“Wait, I have workers where?” Discovering there are contract workers in remote corporate locations is an issue that no senior level executive wants to learn anecdotally. It is a problem that opens up an organization to a variety of risks, not to mention financial implications. It is something that a HR executive at a global technology company recently shared with PRO Unlimited after looking at his entire global workforce. This executive was seasoned and passionate about his objectives and responsibilities; however, he was unaware that the company was employing contingent workers (e.g. agency-recruited workers, self-sourced payrollees, independent contractors, freelancers, and statement of work vendors) in various countries including Africa and parts of Asia.
An organization’s workforce is complex, dynamic, and disparate. While tracking the full-time workforce is typically achieved through an ERP system, this task becomes exponentially more difficult when factoring in the variety of different types of non-employees across the globe and the different systems and rules that may be involved.
With the growing popularity of the contingent workforce, the simple ability to track a company’s holistic workforce (full-time employees along with all types of non-employees) has become extremely difficult. This “gap” opens organizations up to a multitude of risks including:
• data security breaches;
• worker misclassification;
• compliance with company policies and/or local, national and international laws;
• and general workforce management concerns.
It also severely limits the business’ ability to make informed decisions that affect profitability.
According to the “2017 Workforce Compliance Report” published by WorkMarket, the contracted labor population accounts for 20-60% of the workforce at half of the 200 companies surveyed. Yet, approximately 23% of the company leaders surveyed do not know how many contractors they have and approximately 20% do not have easy access to contractor data.
Companies need to be able to quickly and easily understand the geographical location of their workers, what classification of workers they have, and what level of access they have (to infrastructure, like buildings and IT systems). They should also be able to understand the financial impact of each worker to the business and how the organization is effectively utilizing its workforce. Without this information, an organization could be susceptible to multiple detrimental situations.
Data security breaches
System access to sensitive information (confidential employee or customer data, intellectual property, etc.) can be challenging to manage for large, complex organizations. Allowing access to the wrong person, or not knowing that someone has access can have catastrophic consequences. For example, a contractor at a large insurance in carrier in Florida sent the names and social security numbers of employees, vendors, and contractors to his home computer. In another case, a programming consultant at an insurance company in Wisconsin stole and sold social security numbers. A third example occurred when a contractor at a financial services company leaked personal customer information to an identity-theft ring. Whether it was due to improper vetting, system access, or oversight, there were steps that could have been taken to prevent these failures.
Worker misclassification / Compliance concerns
The US Department of Labor continues to devote millions of dollars in resources to crack down on labor misclassifications, driving material penalties for organizations at-fault. In the same WorkMarket survey, business leaders said they were concerned with violating the fair labor standards act (FLSA) and running afoul of the Affordable Care Act (ACA). Organizations with a global presence need to ensure that they are compliant with all local laws and worker pay arrangements. Engaging with experts to ensure internal and external compliance policies are being followed is now a business-critical practice. The penalties and fines being assessed by different governmental organizations can cripple a business.
Uncontrollable operating expense
Labor is one of the largest expense line items on a company’s income statement, which also means that it is generally an area that can generate tremendous cost savings when managed effectively. Without visibility to all types of employee labor, organizations do not know if managers are circumventing their own company policies via utilization of “bundled” services that hide costs and other pertinent details. Organizations operating without insights into labor costs across all workers, including the key drivers such as: hours, pay/bill rates, specialization, and even worker quality are working at a severe disadvantage. With all of the possible risks associated with not having full workforce visibility, why are organizations having such a difficult time with it?
Corralling varying different worker populations is often difficult and resource-intensive. There are numerous vendors at play and often multiple systems to navigate. In many cases, contract workers are able to bypass a centralized HR process because they are often hired by project managers or local branches of business. Their presence may be accounted for as a line item on a budget rather than as part of a tally of headcounts.
Then what should a company leader do? How do they bridge the gap from “blind” to “enlightened”? Take these three steps to ensure total talent workforce visbility:
Step 1: Consider partnering with a Managed Services Provider (MSP). By partnering with a MSP and a Vendor Management System (VMS), companies are able to see clear budget breakdowns, and gain regular headcount reporting. This visibility and transparency significantly enhances contingent workforce management and reduces risk.
Step 2: Ensure the MSP has a strong compliance team. Their teams of experts work with suppliers to ensure candidates have the necessary compliance documents and audit each credential and certification prior to engagement. An MSP partner such as PRO Unlimited can provide business validation services to mitigate risk of non-employee misclassification. Should a regulatory body audit compliance documentation, managers can easily access a full compliance.
Step 3: Challenge the MSP on analytics. The amount of data available now is staggering and assuming the first two steps were successfully completed, the organization should have plenty of data to use. However, having access to data is not the same as using the data to drive actionable intelligence. At PRO Unlimited, we are using our Total Talent Solution to look at the holistic workforce (full-time employees, and all non- employee types), which has provided meaningful business intelligence to our clients. We are able to answer a variety of questions with this data such as:
o Where are my workers? How many do we have in a given location?
o What vendors are we using?
o Are we compliant with local/national and international laws?
o Who is onsite and has access?
o Are we in compliance with company policies and procedures?
o Are we sourcing effectively?
o Where should we source for a resource and how should we set up the engagement?
o When should I start sourcing for a position?
o What is impacting talent acquisition and retention?
o Do we need to manage overtime and expenses differently?
Some leading-edge organizations are already utilizing this approach to great benefit. The war for talent is fierce and the list of financial and other risks for businesses continues to grow. Companies that elect to partner with an expert in this space will have a decided advantage and will allow their executives to sleep soundly at night, knowing their company is effectively managing their workforce and mitigating risk.