For years, the workforce has been evolving, with nontraditional roles like consultants, freelancers, and other contingent workers growing steadily. Meanwhile, HR professionals are often responsible for a shrinking pool of traditional employees. This raises an important question: who is responsible for managing the nonemployees in today’s blended workforce? And how can HR effectively oversee such a diverse talent ecosystem?
Organizations approach this challenge in different ways. Some rely on individual managers to oversee the contingent workers on their teams. Others assign this responsibility to procurement, treating contingent labor as a purchased service. In some cases, HR takes on the management of both employees and nonemployees. Each of these models presents challenges, including limited visibility, inconsistent practices, compliance risks, and concerns about cost control.
To address these issues, HR leaders at many large organizations have partnered with managed services providers (MSPs). These third-party experts specialize in managing contingent workforces, from acquisition to day-to-day operations. By outsourcing these responsibilities, HR can concentrate on maximizing the strategic value of a blended workforce, ensuring both efficiency and effectiveness.
What is a blended workforce?
A blended workforce is often thought of as a mix of employees working onsite and remotely. However, even before remote work became widespread, many businesses were turning to flexible labor solutions to address critical needs. Organizations used contingent labor—such as staffing agency contractors, independent contractors, and solutions consultants—to bridge skills gaps, access specialized expertise, and increase agility in responding to market opportunities.
This reliance on contingent resources has resulted in workforces that are increasingly blended, with employee-to-nonemployee ratios ranging from 20/80 to nearly 50/50 in some cases. This shift reflects a growing recognition of the strategic value of nontraditional talent in achieving business goals.
What are the risks HR faces in managing a blended workforce?
Ask any HR leader questions about how many people they employ, where they work, and what they do, and they will have ready answers. The same questions may lead to head-scratching and hesitation in relation to non-employees, which ratchets up the risk factors. And it all carries a potential cost. For example:
- Lack of oversight. Multiple managers most likely handle contingent talent, and HR may not have visibility into the process. This translates to inconsistent approaches and higher risk.
- Lack of visibility. HR may be out of the loop as to how many contingent workers are on the job, where they work, or what they actually do, to say nothing of how much the company is spending for them.
- Lack of consistency. It is also likely there is little consistency or established standards for screening talent, background checks, on- and off-boarding, timekeeping, or payment records.
- Co-employment risk. Sometimes, contingent workers are effectively walled off from employee teams, but in any workplace where collaboration and collegiality are prized, teams are mixed to the point that it is difficult to distinguish employee talent from non-employee talent. This often leads to situations where contingent workers are included in employee meetings, attend company-sponsored events, and are invited to take advantage of selected employee benefits and perks, as though they are company employees.
- Higher cost. The cost of acquiring and managing contingent workers may appear in departmental budgets, but there is often a significant and hidden administrative burden. Sourcing workers through multiple agencies at varying bill rates—often for similar roles—can drive up costs unnecessarily. Even more critically, misclassifying workers, such as incorrectly designating an employee as an independent contractor, can result in substantial penalties, with fines reaching six or even seven figures.
How HR can manage nonemployees more effectively?
Contingent workers are the exceptions to the rule in the HR universe. Every time HR has to split its time and resources to address non-core needs, there is a risk that its primary focus and function can become diluted or fractured. To maintain the right focus on employees, HR can outsource contingent workforce management to a third-party expert.
An initial step to more effectively manage contingent workers who have been pre-identified, e.g., former employees or interns would be to place them under the auspices of an employer of record (EOR). This solution removes the administrative burden associated with nonemployee talent. It offers digital onboarding, pre-employment screening, timesheet management, and invoicing, in addition to managing tax obligations and compliance issues.
An MSP solution is more comprehensive. It centralizes and standardizes all contingent talent acquisition, establishing consistent processes and standards for quality and performance with universal applicability to all talent suppliers and all contingent workers, including payrolled workers. MSPs also rationalize bill rate fluctuations across suppliers, leading to lower overall costs. They ensure compliance, increase operational efficiency, and simplify contingent workforce management, freeing HR to focus more on strategic issues.
How does an MSP contribute to a more effective HR function?
An MSP partner acts as an extension of the HR team. HR sets policy, and the MSP adapts it for the contingent workforce. The result is a clear divide between employees and nonemployees, but greater consistency in how all talent is acquired, on-boarded, and managed.
When HR partners with an MSP, it gains enterprise visibility, making it far easier to understand the makeup of the entire workforce and how best to deploy resources and plan for the future. When an MSP partner is managing the contingent workforce, HR has the freedom to focus on the best ways to align the entire workforce with business strategy. That makes HR a more valuable contributor to the organization.
How should HR partner with an MSP to optimize results for the organization?
Beyond some of the basic benefits of greater visibility, compliance, reduced risk and cost, an MSP can elevate your contingent workforce program through collaboration and partnership. An MSP partner brings unique expertise and knowledge to the organization. Based on experience with multiple contingent workforce programs, HR can tap into an MSP partner’s knowledge of best practices and prevailing trends in managing a blended workforce. As an example, an MSP partner can help HR analyze roles and functions to determine which jobs are best suited to contingent talent vs. employed talent. By understanding a company’s plans for future growth, an MSP partner can help identify the right talent pools to support growth.
Achieving the Right Balance
When an MSP is a trusted partner, HR can be assured of achieving the right balance and focus for all components of the workforce. No one is orphaned or neglected. The contingent workers who support the business are as carefully managed as the employed workforce, but in a distinctly different way. The blend of employee and contingent talent ensures the organization can optimize all its talent resources to advance critical business goals.
