There’s no escaping it; when trying to get management support for your plan- even if it’s brilliant- forget the target, never mind the vision- for most executives it all comes down to the cost- is it worth it for them financially? And how much?
Companies now spend an estimated $270 billion worldwide on contingent labor, with this number expected to rise much higher over the coming decade. And while this is often ranked in the top five spend categories, and despite the growing investment in contingent workforce, nearly 60% of all contingent labor is unaccounted for in financial forecasting and annual budgets.
Nearly 60% of all contingent labor is unaccounted for in financial forecasting and annual budgets.
Unbelievable as this sounds, it means now more than ever, building a solid, comprehensive contingent workforce management program is essential. That growing share of contingent labor in your organization is not going to manage itself- You need to have a detailed financial plan to ensure you’re not overpaying for your contingent labor on the one hand, and getting the return you need on your investment on the other.
Contingent workers are sometimes harder to assess by the classic HR formula for cost effectiveness (gathering data on pay, benefits, training, supervision and productivity), mostly because the productivity measurement is usually subjective when judging a contingent professional. In order to truly asses a contingent professional’s cost effectiveness, you need to compare their productivity with the regular professional staff, and determine your KPI’s by asking these questions:
Monetary gains aren’t the only ones that should be measured under ROI. You need to consider not only the cost you save, but the cost you gain: Though often unrecognized as ROI, other intangible non-financial benefits are as valuable, such as:
And these are just a few of the benefits a well-designed contingent workforce program can produce. 3
Time to hire a contingent employee can be divided into 3 main categories:
Consider all expenses not directly related to employment, such as HR, accounting, legal, etc. While a regular employee usually costs between 10-15%, a contingent employee may cost up to 50% more.
A major factor here is 3rd party margins sometimes constituting for 10-20% of the overall costs.
In addition to comparing the cost of your proposed model to the current state, use forecasts data to analyze your ROI for different volumes. 4
Having said all that, your best chance at gaining valuable, precise, credible ROI insights, is by having true visibility into your contingent workforce management’s process and the right technology to support it.
Truth is, if you’re able to save valuable time and money with the right technology, making your ROI look that much more attractive-
When the cost of the services constitutes a lower percentage of your budget, you can spend more on talents and gain better value from the experience and quality of your contingent workers.
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