Contingent labor management: How to mitigate risk and improve compliance

Multiple contingent labor vendors could mean increased risk for a company. A managed services provider can work with the HR department to mitigate potential pitfalls.

Companies that utilize a contingent workforce often contract several contingent labor vendors to supply workers with unique skills. Depending on the number of specialties required, an enterprise may rely on their vendors heavily throughout the year. The same workers may come and go as projects begin and end, and each vendor may have its own process for onboarding and offboarding contingent labor.

All these independently-operating parts cause a potential dilemma: The more complex the situation, the less clarity the company has regarding the time, money, energy and resources spent on its contingent workforce. The HR department may not have the bandwidth to properly onboard and vet each worker that comes in from each vendor, and poor workers may find their way back again and again.

Untangling this knot is particularly tricky for an HR department that's already stretched thin. This is the true value of a managed services provider (MSP); to help them achieve their goals of reducing risk and improving compliance for their contract and temporary employees, while simultaneously allowing them to focus on their core competencies rather than chasing around multiple talent vendors.

"More and more mid-size companies turn to MSP/VMS engagements to mitigate risk," says Kathleen Keliher, Managing Director of Beacon Hill's Solutions Division. "It is imperative that a structured onboarding and offboarding program be put in place. This, along with other high-touch talent programs, will not only protect your employer brand but ensure risks such as co-employment, misclassification, missed screenings and prolonged system access are eliminated. The MSP is obligated to their clients as well as the vendors that support them to implement a robust program to ensure compliance and ultimately eliminate potential pitfalls."

The flow of contingent workers introduces a number of risks. An MSP can solve those issues.

It's all in the details

If left alone, the inflow and outflow of contingent workers will continue unabated, almost automatically, for quite some time. From an outside perspective this may seem efficient, but on closer inspection, a number of risks and compliance issues become apparent:

  • Misclassification of workers: A huge risk of the talent vendor knot is the misclassification of workers. Without proper vetting, a company may mistakenly work with a 1099 resource that pays workers as 1099 contractors, while they should actually be paid as W-2s. This opens the organization up to serious litigation.
  • Information leaks: With so many workers coming and going - and potentially going to a competitor - the risk of information breaches grows. An MSP can assist with proper offboarding, ensuring that former workers do not maintain access to critical systems after they have left the company.
  • Inefficiencies: Communication confusion among vendors and the HR department can lead to a number of inefficiencies. For instance, a poor worker could leave one department of the company only to get hired again in another.
  • Co-employment: One of the additional benefits of an MSP is its ability to prevent instances of co-employment. An MSP protects the employer by providing careful onsite management, making sure that lines are not blurred.
  • Employer brand: A contingent worker who is properly brought on and offboarded through an MSP is more likely to leave with a positive impression, strengthening the employer's reputation.
  • Supplier management: Working with many different talent vendors creates a litany of potential issues. MSPs audit these suppliers to confirm following of contractual obligations, such as background checks and drug screening.

The solution to this problem is a detailed plan for onboarding and offboarding contingent workers. According to Sujan Patel, a marketing expert writing for Forbes Magazine, the onboarding process needs to start before contingent workers show up for their first day on the job. Depending on the complexity of the job, the company should create a 30- to 90-day ramp up for onboarding. When offboarding contingent workers, a similarly stringent plan needs to be in place to ensure poor workers don't get rehired and that company secrets remain safe.

"An MSP can untangle the contingent workforce knot."

An MSP can help your company

The solutions above make sense in a perfect world, but all too often, HR departments simply lack the resources to implement them. An MSP takes the contingent workforce knot and untangles it into a much more efficient and risk-averse system. The MSP manages all contingent labor vendor relations and ensures communications with vendors are crystal clear. An MSP can also streamline the onboarding and offboarding process to increase efficiency.

A tangled vendor relationship opens businesses up to risk that could mean lost time, money and other resources. With the help of an MSP, HR personnel can focus on administrative tasks with true peace of mind that their contingent workforce is functioning properly with minimal risk.

This content is brought to you by the Marketing Team at Beacon Hill Staffing Group.

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