­­­Mitigating Risks in Contingent Workforce Management

June 3, 2024
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65% of executives plan on increasing their contingent workforce in the next two years, according to the most recent Ceridian Executive Survey. A contingent workforce can enable businesses to tackle critical projects with agility, but it comes with its own risks.  

This article will examine key risk areas associated with contingent workforce management and potential strategies for mitigating them.

Talent Shortages and Skills Gaps

The demand for specialized skills in IT, engineering, and other fields often outpaces the available talent pool. Organizations seeking contingent workers face the risk of prolonged vacancies, delayed projects, and missed business opportunities.

Even when talent is available, skills gaps can hinder project execution. A survey by Ceridian found that 44% of executives report difficulty finding contingent workers with specific skills.

Mitigating this Risk

Strategic Talent Pipelining

Engage with universities, professional associations, and industry events to connect with emerging talent and build a talent pipeline. For insights on how to attract Gen Z talent, please read our article here:

How to Attract and Retain Gen Z Talent

Partner with a Reputable Staffing Company

A qualified and experienced staffing company can be a valuable asset in combating talent shortages or skill gaps. Staffing companies specialize in sourcing top talent with the necessary skills and experience to meet a project’s needs. They can also handle crucial tasks like compliance and payroll processing, freeing up internal resources to focus on core business functions.

Skills Assessment

Conduct thorough skills assessments during the recruitment process. Understand the precise skills needed for each position and match candidates accordingly—partner with training institutions and online learning platforms to bridge skills gaps. Offer targeted training programs to contingent workers.

Upskilling and Reskilling

Invest in upskilling existing employees and reskilling candidates. By enhancing their skill sets, you create a more adaptable workforce that can meet evolving project requirements.

Compliance Issues

Misclassifying workers as independent contractors when they should be classified as employees can have serious legal ramifications. Strict labor laws at the federal and state levels govern worker classification. Misclassification can result in hefty fines, back taxes, and penalties, significantly impacting your organization’s bottom line.

Mitigating this Risk

Develop a Clear Classification Policy

Establish a well-defined policy for classifying workers as employees or independent contractors. A well-defined classification policy provides clarity for both your organization and contingent workers, fostering a positive working relationship. This policy should adhere strictly to federal and state labor laws to minimize the risk of misclassification. This Federal Register document provides guidance on employee vs independent contractor classification under the Fair Labor Standards Act.

Utilize the resources available from the Department of Labor (DOL) or consult with legal counsel to ensure your classification policy is compliant and protects your organization from legal repercussions.

Continuity of Operations and Project Success

Contingent workers play a vital role in maintaining operational continuity. However, abrupt transitions (e.g., contract expirations, sudden departures) can disrupt workflows.

Contingent workers may lack familiarity with your company culture, established processes, and internal tools. This unfamiliarity can hinder their productivity and potentially derail project timelines and overall success. Integrating contingent workers smoothly into your existing workflows requires a well-defined onboarding and training program.

Mitigating this Risk

Contingency Planning for Critical Positions

Succession planning is essential for ensuring continuity of operations, particularly for key roles within an organization. Critical positions should be identified, and robust succession plans should be developed to minimize disruptions during personnel transitions. By investing in cross-training and knowledge transfer initiatives, organizations can mitigate the risks associated with key personnel changes.

Onboarding, Offboarding, and Training

Streamline the onboarding and offboarding processes. Investing in a comprehensive onboarding program for contingent workers is essential for ensuring project success and mitigating risks. Onboarding should familiarize them with your company culture, policies, security protocols, and internal tools. You can read more about strategic onboarding in our article here:

Strategic Onboarding: The Key to New Hire Success and Retention

Contingent workers should also receive training specific to their project role. This training could involve familiarization with relevant software applications, established workflows, and communication channels. Thorough onboarding and training empower contingent workers to integrate seamlessly into your team and contribute efficiently.

Data Security and Privacy

Granting contingent workers access to sensitive company data or IT systems exposes your organization to potential security breaches. Without robust security protocols, unauthorized access to confidential information can occur, compromising data integrity and potentially damaging your reputation.

Mitigating this Risk

Implement Robust Security Measures

Security measures should be implemented in accordance with the Workforce Framework for Cybersecurity from the National Institute of Standards and Technology.

Contingent workers should only be granted access to the data and systems necessary to complete their assigned tasks. The principle of least privilege should guide your approach to access control. This means granting them the minimum level of access required to perform their job duties effectively.

Enforce strong password policies that combine uppercase and lowercase letters, numbers, and symbols. Multi-factor authentication (MFA) protocols should also be implemented to add an extra layer of security when accessing sensitive information. MFA typically involves a combination of a password and a temporary code sent to a registered phone number or generated by an authentication app.

Management Overhead

Effectively managing a dispersed contingent workforce can be time-consuming and resource-intensive. This includes tasks like onboarding, performance management, payroll processing, and administrative support. Without a streamlined system in place, managing a large contingent workforce can strain your internal HR teams.

Mitigating this Risk

Performance Management and Communication

Establish clear communication channels with contingent workers and conduct regular performance reviews to ensure they meet expectations and project goals are on track. Regular check-ins allow you to identify any challenges or roadblocks they may be facing and address them promptly.

Providing timely feedback and performance evaluations motivates contingent workers, fosters a sense of accountability, and ensures project deliverables are met according to established deadlines and quality standards. Open communication channels also allow contingent workers to voice concerns or ask clarifying questions, promoting a more collaborative and productive work environment.

Develop a Risk Management Framework

Whether the contingent workforce management risk is one of these common ones or company-specific, a risk management framework provides a structured approach to risk identification and mitigation. This framework should encompass clear policies and procedures, ongoing compliance monitoring, and regular risk assessments.

Effectively managing a contingent workforce requires a strategic approach. By proactively addressing talent shortages, bridging skills gaps, ensuring operational continuity, aligning project goals, and maintaining compliance, organizations can mitigate risks and drive successful outcomes. The right contingent workforce strategy isn’t just about filling positions—it’s about building a resilient and adaptable workforce that contributes to long-term business success.

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