In today’s economy, there’s only one thing more in demand than on-demand workers: the skills needed to manage them.
In January, the U.S. temporary help services employment sector added about 14,800 jobs, a gain of about 0.5%. At the same time, the penetration rate of temporary workers increased to 2.05%, which tied the previous all-time high hit in December 2015 and November 2016.
Call them what you will, but contingent (often referred to as 'temporary' or 'on-demand') workers represent an ever-growing share of today’s HR environment. With unemployment at a low not seen in decades — 4.7% in February, according to the U.S. Bureau of Labor Statistics — many employers are turning to contingent workers.
Unfortunately, few companies are equipped to handle their surging contingent workforces. While contracted labor accounts for 20% to 60% of the labor at half of the companies surveyed in WorkMarket’s 2017 Workforce Compliance Report, 23% of surveyed leaders don’t know how many contractors they have. Worse, 20% of those leaders can’t easily access contractor data, which can constrain businesses’ decision-making and hurt their profits.
Today, there are more temporary workers than ever, but human resource teams are failing to manage them effectively. The result? Critical HR functions like tax management, departmental strategy, and culture cultivation are suffering.
Haste Makes Waste
When HR teams are strapped for time by 24/7 contingent worker recruitment and management, they can make costly tax and benefits missteps.
Take the IRS Form I-9, which certifies employment eligibility. If an employer fails to correctly complete and file the I-9 and it turns out they’re employing workers who are ineligible for U.S. employment, fines start at $539 and go up to $21,563 — per employee. Ouch!
Then there’s the misclassification mistake. HR leaders new to managing contingent workers often accidentally mislabel workers as independent contractors. Cautionary tales abound, but high-profile cases of companies mishandling employment classifications include FedEx, Uber, and Lyft. These companies were forced to pay multimillion-dollar settlements to cover employment taxes, fees, and interest charges. FedEx’s classification error, for instance, cost it a whopping $228 million.
Manage Without Damage
With all the pitfalls associated with contingent worker management, what’s an HR team to do? Well, when HR leaders outsource onboarding and administration to reputable payrolling providers, they’re free to focus their time in three essential areas:
1. Look at the bigger picture
Just because your contingent workforce is on-demand does not mean that your workforce management strategy should be. According to Deloitte, even though employers’ use of temporary workers is on the rise, most companies aren’t effectively managing them. Ad hoc management, inadequate analysis of worker time, and outdated technology opens companies to serious financial and public relations risks.
So rather than spending your time in the trenches managing contingent employees, take a step back. Devise a plan for when temporary workers will be hired, who’ll recruit and vet them, and how they’ll be compensated.
2. Don’t tax yourself
Most taxes truly are as unavoidable as death, but there is one tax entirely within your control: unemployment tax.
Although unemployment claims fell to a 12-week low in February, they rebounded during the week ending March 4 to a seasonally adjusted 243,000 nationwide. Although they vary by state, unemployment benefits can cost employers up to $742 per week for 30 weeks per employee.
Fortunately, employers can mitigate that tax liability through an employer of record, which hires and manages temporary workers assigned to your company. If you were to hire those same employees directly and they subsequently filed for unemployment, your company’s unemployment rates would shoot skyward.
3. Take a cultured approach
If your contingent workforce is a well-oiled machine but your company culture is a rusted-out jalopy, then your focus is in the wrong place.
Improving company culture may be the most important contribution HR managers can make to the company bottom line. Although 87% of employees worldwide are not engaged at work, those companies that do have engaged workforces outperform their peers by 147% in earnings per share. In other words, it pays to create a culture of engagement.
Engagement improvements can come from many sources, so you’ll need to experiment until you find what works. It may be a matter of stress management, a killer employee incentive program, or even LED light displays.
In the on-demand world, it’s easy to get caught up in the constant ingress and egress of temporary workers. But HR leaders looking to make real improvements — and avoid costly mistakes — need to look beyond the right-here-right-now demands of a contingent workforce. The help may be temporary, but when managed with the big picture in mind, the bottom-line impact is certainly not.