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A simplified way to manage contractor employees

Across the business landscape, workforces are changing. There is an ongoing fundamental shift in the global and local market towards assignment and project based work. The workforce is moving from the traditional master-servant “permanent” workforce structure, to a blended workforce balanced by “non-permanent” contract workers.

Over the past few years organisations have increasingly turned to white collar contractors (referred to as Independent Professionals or IPros by Entity Solutions) as a means for facilitating a scalable workforce that supports sustainability and profitability.

The trend, evident across a broad range of industry sectors, is being driven by a mix of economic conditions and business priorities. In the current macro-economic climate, organisations are becoming increasingly reluctant to swell the ranks of their full time permanent staff. Rather, they are seeking to fill vacancies with IPros who can be increased or decreased in number as economic conditions change.

IPros also appeal to employers because they allow an organisation to remain flexible and adaptable to new opportunities or shifts in market demand. These IPros with specific skills can be quickly sourced and placed within the organisation to ‘hit the ground running’.

For procurement managers, the rise of the contract workforce brings with it particular challenges. Management methods which worked in the past may no longer be appropriate or efficient. Often they need to be examined and refined for this new employment paradigm.

The evolving recruitment challenge

IPros enter an organisation through a variety of routes. Most organisations have a panel of preferred recruitment vendors from which short-term talent is sourced. However, increasingly, procurement professionals are also finding a rise in the number of ad-hoc hires as line of business managers source talent from specialist or non-approved vendors, as well as sourcing these experts directly without going through any recruitment vendors.

The result is an increasingly complex web of supplier relationships, contracts, and payment trails. Multiple agencies need to be managed and staff benefits tracked. Invoices from direct hires must also be approved and processed, further adding to workloads.

The rise in individual contract numbers can also make it difficult to ensure consistency of payment rates and conditions. Approved recruitment vendors may become frustrated if they perceive that a growing number of hires is occurring outside their responsibilities.

If the situation is not addressed, tracking the true cost of engaging and managing the IPros becomes difficult; if not impossible. For those charged with managing the process, the situation can rapidly become a nightmare.

The benefits of Managed Vendor Services

To overcome these challenges, procurement professionals must take a more holistic approach to the management of IPros.

Rather than struggling with the burden of dealing with multiple suppliers and a range of directly hired workers, procurement departments need a single point of contact that can manage and maintain all relationships.

Dubbed Managed Vendor Services (MVS), this approach provides a range of clear benefits for an organisation. Once implemented, it can significantly streamline how contingent workers are appointed and managed.

For the procurement professional, the most noticeable benefit of adopting an MVS approach will be a significant reduction in the administrative burden. Rather than needing to track multiple vendor relationships, all IPros are managed by the MVS firm. As a result, a clear picture of exactly how IPros are being used by the organisation and their true cost can be obtained.

The MVS approach also ensures issues that can easily fall through the cracks are addressed before any problems arise. These can include legal ramifications around non-standard contracts, occupational health and safety (OH&S) training for IPros and the communication of policies relating to issues such as corporate intellectual property (IP). Additionally, as MVS is a core service their compliance with legislative requirements such as Workers Compensation, Payroll Tax, Income Tax, Superannuation and the like is assured.

When to consider a Managed Vendor Service

There are a number of points at which a procurement department should consider embracing an MVS approach to the management of its IPros. They include:

1. Planning a headcount increase

While the management processes already in place may be working, increasing the numbers of IPros could add unwanted strain. Moving to an MVS provider will help to alleviate this.

2. When pressure is already being felt

Things may already feel out of control, with large numbers of IPros currently working within the organisation. An MVS provider will be able to get things back on track.

3. If gaps in compliance are discovered

Things may appear fine on the surface, but dig a little deeper and there can be issues around the management of factors such as agreed agency margins, benchmarked IPros rates, modes of engagement, protection of IP, and OH&S inductions. An MVS provider can monitor and manage all such factors.

In selecting your MVS provider vendor neutrality is important. Look out for a MVS provider that does not perform recruit activities thereby eliminating conflict of interest or any risk of redeployment of your valued talent. Vendor neutrality also means your recruitment vendors can be comfortable in knowing that the MVS provider is a trusted partner.

Conclusion

As more organisations recognise the benefits offered by contract workers, their proportion within workforces will continue to rise. While this brings considerable benefits in terms of flexibility and cost control, it can also put a strain on existing internal structures and staff.

By adopting a MVS approach, these strains can be significantly reduced if not eliminated. A single point of contact for all IPros means costs control can be maintained and administrative burdens decreased.

The result is measurable benefits for an organisation which is able to continue to enjoy the benefits of IPros without having to also deal with the complexity such a workforce can bring.

Matthew Franceschini

Matthew Franceschini

Matthew Franceschini is CEO at Entity Solutions.

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