Posted by Liz Greene
The contingent and contract workforce is both large and important. Yet, in most organizations, it is loosely managed and all but ignored by HR. Are you able to track SOW consultant spend? Is co-employment risk managed? Do you know how many independent contractors you have on staff at any given time? How much does centralized Contingent Workforce Management cost, and is there a return on investment for organizations doing it? If you’re curious to know the costs and benefits of a centrally managed contract talent program, or learn how major organizations are literally saving millions of dollars, year after year, on their contract and contingent workforce, download this report on the ROI in Enterprise Contract Talent Management.
From May through August 2009, the Human Capital Institute (HCI) conducted extensive research, including a membership survey, interviews and an exhaustive review of secondary sources, to understand whether organizations are realizing a return on their investments in centralized contingent and contract talent management, and if so, how. The key findings, which are sure to interest and even surprise many Human Resources professionals, are summarized and discussed throughout this paper.
Rarely is an independent research organization (such as HCI) able to make so clear cut a recommendation for or against a course of action. In this case, HCI strongly recommended that organizations move toward enterprise-wide, centrally managed and technology-enabled CWM. Specific to companies like MBO Partners, the research concluded, “Among users of Independent Contractor Engagement Specialists (ICES) and/or Portable Employer of Record (PER) services who track cost savings, almost half (48 percent) have experienced significant cost savings greater than 15 percent.”
Excerpts from the report:
“Organizations should be concerned with compliance risk. Co-employment, which occurs when two employers both have an employer-employee relationship with the same person, is a real risk. Several organizations have been sanctioned for co-employment violations, some of which have led to high-profile cases. Organizations in violation of co-employment rules may be liable for back taxes, benefits and bonuses owed, as well as fines. Central, enterprise-managed CWM reduces this risk.”
“Independent Contractor Engagement Specialists (ICES) work with organizations to manage independent contractors — including high-rate, project-based SOW (Statement of Work) consultants — by acting as an Agent or Employer of Record (EOR) for IRS purposes. ICES will assess the eligibility of a potential contractor for 1099 status. If they are found ineligible, ICES will hire the worker as their own W-2 employee, allowing him/her to work for the client on subcontract. For those that are eligible, ICES will act as the “Agent of Record,” simplifying the process for their clients.”
“For eligible contractors referred by the client, ICES providers save clients the entire cost of a staffing firm’s mark-up (typically 25 percent to 35 percent) minus their own fees of about 4 percent to 8 percent.”
“As more of the contingent workforce is comprised of independent contractors, Independent Contractor Engagement Specialists (ICES) are an increasingly important part of the Contingent Workforce Management (CWM) landscape. From the contractor’s perspective, however, ICES can be an imperfect solution. . . . In response, the combination ICES and Portable Employer of Record (PER) provider has arisen. There are, as yet, only a handful of PER providers. Their potential impact is enormous. By focusing on both the contractor’s and the employer’s needs, PERs appeal to the fastest-growing segment of the U.S. workforce. It is important to remember that most independent contractors want to be independent and autonomous. The Portable Employer of Record offers the same services as an ICES/EOR for employers but also allows a contractor to have one employer of record for all of their contracts. In other words, if an employer wants to hire an independent contractor who they have sourced directly, they can refer the contractor to a PER.”
Don't forget to download your free full text copy of the research report, The ROI in Enterprise Contract Talent Management.
If you like this information on contingent workforce management and independent contractor issues, you can get more at the Human Capital Institute's Contract Talent Research Practice Area, or visit the MBO Partners Research portal.
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