Employers Lack Tech to Closely Manage Contingent Workers

Warehouse Workers

Most companies manage their external workers with procurement-focused systems that address tasks involved with contracts, purchase orders and payment but do little to help oversee their performance on the ground.

That’s one of the conclusions of Services Procurement Insights 2019, a report from SAP Fieldglass and Oxford Economics. Though SAP’s bias here is obvious—Fieldglass is a vendor management system, after all—the study’s main points are worth considering as contingent workers grow as a proportion of the overall labor force.

Although employers continue to rely on contingent workers to advance their business, they’re not paying nearly enough attention to managing them, the report said. As a result, companies aren’t realizing the full value of their investment even as they expose themselves to security and compliance issues.

Although employers continue to rely on contingent workers to advance their business, they’re not paying nearly enough attention to managing them. @SAPFieldglass #HR #HRTech Click To Tweet

The study found that external workers, including contingent workers and service providers, have knitted themselves into a number of areas of business operations, increasing agility and speed to market as well as providing necessary skills. For example, 62 percent of the business executives surveyed said external workers are important or extremely important to meeting the need for specialized technology and digital skills.

On average, the report found, 42 percent of total workforce spend is on external workers. More than half of that is on contingent labor.

Under-Managed Contingent Workers

SAP Fieldglass General Manager Arun Srinivasan said the study revealed “the significant need to better manage this sizable workforce to maximize value and minimize risk.”

For one thing, these workers aren’t managed closely enough, the study said. Just 47 percent of executives are “highly informed” about contingent workers’ contract terms, for example, while only 31 percent are as informed about the quality of their work.

Besides making external workers difficult to manage, this lack of insight exposes companies to security and compliance issues. Nearly half, 47 percent, of executives reported some kind of digital security breach with non-payroll workers. Forty percent faced some kind of compliance issue, and 36 percent reported worker misclassifications.

Procurement, Meet HR

SAP’s suggestions for addressing these issues follow the report’s logic. Organizations, it says, must develop greater visibility into their external workforce, manage it more rigorously and do so by working across functions.

For one thing, that means managing external resources as closely as they manage their payroll employees. Among other things, employers should monitor work quality and the ability to meet milestones.

Also, business leaders must understand that managing external workers requires collaboration between Procurement, HR, IT and the lines of business involved with each engagement. Each function brings “meaningful insights to the table,” the report said. However, only 22 percent of the study’s participants believe HR and Procurement collaborate at a “highly effective” level.

Most companies have effective HR technology in place, the study found. And while many have procurement solutions to handle the financial aspects of hiring external workers—items such as contracts, purchase orders and invoicing—they don’t have systems to manage contingent workers at an operational level. For example, few companies have technology that can verify certifications and training.

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