The Emerging Contingent Workforce: Benefits, Challenges, and Opportunities. Research Summary. Brandon Hall Group Research Team April 2017

Transcription

1 The Emerging Contingent Workforce: Benefits, Challenges, and Opportunities Research Summary Brandon Hall Group Research Team April 2017

2 TABLE OF CONTENTS About the Study 3 The Emerging Contingent Workforce: Benefits, Challenges, and Opportunities 4 Overview 4 1. Almost All Organizations Use Contingent Labor, but Only for Small Portion of the Workforce 5 2. Ownership, Management of Contingent Workforce Depends Heavily on Organization Size Most Organizations See Contingent Labor as Effective and Strategic, and Plan to Increase Spending The Greatest Challenges for Managing Contingent Labor Involve Compliance and Technology 14 Key Takeaways 17 Brandon Hall Group s Research Methodology 18 About Brandon Hall Group 19 Authors and Contributors Brandon Hall Group. Not Licensed for Distribution. 2

3 About the Study Brandon Hall Group s 2017 Contingent Workforce Survey provides in-depth data on the evolving contingent workforce market. The survey drew 166 usable respondents from the United States and Canada (75%) and 22 other countries and 30 industries. The most represented industries in the study are: Technology & Software, Consulting, Education, Business Services, Manufacturing, and Healthcare. Complete data, including specific industry segments, from the study can be found on DataNow, Brandon Hall Group s proprietary database of research data. 166 Global Responses SMB, Enterprise and Large Enterprise 24 Countries 75% 22% 3% US/Canada EMEA APAC 37% 31% 32% below 500 employees 500-5,000 employees 5,000+ employees 30 Industries 43% 41% 16% Executives and other senior business leaders HR and talent leaders Individual contributors 2017 Brandon Hall Group. Not Licensed for Distribution. 3

4 The Emerging Contingent Workforce: Benefits, Challenges, and Opportunities KEY FINDINGS Almost All Organizations Use Contingent Labor, but Only for a Small Portion of the Workforce Ownership, Management of Contingent Workforce Depends Heavily on Organization Size Most Organizations See Contingent Labor as Effective and Strategic, and Plan to Increase Spending The Greatest Challenges for Managing Contingent Labor Involve Compliance and Technology Overview There are two types of evidence we deal with every day at Brandon Hall Group: quantitative and qualitative. Quantitative data largely comes from our many surveys such as the 2017 Brandon Hall Group Contingent Workforce Study. The results show significant interest about the contingent workforce. From our daily conversations with service providers, we get the qualitative evidence that all the major technology providers are expanding their platforms to help deal with this influx of contingent and gig workers. So what do you, as a human capital management leader, need to know about contingent labor? First, it s important to make sure that we use the same terminology, because it has become muddled in the mainstream media. Contingent labor is any worker hired on an as-needed basis, and although there are cases where these will be full-time workers, 2017 Brandon Hall Group. Not Licensed for Distribution. 4

5 they would not be considered permanent, full-time workers. Seasonal workers at a retail chain are a good example of contingent workers. Gig workers, on the other hand, are workers who choose their own hours and may work for multiple companies in one day, although they are still paid at a defined wage for defined work. Uber and TaskRabbit are the classic, and best, examples of this. (The gig economy remains a miniscule piece of the workforce; in fact, APM s Marketplace reported last year that Uber accounted for as much as two-thirds of the gig economy). Within this context, it is important to understand the makeup and trends of the new workforce, and determine what is working right now and how high-performing organizations are reacting to this new way of working and using it as an advantage over competitors. Our study reveals the current reality of contingent labor and provides a glimpse into the future of the contingent workforce: the 90% of organizations using contingent labor are expected to increase their use over the next year. For those organizations struggling with the contingent workforce (through a misunderstanding of where to find, and how to manage, these workers), this growth presents challenges that the more successful companies are able to overcome through new technology and internal processes. If organizations can arm themselves with the right tools and technology to manage this new balance of workers, they will be well-positioned for the next decade. ANALYSIS OF TOP FINDINGS 1. Almost All Organizations Use Contingent Labor, but Only for Small Portion of the Workforce The research reveals that the contingent labor isn t deep, but it is wide. That is to say, contingent workers make up only a small percentage of workers in most organizations, but they comprise that small percentage in most organizations Brandon Hall Group. Not Licensed for Distribution. 5

6 Overall, contingent labor comprises less than one-fifth of the workforce in 76% of organizations, and one-tenth or less of the workforce in 52% of organizations. High-performing organizations those with year-over-year improvement across KPIs such as employee engagement, turnover, productivity and revenue utilize more contingent labor than other organizations. 29% of high-performing organizations have workforces with more than one-fifth contingent labor, compared to 21% of other organizations -- a 38% difference. Figure 1 Portion of Workforce Comprised of Contingent/Non-Employee Labor *High-performing organizations are those with year-over-year improvement across KPIs such as employee engagement, turnover, productivity and revenue 2017 Brandon Hall Group. Not Licensed for Distribution. 6

7 Types of Contingent Labor Utilized The type of contingent labor utilized consistently or frequently is heavily dependent on the size of organization and its performance level. Overall, organizations are most likely to use independent contractors consistently or frequently (51%), followed by paid interns (47%), part-timers (36%), and labor from an agency or staffing firm (34%). But the division of labor depends quite a bit on the demographic. At large organizations, paid interns and staffing firm referrals are utilized most often, while independent contractors are most prevalent at mid-size and small organizations. Interestingly, high-performing organizations use retirees almost three times as frequently than other organizations. Figure 2 Consistent/Frequent Use of Contingent Labor (High-Performing vs. All Other Organizations) *High-performing organizations are those with year-over-year improvement across KPIs such as employee engagement, turnover, productivity and revenue 2017 Brandon Hall Group. Not Licensed for Distribution. 7

8 Figure 3 Top 5 Consistent/Frequent Uses of Contingent Labor (Large, Mid-Size and Small Organizations) Drivers of Contingent Labor Use *10,000+ employees, ** 1,000 to 9,999 employees, *** Less than 1,000 employees Duration of assignment is the single largest factor driving use of contingent labor, with 57% of organizations overall deciding that, if other things are equal, a (presumably) shorter length assignment should go to a temporary employee over a permanent one Brandon Hall Group. Not Licensed for Distribution. 8

9 Nearly half of organizations overall (49%) saw the need for external expertise as the reason for bringing in contingent labor. But outside expertise drove use of contingent labor in 63% of high-performing organizations, compared to just 46% in all other organizations. Figure 4 Reasons Behind Use of Contingent Labor *High-performing organizations are those with year-over-year improvement across KPIs such as employee engagement, turnover, productivity and revenue 2017 Brandon Hall Group. Not Licensed for Distribution. 9

10 2. Ownership, Management of Contingent Workforce Depends Heavily on Organization Size Who should be responsible for hiring contingent labor: HR, Procurement, or HR and Procurement jointly? The answer to that question depends largely on the size of the organization. Overall, HR owns all talent in 40% of organizations, HR and Procurement jointly manage contingent labor in 34% of organizations, and Procurement manages all contingent labor in 26% of organizations. But HR is more than twice as likely to have sole ownership of contingent talent in small and mid-size organizations than in large organizations. Figure 5 Responsibility for Hiring Contingent Labor *10,000+ employees, ** 1,000 to 9,999 employees, *** Less than 1,000 employees 2017 Brandon Hall Group. Not Licensed for Distribution. 10

11 The most important thing is determining which function within the organization has the best knowledge base to recruit contingent labor or, conversely, making the decision to take contingent hiring outside the organization to a third-party provider. The decision should be based on the skill sets within the organization and how the organization is structured. Management of Contingent Workforce The question of which department manages these contingent workers is more than just organizational politics; it has lasting implications for how these workers are managed. In fact, 71% of organizations overall answered that their managers are responsible for directly managing contingent workers (as opposed to an external resource or dedicated person or department). However, just as there were significant differences in who hires contingent labor based on organization size, the same is true for management of the contingent workers. Large organizations are 21% more likely than mid-size organizations, and three times more likely than small organizations, to manage contingent workers through an external resource, such as a Vendor Management Organization or Managed Service Provider. Figure 6 Internal Management Responsibility for Contingent Workers *10,000+ employees, ** 1,000 to 9,999 employees, *** Less than 1,000 employees 2017 Brandon Hall Group. Not Licensed for Distribution. 11

12 Contingent workers have different characteristics than permanent employees (different motivations, levels of engagement, job types, etc.), but are possibly being managed by individuals with no specialized training on these differences. This is especially important as new laws are adopted specifically to deal with this growing group. The changes to the FLSA that went into effect in 2017 (although on hold as of this writing) were specifically created to address the growing use of part-time and seasonal workers. The ability to understand and work with these regulations as well as the many state laws is another critical skill that must be possessed by HR, Procurement or managers to make the best possible use of the contingent workforce. Figure 7 External Management Responsibility for Contingent Workers *10,000+ employees, ** 1,000 to 9,999 employees, *** Less than 1,000 employees 2017 Brandon Hall Group. Not Licensed for Distribution. 12

13 3. Most Organizations See Contingent Labor as Effective and Strategic, and Plan to Increase Spending Almost three-quarters of organizations say their contingent workforce is effective or very effective, and more than 70% believe the use of contingent labor is strategic to specific business functions or to the business as a whole. It should come as no surprise, then, that half of organizations overall plan to increase spending in the next year. Among high-performing organizations, which are getting even better results than the rest of organizations, 70% plan to spend more on contingent labor next year. It is somewhat surprising, though, that the most aggressive spenders on contingent labor are small organizations (1,000 employees or less); 60% plan to spend more in the next year, compared to just 38% of mid-sized organizations and 44% of large organizations. The reason may be that smaller organizations, which often struggle to find the high-caliber talent and expertise they need in full-time employees, are able to find the expertise among the contingent workforce. 61% of small organizations base contingent labor spend on outside expertise needed, compared to just 35% of mid-size organizations and 42% of large organizations. Figure 8 Perceived Effectiveness of Contingent Labor (Effective/Very Effective) *High-performing organizations are those with year-over-year improvement across KPIs such as employee engagement, turnover, productivity and revenue 2017 Brandon Hall Group. Not Licensed for Distribution. 13

14 Figure 9 Anticipated Spending Increase on Contingent Labor Over the Next Year (Somewhat/Substantial) *High-performing organizations are those with year-over-year improvement across KPIs such as employee engagement, turnover, productivity and revenue 4. The Greatest Challenges for Managing Contingent Labor Involve Compliance and Technology Compliance with state and federal regulations related to contract labor tops the list of challenges organizations face, followed by the need to improve talent engagement strategies and poor visibility into talent. Concerns over compliance are well founded. Though contingent workers are not new, contingent labor certainly is one of the fastest growing segments of the overall American employee workforce. As mentioned earlier, the stalled FLSA regulations that were meant to go into place January 1 were directly tied to giving some clarity between contingent and full-time workers Brandon Hall Group. Not Licensed for Distribution. 14

15 The second- and third-highest ranked obstacles in this research point to another issue altogether that of insufficient technology. Insights into the contingent labor pool and contingent worker engagement are areas that require specialized software and products. Taking each individually, the insights into the contingent labor pool, both within an organization and external, cannot be achieved through traditional job boards, workforce management or talent management software. This is simply because most contingent workers, by their very nature, do not fit within the confines of these programs. This is the reason that so many providers are expanding their systems to accommodate the management, reporting, and compliance of contingent workers. Figure 10 Top Challenges in Managing Contingent/Non-Employee Labor 2017 Brandon Hall Group. Not Licensed for Distribution. 15

16 Besides existing companies expanding their systems, many organizations have been created specifically to meet market demand to address those exact obstacles. Companies that specialize in gaining insight into the contingent and gig worker pool, with mobile capabilities that allow for real-time rate-of-pay tracking and worker availability, are just the tip of the iceberg when it comes to what is being offered to help address these obstacles and allow any organization to take advantage of the new American and world economy. Figure 11 Uses for Real-Time Salary Data Already some organizations are taking advantage of these specialized services. The use of managed service providers, vendor management services, and outsourced contingent management, while low overall, is twice as high at high-performing organizations than other organizations (28% vs. 14%). The real-time salary data tracking services mentioned above are also in high-demand, with 76% of survey respondents saying they would find this type of data valuable. Organizations said the real-time salary data would help most in in salary/wage negotiations (53%) and comparing current salary ranges to the market (52%). The perceived value goes beyond those two areas, though. 38% of respondents said all uses of real-time data are attractive Brandon Hall Group. Not Licensed for Distribution. 16

17 Key Takeaways The contingent workforce and the gig economy have received a lot of attention in the national media, but very little research has been done on the actual numbers and usage of these workers. With the Brandon Hall Group Contingent Workforce Survey, more details are emerging on the way organizations find, retain, and make the most effective use of this growing labor pool. The planned increases in spending show that organizations expect the contingent workforce to continue to grow, and for good reason. There are a number of market forces in play: a more mobile workforce, a younger workforce, and a greater number of jobs that can be performed from any location. Contingent workers bring more challenges than their temporary nature. They have different laws surrounding them, some brand new; they lack the daily supervision and management that permanent workers might get, which of course also means they have different career pathing and motivations. Contingent workers are often recorded in different systems, or in different ways, or even managed by completely different groups. Taken together, these challenges amount to a lack of understanding and visibility for some organizations into the contingent workforce, and that gap between the reality and the ideal is driving existing companies to expand their workforce software offerings, and giving reason for some wholly new organizations that can provide the services and software necessary for this workforce. With Brandon Hall Group s knowledge of the broader national and international market, and based on our research, we make the following recommendations: Seek out new tools from your current technology solution provider, or tools from new providers that are specific to contingent workers. The software and processes for different workers can and should reflect their separate status. Understand the different types of contingent workers, and remember that different groups will have varying levels and types of motivations and communication preferences. Train your HR staff in the tools and management used specifically for contingent workers, and work directly with procurement to provide the best possible use of your organizational resources Brandon Hall Group. Not Licensed for Distribution. 17

18 Brandon Hall Group s Research Methodology 2017 Brandon Hall Group. Not Licensed for Distribution. 18

19 About Brandon Hall Group Brandon Hall Group is a HCM research and advisory services firm that provides insights around key performance areas, including Learning and Development, Talent Management, Leadership Development, Talent Acquisition, and HR/Workforce Management. With more than 10,000 clients globally and 20 years of delivering world-class research and advisory services, Brandon Hall Group is focused on developing research that drives performance in emerging and large organizations, and provides strategic insights for executives and practitioners responsible for growth and business results. Our vision: To inspire a better workplace experience. Our mission: Empower excellence in organizations around the world through our research and tools each and every day. Authors and Contributors Cliff Stevenson (cliff.stevenson@brandonhall.com) wrote this report. He is the Principal Analyst, Workforce Management Practice at Brandon Hall Group. His expertise includes data and analytics, performance management, recruitment, acquisition, retention, and attrition. He also served as the HR leader for a Boston consulting firm. Claude Werder (claude.werder@brandonhall.com) edited this report. He is the Vice President of Research Operations and Principal HCM Analyst at Brandon Hall Group. His responsibilities include overseeing Brandon Hall Group s team of analysts, directing research priorities, content quality assurance, and producing the annual HCM Excellence Conference. Nissa Benjamin (nissa.benjamin@brandonhall.com) is the Marketing Coordinator at Brandon Hall Group and created the graphics and layout for this report. Cindy Stiff (cindy.stiff@brandonhall.com) a contract editor with Brandon Hall Group, edited this report. She has experience as an editor for print and online media, and as a master trainer in leadership development, team collaboration, and performance management Brandon Hall Group. Not Licensed for Distribution. 19

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