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Developing a Contingent Worker Strategy
In this chapter, you will learn:
• why developing a contingent worker strategy is important when organizing and coordinating your efforts to introduce contingent workers into your organization
• how establishing a contingent worker strategy can help you better communicate the objectives and direction that this program will follow
• how a contingent worker strategy will keep this program on track and focused its goals.
RESUMING YOUR ROLE AS CEO OF ELASTICITY, you now believe you have a better grasp on what contingent employment in its various forms entails, and you have familiarized yourself with some of the potential issues. Do you simply give your managers the go-ahead? Before you do, perhaps it would be better to think things through a bit more.
At your next staff meeting, the subject of contingent workers comes up again. The staff debated many differing ideas concerning how such a program should be implemented. As you listen to each member of your leadership team try to convince the others of the advantages of their plan, you realize that a single coordinated approach, one endorsed by each member of this leadership team, is essential. This is what is needed most at this part of the process, or there could be confusion, even chaos, in the implementation stage.
Based on what you have recently learned on this subject, you believe that you must get this team focused on the goals of this initiative. You interrupt the unproductive debate by asking the group to focus first on what the objectives should be concerning introducing contingent workers into the company and the strategy they should develop before initiating this program. You ask the group to consider some basic issues:
• Which approach best fits the company at this time?
• Could we use multiple approaches to contingent workers? How would this be managed?
• Do we need to retain a high level of control over contingent workers even at the risk of increased liabilities?
• What jobs or tasks could reasonably be turned over to contingent workers?
• Could the company’s periodic need for certain types of skills or expertise be met through retaining contractors or consultants as needed, rather than full-time employees?
• Should there be certain parameters established for contingent workers, and what would these be?
• What are the potential problems or consequences of introducing contingent workers in the organization, and how could these be addressed or prevented?
• How should this strategy be communicated to the rest of the organization?
• What would happen if the commitments made in this strategy should become inconsistent with the overall business objectives of the organization?
Balancing Act
Organizations must balance the opportunities and challenges that contingent workers present to them. To help achieve this balance, it is important that an organization develops a well-thought-out strategy concerning the introduction and utilization of contingent workers. When an organization fails to create an overriding strategy, the use of contingent workers takes place in an ad hoc fashion, leading to higher costs, inefficiency, and worker dissatisfaction. Without a well-planned and articulated strategy, an organization could find itself engaged in multiple initiatives to bring contingent workers into its workplace with no direction or coordination. Many of these actions could even become counterproductive to the overall goals of using contingent workers in the first place. An organization needs to have and consistently apply requirements and standards for contingent workers. And the leadership team should endorse this strategy and communicate it to everyone in the organization.
A formal strategy for the acquisition, use, and integration of contingent workers should serve as direction to implement contingent worker programs. An effective contingent worker strategy should support and reflect the overall objectives of this initiative. This strategy should be reviewed regularly by the organization’s leadership team to ensure that they are continuously updated on the progress toward meeting the objectives of the contract worker initiatives. Accountabilities should be established for those responsible for the success of this plan as well.
What the Strategy Should Cover
The goals for contingent workers should be identified and baked into the strategy. For instance, if the organization’s main strategic objective is to reduce labor costs, the strategy should be designed to accomplish that. Other goals may also be quite important, such as avoiding adding to the permanent full-time equivalent (FTE) workforce while still meeting staffing needs. The strategy should identify and implement the organization’s decision to share direction and control over the work of contingent workers with a contract staffing agency, or to shift the responsibilities for the employment and supervision of these workers completely to an agency.
The strategy should also identify longer-term objectives of this program. For instance, in many organizations, contingent workers may serve as part of the feeder pool for future permanent workers. Identifying this goal as part of the overall contingent worker program strategy allows the organization to set certain pre-employment standards for the staffing agency in hiring these workers consistent with what is required of permanent workers. Neglecting to do this at the beginning of the contingent worker hiring process can cause disappointment and frustration down the road, should contingent workers fail to meet these standards in the event they are considered for permanent employment. Other employment-related goals such as diversity, equal employment opportunity (EEO), or an affirmative action program should be considered part of this strategy as contingent workers are brought into the organization, especially if the possibility of permanent employment exists. This last point will be discussed in greater detail in chapter 4.
Creating the strategy can also serve as an opportunity to consolidate or update any existing documents, policies, or directives concerning contingent workers. It should identify and explain any approved variations of contingent worker policies in place.
An organization also would be well advised to establish in its strategy the extent that contingent workers will be utilized, as well as any goals for the number of contingent workers overall or in each facility and limitations on the duration of any single contingent worker’s employment.
The strategy for using contingent workers should acknowledge that certain issues, liabilities, and limitations are associated with the use of contingent workers and commit the organization to minimizing any potential risks by effectively managing this program. The strategy should identify the metrics and methodologies, such as software solutions, designed to establish and monitor uniform requirements for all agencies supplying contingent workers and regularly measure the effectiveness of the overall contingent worker initiative. The strategy should require that the overall costs of the program be reviewed routinely to ensure that the financial objectives of the program are being met, or are on target to be met in the future.
The strategy should also anticipate the impact that introducing contingent workers in the organization can potentially have on existing employees, and commit to both addressing their needs and establishing effective communications concerning the objectives and goals of this initiative. The importance of this point can be illustrated by the experience of one telecommunications company that decided to convert its call center employees into a contingent workforce, employed and managed by an outside agency. The workers, some of whom had several years of service, were called to a meeting and informed that their employment with the company was ending, but that they would be offered jobs by the agency, albeit at reduced wages and benefits. They were quite upset, as was anticipated.
What wasn’t anticipated, however, was the reaction of workers elsewhere in the company whose jobs had not been affected. The company didn’t say anything to the technicians and office workers at other facilities about what was happening, why it was happening, or what the plans were for the use of contingent workers at their own facilities. Thus, the announcement resulted in shock and fear for these workers as well. A union successfully used the workers’ fears as the focus of covert union campaigns at three of the employer’s other facilities. The company barely avoided unionization at its remaining facilities by carefully explaining its contingent worker strategy and making it clear that there was not and never had been any plan to replace current employees with contingent workers in any other facility or function.
The lesson to be learned from the painful experience in this example is that better planning and communications could have helped make the transition better. Failing to develop a plan to address the impact on the workers at other locations created unwarranted concerns for those employees and a mess for their employer.
Total transparency may not be possible in planning major changes like outsourcing, but a reasonable level of transparency in implementing your contingent worker strategy can help even the most difficult transitions go smoother. The organization in this example could have established support systems for those potentially losing their jobs to help them find new employment or retraining well in advance of the implementation date. This would have likely helped maintain the morale of both the affected and unaffected employees during the transition.
Finally, if you’re working with a staffing agency, the strategy should outline the agency’s obligations, including its responsibility to assume all employment administrative functions such as timekeeping, payroll, discipline, raises, benefits administration, counseling, performance evaluations, random drug testing, and export control compliance. If applicable, the strategy should state that the agency will provide direct supervision and assume all responsibilities as the employer of the contract workers to ensure that the organization is not considered a joint employer. The strategy should also identify who will be responsible for reviewing the agreements with the agencies providing contingent workers to the organization to ensure they are implemented contractually and are being consistently applied as agreed.
Contingent Worker Strategy Example
The following is an example of a contingent worker strategy document that incorporates strategic objectives in a manner that would provide guidance and direction as you begin or redirect a contingent worker initiative.
The XYZ Corporation created the following contingent worker strategy to provide guidance to the organization as it begins to utilize contingent workers to supplement its existing permanent workforce to meet both current and future staffing needs. A major objective of this strategy is to ensure consistency across the company in all initiatives related to the utilization of contingent workers.
Purpose. This strategy is focused on the primary goal of reducing long- and short-term staffing costs for the organization. We recognize that there are certain risks accompanying this initiative, which we will do everything possible to avoid. To achieve this objective, the corporate purchasing team will identify a qualified contract worker agency or agencies (“vendor” or “vendors”) approved for use at each facility, and establish standard agreements with these vendors. Such contracts will require vendors to assume, among other functions, sole operational responsibility for contracted services, including direct supervision, training, and discipline of the contingent workers. To help ensure the consistency of this initiative, the number of contract vendors being utilized nationally will be limited to the fewest possible.
Administrative Responsibilities. The recruitment, screening, selection, and hiring of these contingent workers will be the sole responsibility of the vendor. The vendor is to assume responsibility for all employment administrative functions such as record keeping, payroll and payroll deductions, timekeeping, discipline, raises, promotions, benefits administration, counseling, performance evaluations, and random drug testing. Corporate purchasing will be responsible for negotiating these contracts and ensuring vendor compliance. Any exceptions to these requirements must be approved by the vice president of operations or their designee.
Future Permanent Employment. To maximize the benefit of the investment being made in this contingent worker program, it is our intent to consider these individuals for any future permanent employment openings they are qualified to fill. Vendors must conduct equivalent pre-employment screening required of XYZ permanent job applicants. As these contingent workers may potentially become a feeder pool for the future permanent workforce of the company, our diversity, equal employment opportunity goals, affirmative action goals, and community outreach employment goals will be reviewed with these vendors.
Rules for Contingent Worker Duties. The company is establishing certain parameters concerning the extent to which contingent workers can be utilized. Contingent workers must not exceed more than 20 percent of the total workforce at any one facility without express authorization of corporate human resources. Each facility shall identify the specific jobs that contingent workers can be trained to perform. Generally, a contingent worker’s employment at one of the company’s facilities should not exceed two years unless conversion to permanent employee is imminent.
Reporting and Oversight. The overall total costs of contingent workers will be reviewed regularly to ensure that the financial objectives of this program are being achieved utilizing the most current software programs available. This and other progress reports on the program will be made to the leadership team at least annually.
Additionally, we acknowledge that the introduction of contingent workers can have an impact on employees at all levels of the organization. The company will develop an ongoing communications process to keep employees informed concerning progress toward meeting the program’s goals, and answer any questions they may have on how contingent workers might affect their own employment and future.
This document supersedes any previous rules or guidance on the subjects addressed in this strategy as of the date of its publication.
Practical Applications
• If you do not have a contingent worker strategy, assign a task force to create such a document. Include those most familiar with the current laws and regulations concerning contingent workers, such as members of your human resources department and legal representatives, as well as key stakeholders in the process.
• Review your contingent worker strategy with everyone in the organization, including leadership, managers, supervisors, and permanent nonexempt or hourly employees.
• Explain the purpose of developing this strategy and how it will be utilized to help manage this program.
• Explain the reasons and rationale for the parameters established in this strategy during these presentations or meetings.
• Explain that sharing this strategy is just the beginning of the communication process, which will be ongoing concerning the use of contingent workers in the organization.
Questions to Consider
• What are the advantages of developing such a strategy before embarking on such a process?
• Who should be involved in establishing this strategy in your organization?
• How comfortable will your leadership and managers feel with making such a strategy available for your entire workforce? What do you envision as the problems and benefits of this transparency?
• How can you ensure that once such a strategy is developed, it is followed?
• What accountabilities should be assigned concerning the implementation of your strategy?