Today’s contingent workforce is made up of a number of different workers, including freelancers, independent contractors (IC), temporary workers sourced via staffing agencies and statement of work-based (SOW) labor. In this article, we look dive into SOW spend: what is it and how does it integrate into your contingent workforce management strategy.
There’s a tendency for small and medium-sized organizations to categorize all contingent labor under the same spend, but SOW spend absolutely must be differentiated within your vendor management system (VMS).
Understanding the difference between statement of work spend and traditional staffing agency spend will ensure your business saves money, is able to effectively manage contingent workers (and vendors) and avoids any compliance headaches.
SOW engagements are the strategic process of hiring non-employee workers on a per-project basis, in which companies do not control the work being done and are instead paying for a finished product to be delivered.
A statement of work will define the specific deliverables of the project, timelines, expectations and payments for the work being performed, ensuring that a non-employee worker understands exactly what is involved in working on a specific project for your business.
Implementing a SOW strategy into the management of your contingent workforce will come with a number of benefits. Perhaps the most important of those is the ability to pay for results rather than hours worked, and the ability to mitigate risks.
Statement of work, or project-based employees, allow organizations to pay for results rather than hours worked. These non-employee workers provide specialized talent on an as-needed basis and are perfect for delivering specific projects that your organization is working on. Under a SOW relationship your company gets exactly what you pay for. You hire highly-skilled talent for a specific, predefined objective.
Poorly managed contingent workers bring risks associated with contracts, security, benefits, intellectual property, and human resources. Incorporating SOW into your non-employee workforce management will mitigate these risks for those engaged via a SOW contract since your company will have properly documented their entire project.
Managing statement of work spend can be tricky. Payments vary from hourly, fee-based or milestone-based, and there are a number of vendors involved in the process of sourcing top talent to work on SOW projects.
Yet did you know that statement of work spend in many organizations dwarfs contract labor spend? In fact, industry research indicates that SOW spend is typically 65 percent of all contingent labor spend.
That’s why SOW spend should be managed in a vendor management system, in conjunction with the rest of your non-employee workforce, to gain complete visibility into your contingent workforce and the vendors you use to source them.
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