provider helps organisations to ensure that their contingent workforce stays visible, trackable and compliant. This is especially important as that contingent workforce inevitable grows and talent enters the business through numerous different avenues. Typically, an MSP can:
» Manage the talent supply chain and ensure that agencies are aligned, high performing and working within the scope of the agreement.
» Implement a Vendor Management System to support an effective contingent worker recruitment and onboarding process.
» Streamline processes and harmonise contracts, invoicing, rates of pay and payroll infrastructure.
» Build talent communities to support more direct-to-talent hiring.
» Provide additional specialist resources for hard-to-fill recruitment, employer branding and attraction campaigns, as well as market research & insight.
Conclusion
Historically, Managed Service Provision was exclusively the domain of large global organisations. But as technology becomes more accessible, regulation becomes more complex and the contingent workforce becomes more important for every type of organisation, across every type of sector, mid-sized enterprises are finding more value and more cost-savings in building a more structured workforce management programme.
If you are seeing your investment in contingent workers rising, now could be the time to look at how you manage those costs more effectively, ensure your workers are correctly classified and mitigate any risks to the business as it looks to grow.
