Companies Turning to Tools to Manage Contingent Labor

In 2012, more than 1 in 4 employees were contingent labor, according to the Aberdeen Group in Boston. And that number is likely to jump to 30 percent in 2013.

As those dramatic statistics suggest, contingent workers such as staffing agency temps and independent contractors have become a large and permanent part of the workforce. As a result, companies need to think carefully about the tools they use to manage these workers so they can maximize productivity while minimizing compliance issues.

“It’s risky to treat contract workers like full-time employees,” says Bryan Pena, vice president of contingent workforce strategies at Staffing Industry Analysts, a research firm in Mountain View, California.

Because contingent workers are paid differently, receive different benefits and operate under different employment rules, they need to be tracked using different talent management tools, he says. Otherwise, employers can open themselves up to litigation over access to health care and other benefits if job descriptions or employment language overlap.

While many human resources software providers offer basic tools to track their contingent workforce population, to meet payment and hourly compliance requirements, when companies want more detailed management options they turn to vendor management systems. A VMS is an automated software system to track suppliers, temps and contract labor. Most are cloud-based and offer tools to track time and deliverables, as well as analytics and forecasting features so companies can manage contingent labor costs and better align workers with projects.

In the past, these tools focused largely on compliance concerns and reducing cost by allowing employers to match work needs with the lowest-priced staffing vendor. More recently, VMS products have added capabilities to measure the performance of contingents.

“VMS solutions have evolved in the past decade to become a vital solution in the contingent workforce space,” Dwyer says. They “help best-in-class organizations drive visibility into all facets of contingent workforce management, enhance analytics and reporting, and provide an automated portal for managing day-to-day operations.”

The VMS market is fairly mature, with companies such as Fieldglass Inc., IQNavigator, Provade and Peoplefluent dominating the market.

However, many companies still take a piecemeal approach to managing contingent labor. GeoDigital International Inc., a mapping and visual infrared inspection company in Hamilton, Ontario, uses five different tools to track and manage its 320 employees, which includes roughly 50 contingent workers.

“We use ADP and Paychecks for payroll, Replicon to track contractors’ time and attendance, Halogen for training, and a new SilkRoad HR system for talent management and other HR processes,” explains Liza Scurr, GeoDigital’s vice president of human resources. “And they all need to tie together.”

Every other week, contingent workers input their hours to the cloud-based Replicon system, which automatically forwards the information to their manager for approval, and then sends it to payroll. The entire process is automated and takes no more than two days to complete, she says. All of the workers, including contingents, participate in employee surveys and online training courses using a program from Halogen Software Inc.

The challenge is integrating all of these systems so that workforce data can be easily shared and incorporated into all of the HR management functions.

Integrating data management systems is key to managing contingent workers, whether you are using a VMS, an HR system or multiple stand-alone programs, says Ray Wang, principal analyst and CEO at Constellation Research,. Along with making sure contractors are paid promptly, integrated data systems protect employers from inadvertent compliance violations, and enable them to track performance and cost metrics so they can identify high performers, negotiate better rates and define delivery criteria.

At GeoDigital, the HR team is using data from Replicon to establish performance metrics for contractors, such as the number of pages of data they should produce in an eight-hour day.

“We already know the number of people it takes to deliver specific activities, but we couldn’t see the average daily output,” Scurr says. “Through daily tracking we are starting to see patterns, and we can create benchmarks against our best people.”

This is one of the many ways contingent labor data can help companies improve efficiencies, Dwyer says. “The intelligence gleaned from these systems can help executives plan, budget and forecast for the future.”

Sarah Fister Gale is a writer in the Chicago area. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.