Over the past several years, the working landscape has changed dramatically. For the first time in decades, we saw a concerted shift towards skilled project work over full time employment en masse. This shift from traditional employment was coined as the “gig economy” and shows no sign of slowing. Within the gig economy, workers are now deemed “contingent workers”, instead of temporary labor. They are the faces of not only Uber drivers, but highly skilled nurses, computer software coders, and more. The primary industries driving the growth of the gig economy are technology, healthcare, manufacturing, and skilled assembly/repair. But how large is the gig economy and how is it impacting employers?
Taking a Closer Look at the Gig Economy and Employers Operating Within it
According to the U.S. Government and Accountability Office, approximately 40% of workers will be considered contingent workers by 2020. Ardent Partners predicts an even more dramatic increase, predicting that by the end of 2017, 45% of workers will be considered contingent workers, including statement of work (SOW) workers and freelancers. It’s clear that from enterprise organizations to small businesses, contingent workers are becoming a staple of the global workforce.
Employers have embraced these nontraditional work arrangements for a variety of reasons- to obtain specialized skills on a project basis, to evaluate potential new full time employees, and to adjust to changing work demands. Yet with the growth of the contingent workforce has come many new challenges for employers. These challenges have included compliance concerns, risk of misclassification of non-employee labor, cost containment, maintaining supply chain visibility, and more. Employers seeking to make strategic use of their contingent workforce may be inviting undue risk into their organization absent proactive strategy and intelligent contingent workforce solutions.
Contingent Workforce Solutions Impacting Employers
The rise of the gig economy has caused employers to seek contingent workforce solutions that solve their challenges. A variety of contingent workforce solutions have emerged to strategically guide employers through the changing seas. Among them are the following workforce solutions that may significantly impact how contingent labor is acquired, managed, and used in furtherance of employer goals:
- Outsourcing contingent workforce management to a vendor neutral MSP. When contingent workforce programs grow in size and scope, they also grow in complexity. Organizations relying on hiring managers to acquire, engage and manage contingent labor often find they open the door to undue risk. Hiring managers aren’t experts in non-employee classifications, market rate competitiveness or staffing supplier management, nor should they be. This is why many employers seek to partner with a vendor neutral MSP instead. A vendor neutral MSP is able to work with any third party software solution to streamline operations and transform programs with sound contingent workforce solutions in alignment with an employer’s goals. In such a partnership, employers gain increased access to contingent labor through expanded staffing supplier relationships, improved compliance and risk mitigation, process efficiencies, reduced costs due to a fair and competitive market, expertise in non-employee classification analysis, market leading analytics and reporting, and consultative services that transform good contingent workforce programs into great ones.
- Increasing visibility across the supply chain with a VMS. Vendor management solutions (VMS) have grown in popularity because of the explosion in the use of contingent labor. Within a VMS tool, employers are able to increase visibility across the entire supply chain by illuminating spend across the organization, detail into cost centers, headcounts of contingent labor, business departments and units operating outside of budgetary guidelines, alignment with SOW project milestones, and more. A VMS is transformative for employers using contingent labor in the gig economy. Absent such a tool, employers may find their budgets swelling and risk growing. A VMS provides a holistic view into contingent workforce programs that allow for process improvement, compliance adjustments, and more.
- Engaging business validation services to mitigate potential non-employee misclassification risk. The risk of non- employee misclassification has grown significantly in the past year. To date, 35 states have joined the IRS and the DOL in addressing employee and non-employee misclassification errors. The risk of such errors could include fines, penalties, loss of certifications, and lawsuits which could potentially shut an organization down. To mitigate this risk, many employers have sought to engage business validation services of experts such as their vendor neutral MSP partner. With business validation services, employers no longer rely on hiring managers to make determinations which could turn out to be risky for the business. Instead, they provide detailed information on consultants, contingent workers, and SOW project workers for a determination. These experts are able to advise employers on how to proceed with a proper classification and how to mitigate potential risk with options such as payrolling workers, and more.
- More nuanced and robust strategic analytics. In the age of Big Data, strategic analytics are increasingly important to employers. In contingent workforce programs, strategic analytics provide quantitative evidence to inform business decisions. This can include the need for increased staffing supplier partnerships, exposure of inefficient processes hindering engaging qualified candidates, market rate intelligence to contain costs, and more. Employers using contingent workforce solutions such as strategic analytics are able to make better informed decisions and mitigate risk.
The rise of the gig economy has created a confusing new terrain for employers. Many eagerly create contingent workforce programs that could expose them to undue risk and derail organizational goals. Using contingent workforce solutions such as those outlined above, employers are better able to realize the strategic benefits of using contingent workers in the new gig economy.
