Companies falling short in managing contingent workers

3 April 2018

Only 17% of UK companies have policies and strategies in place for the use of ‘non-traditional’ labour such as freelancers, contractors and gig workers, according to research by consultancy Deloitte.

This is despite the fact freelance workers are making up an increasing proportion of the UK’s workforce: between 2008 and 2016 the number of freelancers in the UK increased by 43%.

Deloitte’s 2018 Global Human Capital Trends survey found 42% of companies expect to see a rise in the use of contractors by 2020, while 41% predict an increase in freelancers and 34% a rise in gig workers. A separate study by Deloitte has found some large companies estimate up to 30% of their procurement spend goes towards contingent workers.

Organisations are alive to the potential risks of relying on non-traditional labour, the research found. Some 42% said they were worried about the loss of confidential information due to the use of contractors, while 31% said they had concerns about the instability of using non-permanent workers.

A further 42% have concerns about changing government regulations in managing or categorising these workers. The gig economy is on the government’s agenda, with the independent Taylor Review recommending the introduction of a new employment status, dependent contractor, and calling on companies to report on the number of agency workers they use.

IR35 rules, which have changed the tax systems for the self-employed in the public sector, are also causing some headaches for those organisations that rely on contractors. It has been suggested that the regulation will soon extend to cover the private sector as well.

Matthew Dickason, global managing director of Hays Talent Solutions, told SM as reliance on contingent workers increased, procurement should step up its understanding of managing non-traditional labour.

“It’s first of all crucial to obtain full visibility of spend. Unless businesses are able to say how, where and why money on non-traditional labour is spent, they won’t be able to strategically manage this category of labour and control these costs given the complexity,” he said.

He warned that many contingent workers are “invisible” to procurement and HR, increasing risk. “Some managers may use contingent workers as a work around headcount spend controls, driving increases in costs,” he said. “Hiring managers may not be aware of relevant legislation, how much they should be paying and the implications making a wrong decision can have.”

Dickason advised procurement professionals to “work hand-in-hand with HR” to manage the increasing numbers of contingent workers. “It’s logical for procurement to work with [HR] to ensure the procurement of non-permanent labour is not only compliant, efficient and cost-effective, but also takes into account the wider total talent needs of the business,” he said.

Deloitte UK human capital leader Anne-Marie Malley said: “As freelancers, gig, and crowd workers become a growing proportion of the workforce and scrutiny of non-traditional workers intensifies, improving the management of the diverse workforce will grow in importance.”

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