The Reputational Risks of a Contingent Workforce – and How to Avoid Them

The Reputational Risks of a Contingent Workforce – and How to Avoid Them

Our Thinking / Career / Voice on Talent

The Reputational Risks of a Contingent Workforce – and How to Avoid Them
The Reputational Risks of a Contingent Workforce – and How to Avoid Them
Calendar20 September 2019

While contingent workers can make organizations nimbler, they can also create risks for the brand and employee trust. Here’s how to ensure your contingent workforce strategy contributes to business success rather than damaging goodwill.

Consider the following scenario: Several years ago, your company considered expanding into a new business area. Daunted by the drawn out process of hiring full-time employees, you found the temporary worker route tempting, and you hired third-party contractors to try things out. Soon, you needed an outsourced company to manage the continent workers.[1] Today, that new business area accounts for a significant part of your business, and contingent workers work alongside full-time employees doing, in the majority of cases, the same thing. In other words, you have inadvertently created two classes of employees – and your employment brand is at risk.

If this sounds familiar, it is because all too often decisions around contingent workers are developed as a matter of expediency. A lack of detailed planning in developing a contingent workforce strategy that protects, if not enhances, your brand can have long-term repercussions, including a negative impact on full-time workers. An internet search of news about high tech firms’ use of contractors shows the high-profile nature of this challenge.

These cases highlight the need to be transparent about the policies, practices, and methods a company has for contingent work. The requirement is all the more pressing given that contingent workers are a growing part of the employment ecosystem. Indeed, 79% of executives expect that contingent and freelance workers will substantially replace full-time employees in the coming years, particularly in the automotive and consumer goods sectors. So ignoring this option means losing access to a critical part of the talent pool.

There is a real opportunity for wider talent access resulting in brand improvement if you deploy a few key strategies for your contingent workforce:

1. Consider what work fits a contingent workforce. Are there roles you need to fill for a short period of time that also call for specialized skills not available in your current population? Are current staff not the right fit to develop into these roles over time? Are you sure the roles will not be needed long-term to realize the business strategy? Clearly defining what work is suitable for contingent roles – and defining and monitoring the job definitions of full-time versus contingent workers as they evolve – are the first steps to ensuring you do not have an unsustainable overlap between the two. Otherwise, you might be using contingent workers improperly, creating situations likely to bring the company into the spotlight for poor workforce practices. Having a continuous understanding, even at a high level, of the work that needs to be done is critical.

2. Let full-time employees switch to contingent work, if that suits their needs. Many companies believe individuals crave the suite of benefits that accompany base pay and that are often only accessible to full-time employees. But this framework may become less appealing as individuals’ personal lives change. Segments of your population might prefer the compensation package of a contingent worker over a typical corporate total rewards practice. In another instance, employers could better align rules to today’s realities by enabling eligible older employees to collect partial pension payouts while engaged in alternative work arrangements. Breaking down barriers to allow workers to switch from full time to contingent – and vice versa – may keep talent you might otherwise lose. And indeed, statistical modeling done with one of Mercer’s workforce strategy clients revealed that contractors who became full-time employees were more successful than campus hires, in terms of performance ratings and retention rates. Consequently, if done right, contingent can be an integrated part of a successful talent strategy.

3. Make contingent workers part of the team. Deploying contingent workers so you can squeeze them for a short duration will negatively impact your brand. Instead, look at this portion of the workforce as part of the company by including them in upskilling opportunities and social achievement events. Fair treatment of all employees, regardless of how they are employed, will carry forward well past their days as an employee and turn them into brand ambassadors. As an example, a US cosmetics company used an app to engage with freelance makeup artists, sending messages and event invitations to make them feel part of the organization. The company found it easier to recruit the best freelancers as a result of this integrated approach to workforce management.

4. Be transparent about rewards. This will reduce the perception that massive inequities exist between contingent workers and full-time employees. This does not necessarily mean posting everyone’s salary – there are various ways to provide transparency, starting with total rewards statements for all workers. Additionally, the policy for selecting contingent workers should be shared broadly so employees understand why, in some cases, teams are not entirely built from full-time employees and what to expect when contingent workers join a group.

With these considerations in mind, some additional practices will likely need revision. For example, even if the timeline to define, approve, post, source, and fill a role is extremely long and mired by roadblocks, resist using contingent staffing to expedite the process. Instead, review your people processes and capabilities to ensure they are fit for the reality of today’s diverse sources of talent. Ask yourself whether frustrated hiring managers are using contingent workers to avoid cumbersome people processes, or whether hiring contingent workers serves a clear, rationale business and talent purpose.

Your company’s reputation drives more than results. It drives the ability to build the workforce for the future and to connect with customers who increasingly value the type of company they buy from. If done well, the use of a contingent workforce can mean more choice for your existing employees, access to a broader talent pool, and new compensation options for you to reward the best contributors for success.

[1] Defined in this article as freelancers, consultants, or any independent worker within your company on a per-project basis; it does not include seasonal or gig workers such as Uber drivers.