Conexis VMS | Blog

Identifying the Hidden Risks in Your Contingent Workforce Program

Written by Wayne Burgess | Jul 13, 2021 6:25:00 PM

The contingent workforce - which is made up of independent contractors, freelancers, consultants and temporary workers (temps) - is clearly here to stay. 

Employers are turning to the contingent workforce to access benefits such as improved access to expertise, business flexibility, filling skills gaps, greater cost efficiencies and better access to talent. 


In fact, according to the 2020-2021 CXC Contingent Workforce Global Trends Report from CXC Global, 77 percent of executives believe freelance and gig workers will substantially replace full-time employees within the next five years.

Yet, although a contingent workforce comes with many benefits for businesses - a poorly managed contingent workforce comes with a range of risks that impact the bottom line of your organization if left unchecked. 

That’s why contingent workforce management is crucial to a successful non-employee workforce. With that in mind, in this blog we’re going to take a look at the most common hidden risks in a contingent workforce that has no real program, strategy or vendor management software to underpin it.

The most common hidden risks associated with your contingent workforce

More companies than ever before are relying on nontraditional workers to access hot skills and beat the skills shortage, but the vast majority of these companies aren’t ready to manage the hidden risks that come with it. 

That’s because managing a contingent workforce is complex. It involves a huge number of workers, vendors (staffing agencies) and data points across every department within your organization.

To be successful, contingent workforce management needs to be a centralized, company-wide initiative, in which hiring managers are all using the same staffing agencies, at the same rates and following standardized rules for hiring non-employee workers. 

If this isn’t followed, hidden risks will run through your organization and your business will have absolutely no visibility or control over them.

Here are some of the most common hidden risks associated with the contingent workforce:

No visibility into staffing vendor performance

With no real contingent workforce program in place, it’s virtually impossible to standardize vendor analysis and rates across your organization. When you have a decentralized approach to sourcing, engaging and managing your staffing agencies, your business will have absolutely no visibility or control over how your vendors are performing.

To improve this process, it’s crucial that your business consolidates all vendors and transactions into one centralized location through the use of a vendor management system (VMS). You’ll have access to the KPIs, data and metrics that show how your vendors are performing. 

Rogue spend

Financial risk can come from a number of places within your contingent workforce, but it typically goes unnoticed when an organization has no centralized management strategy for their staffing agencies and contingent workers. 

This ‘rogue spend’ could come from poor visibility and inconsistency with how you manage your staffing vendors, no transparency into how much money you are actually spending on nontraditional workers or no standardization of contingent worker rates - leading to your business overpaying for talent. 

Operational inefficiencies

Most organizations have fragmented contingent workforce management processes that lead to wasted time and human error. This is often the fault of using manual spreadsheets to manage your contingent workforce and staffing agencies. 

Finding a way to automate these processes, such as through the use of a VMS, you’ll be able to free up your employees from working on time-consuming, repetitive tasks and instead allow them to focus on the things that drive real value to your business. 

Worker misclassification

Non-employee worker misclassification happens when an organization incorrectly identifies the relationship that exists between their business and the contingent worker. To avoid hefty fines and penalties, it’s important that your organization classified its nontraditional workers correctly.

No matter where your organization is based, most countries and states have online tests that help ensure your business is properly classifying its contingent workers. 

Stay tuned for our next blog, 5 Ways to Mitigate Risk in Your Contingent Workforce, where we discuss how you can relieve the hidden risks associated with your contingent workforce.

In the meantime, if you have any further questions please don’t hesitate to reach out to Conexis VMS today. Our team of contingent workforce and vendor management system specialists would be happy to answer any questions that you may have. 

Interested in learning more about Vendor Management Solutions?

Whether you are looking for a new VMS Solution, or just getting started, we are here to help.  See how easy Conexis is to use by taking a quick 2 minute Self-Guided Tour.  Contact Us for a Free No-Obligation Consultation to discuss your workforce challenges (and get immediate actionable insights) or Book a Personal Demo Today!