Back in the days when father knew best and Donna Reed was in the kitchen, most workers had full-time jobs. Today, more and more companies are adding contingent (anyone who is not full time) labor to the mix to get the most out of their talent. In some cases, the current contingent workforce is typically 15-20 percent for mid-to-large companies and as many as 50 percent of smaller ones, according to Matt Rivera, director of customer solutions for Yoh.
Outsourcing is reflecting this change. Today managed service providers (MSPs), which have been around since the mid-1990s, are growing in importance.
A July report from The McKinsey Global Institute found more than half of U.S. employers who responded to its survey will rely more heavily on contingent labor during the next five years. “Our survey reveals that employers foresee a more flexible and virtual labor force,” says the report. Specifically, 57.8 percent of the 2,000 respondents said they expect more part-time, temporary or contract workers in their workforce through 2016. (For the record, 25.5 percent expected to increase telecommuters with 21.5 percent planning to outsource and/or offshore workers.)
These numbers align with the findings of Yoh’s annual Workforce Trends study. Last year’s study found 80 percent of respondents expect their levels of temporary and contingent employees to stay the same or increase this year.
Bruce Morton, chief marketing officer of Allegis Group Services, says traditionally contingent labor experiences an uptick at the end of a recession. “But this time is different. There’s no going back. Contingent labor is not a blip but a trend that’s here to stay,” he says.
What is an MSP?
An MSP, typically a division of a recruitment process outsourcing firm, a temporary staffing firm or an HR consulting firm, manages the organizational process of recruitment, fulfillment and payment of contingent labor services. They perform a procure-to-pay process, if you will. The MSP manages all the vendors who actually employ the contingent employees. Using an MSP typically costs an outsourcing buyer nothing, although that model is changing. I will discuss how MSPs work in detail in Part 3 of this article series.
“This is a new world of work,” says Kip Wright, the executive who manages TAPFIN, the global MSP offering of ManpowerGroup Solutions. “Contingent labor has become part of a company’s overall HR strategy,” adds Scott Fraleigh, vice president of managed services for SourceRight Solutions.
Lisa Fitzgerald, senior director within the contingent workforce practice of Kelly OCG, says the workplace has shifted because “it is becoming increasingly harder to predict the demand for talent.”
Globalization is a driver, too. “Companies are more sophisticated today and need global help,” points out Joan Davison, president and COO of Staff Management|SMX.
Adds Dave Barthel, executive director, Human Capital Solution for Allegis Group Services, “Before, using contingent labor was reactive. Companies needed these workers to handle a spike in demand or seasonal needs. Today contingent labor has become strategic.”
Fraleigh says companies learned some valuable lessons during the recession. “First, it was painful to handle layoffs. They didn’t like the impact on their brands. They realized they could get the work done without any long-term labor commitments.”
Barthel of Allegis observes companies still don’t feel like they are “out of the woods completely. They feel right now it’s safer to hire a contingent worker.”
Barthel says companies like contingent IT and engineering workers “because their skill sets can become outdated over time.” Using an MSP allows them to hire proven talent with niche skills. Davison of Staff Management|SMX adds, IT contingent labor “is a great way to get new ideas and innovation into your company.”
The SourceRight executive says companies are increasingly turning to MSPs because “they lack the internal resources to do it themselves.”
What exactly is contingent labor?
Contingent labor includes:
- Independent contractors (IC)
- Statement of work (SOW) consultants (typically hired for projects)
- Temporary employees
Contract labor had its beginnings in two different areas. CEOs wanted a talented temp to sit in when his admin went on maternity leave while the engineering department and other professional areas like IT needed contract labor to fill specialty jobs.
Today, however, flexibility is one of the chief ingredients of survival, according to Rivera of Yoh. “Companies have research and development pushes and have to respond immediately to the economic cycle. Today they want the flexibility of contingent workers, not full time employees.”
“Employers want an employee right now who has specific skills. But they only need them for today because they don’t know about tomorrow,” says Davison of Staff Management|SMX.
However, this model only works if there are employees who don’t want to work full time directly for any one company. The changing nature of work has created a deep pool of this kind of talent, producing the supply to meet the new demand.
Next: How the changing nature of work is producing people who do not want to be full-time, direct employees.
This is the first of a five-part series. This article discusses “Why now?”
- Part 2: The changing nature of work. Why employees want to be contract labor
- Part 3: How does an MSP work? What are the benefits?
- Part 4: Tyros and mature buyers: The changing needs of both
- Part 5: A telling case study