Procurement can be challenging, especially with several roadblocks along the supply chain. Still, the most significant liability could easily be the talent shortage. Following the pandemic, procuring top talent in a shifting economic landscape deserves more spotlight, especially amid a turbulent fiscal forecast.
“Inflation will put more pressure on chief procurement officers to manage their departments strictly within budget,” according to the Ardent Partners Annual Research Report. That said, here are some compliance pitfalls to be aware of when hiring contingent workers.
Worker classification. A common freelance hiring issue originates from a poor chain of custody around worker classification. Without legal worker classification, your organization is in danger of costly litigation. If your worker classification is outsourced to a managed service provider (MSP), they may also have outsourced this important function to a vendor management solution (VMS).
Many businesses have redistributed the responsibility of worker classification to a third party or still have paper processes in place, which is precarious and, dare I say, archaic. The party you employ to carry out worker classification won’t be in the hot seat if an audit occurs, so it’s up to you to ensure your worker classification is compliant with the law.
Selecting poor MSPs/VMSs. Poor vendor choices can happen using an outdated MSP. Many MSPs have not updated their practices to include modern technology and inevitably have inaccurate need analysis and data errors. Using inadequate MSPs and VMSs can leave you non-compliant, and may contribute to a perceived talent shortage because of their limited bandwidth in quickly and compliantly hiring contingent workers.
If your MSPs or VMSs are not adhering to the established set of guidelines laid out in their contracts, your organization is at risk for fraud, corruption and rogue spending. Dependable vendors can also be the link between you and a flowing supply of labor. Capitalizing upon what VMSs and MSPs do well while directly sourcing your own external talent could save you time and money. Tech tools allow you to sidestep low-quality recruiting services, undelivered talent quotas, questionable ethical standards and compliance risks around hiring.
No agile workforce strategy. Smart enterprises are hiring at speed using External Workforce Management systems to minimize the effects of the talent shortage by adopting strong external hiring processes. A good process streamlines onboarding, tracks progress and compliantly pays freelancers on time.
Procurement teams can benefit from External Workforce Management to reduce risks around signing contracts, non-disclosure agreements, background checks and the long-term storage of and access to onboarding documents. Standardized procurement procedures in one central system allow internal stakeholders to know exactly what to do at each hiring stage because the system is virtually automated.
According to Deloitte, “Only 8% of respondents, for instance, said that they had established processes to manage and develop alternative workforce sources…”
Managing independent contractors compliance -at speed- can be difficult. Nonetheless, there are technological workarounds that procurement professionals can use to speed up the notoriously slow non-employee hiring process while upholding ethics, data privacy, transparency and other legal requirements surrounding employment laws.
Don’t Be Afraid to Tap Into the Gig Economy
It’s critical to hire flexible global talent to stay competitive. While communicating with external talent is more straightforward, engaging contractors for flexible work and maintaining compliance can seem overwhelming without the right innovation.
Using agile talent means you can scale your labor force during seasonal demands, contract talent to fill gaps in your teams, reduce workers during slower periods and have access to a larger talent pool.
According to Statista, “In 2021, there were about 23.9 million independent workers in the United States, an increase from 12.9 million in 2017.” Using quality External Workforce Management can help you outmaneuver the competition with perks that include tax benefits, increased productivity, higher ROI and lowered overhead costs while providing options for increased diversity and inclusion. Advanced tech exist that works alongside your MSP and VMS, not replacing them, but enhancing the workflows around labor law compliance, worker classification, custom contracting and spend visibility — cutting out rogue, low-quality hiring practices.