1 December 2020

What is Statement of Work (SOW), and How Do You Manage it?

John Clark
John Clark

The number of contingent workers has increased dramatically in the past few years. As a result, a survey from Oxford Economics, found that 83 percent of executives plan to increase their use of contingent, intermittent, and consultant workers over the next three years.

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) labour. 

There’s a tendency for small and medium-sized organizations to categorize all non-employee labour 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 non-employee workers (and vendors) and avoids any compliance headaches.

What is a statement of work?

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.

What are the benefits of integrating SOW spend into your non-employee workforce management strategy?

Implementing a SOW strategy into the management of your non-employee 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. 

Results: 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.

Mitigating risks: 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. 

Why you need a vendor management system to manage SOW spend

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, according to Randstad, SOW spend is typically 65 percent of all contingent labour 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 non-employee workforce and the vendors you use to source them. 

Thankfully, with Conexis VMS there is now a vendor management system that has been specifically developed for companies with smaller non-employee workforce management budgets.  

The majority of VMS solutions lack the knowledge and capabilities to manage SOW spend effectively. However, our innovative VMS not only automates and consolidates the entire contingent workforce management process, it also supports and improves your SOW processes as well. 

The result is improved cost savings, better visibility into non-employee workers, operational efficiencies and much more.

Want to learn how it works? Contact Conexis VMS today. Our team of contingent workforce and SOW specialists would love to answer any questions that you may have and explain how our VMS can improve your management processes.

Request a Demo

John Clark

John Clark

A Co-Founder of Conexis, and Staffing Industry Analysts’ (SIA) top 40 under 40 recipient, John has more than 15 years experience in the Contingent Workforce, Managed Service Provider and VMS technology space. John has designed, built and run dozens of client workforce programs across multiple industries, managing over $1bn in spend. John’s expertise sits in both program design and delivery as well as VMS technology implementation and management.

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