controlling the cost of temp and contract labor - … · controlling the cost of temp and contract...

T H E R I S E A N D R I S K S O F T H E C O N T I N G E N T W O R K F O R C E

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Controlling the Cost of

Temp and Contract Labor

Key Strategies for Finance Departments

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ABOUT THE PRESENTER

Bill Inman

President, Emergent

17 years management and entrepreneurial

experience with the contingent workforce as:

• Employer of Record Executive

• Managed Services Program and

Vendor Management System Executive

• Applicant Tracking System Founder

• Former Staffing Company Owner

• Industry Media Producer

LINKEDIN.COM/IN/BILLINMAN

ABOUT

T H E R I S E A N D R I S K S O F T H E C O N T I N G E N T W O R K F O R C E

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Emergent employs the contingent workforce.

ABOUT EMERGENT

The Emergent family of companies:

Emergent

Innovative

Corporate

Contingent Labor

Solution

Entertainment

Partners

World Leader in

Production

Employment

Central

Casting

World Leader in

Extras Casting

Founded 1976

ABOUT

2013

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The contingent workforce continues to become a critical component of

the U.S. labor force and is expanding more rapidly than ever.

However, with increased usage comes increased risk.

PRESENTATION OVERVIEW

The presentation explores:

- How to reduce the overall cost of your flexible workforce by 20-40%

- Negotiate better rates with staffing vendors by revealing

their hidden profit centers

- Lessen the financial impact of compliance issues on your business

ABOUT

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Nothing on this presentation is intended to create any contractual or

other legal relationship between the presentation viewer, Emergent or

any of Emergent’s staff, and should not be construed as legal advice or

professional opinion for handling a specific factual situation.

Emergent cannot guarantee or warrant the accuracy or completeness

of information in this presentation any way.

Presentation participants and readers should not act upon any

information from this presentation without consulting with the

appropriate legal, financial, or other business professional for guidance

and advice.

DISCLAIMER

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The Contingent Workforce

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‘Temps’ Contractors

Freelancers Statement of Work

Staff

Augmentation

CONTINGENT WORKFORCE SEGMENTS

CONTINGENT WORKFORCE

Project

Outsourcing

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The contingent workforce is one of the fastest

growing segments of the U.S. workforce.

CONTINGENT WORKFORCE GROWTH (U.S.)

$17 billion 990K Workers

$124 billion

3M+ Workers

$164 billion 6M Workers

1999

2013

2018

Source: American Staffing Association and Staffing Industry Analysts CONTINGENT WORKFORCE

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INCREASED CONTINGENT WORKFORCE UTILIZATION

36%

40%

42%

2012 2013 2014

Source: Careerbuilder CONTINGENT WORKFORCE

Percentage of U.S. Companies Engaging Contingent Workers

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Reasons for Contingent

Workforce Growth

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REASONS FOR CONTINGENT WORKFORCE GROWTH

• Cost Savings

• Cost Restructuring

• Worker Evaluation

• Improve Quality

• Increase Productivity

• Risk Management

• Specialized Knowledge

GROWTH REASONS

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CONTINGENT WORKFORCE COST SAVINGS

Median Savings

Over Direct Hire

Companies that Believe Using

Flexible Labor Saves Money

Source: Staffing Industry Analysts GROWTH REASONS

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• Reduced hiring costs

• Lower training costs

• Reduced statutory employer burden

• Reduced administrative HR tasks

• Reduces need for severance pay

SAVINGS OVER DIRECT HIRE

GROWTH REASONS

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COST RESTRUCTURING

Use contingent labor

because of pressure to

reduce headcount

Say that contingent

workforce flexibility keeps

company nimble

GROWTH REASONS Sources: Baseline and Harvard Business Review

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COST RESTRUCTURING CONTINUED

Sources: Harvard Business Review

• “Companies are increasingly

focused on…the core 20% of

people who…generate the 70%

to 80% of enterprise value and

are rethinking their relationship

with the rest.” Harvard Business Review

• Procurement departments have

become more strategic about

spend on services

GROWTH REASONS

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INCREASE PRODUCTIVITY

Increase in organizational

efficiency for “Best in

Class” contingent

workforce users

Organizational output is

managed or driven

by contract talent

GROWTH REASONS Sources: Aberdeen

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RISK MANAGEMENT

Sources: CFO Magazine Global Business Outlook Survey and Dept of Labor

59% of CFOs have increased their flexible workforce because of

uncertainty around the economy, ACA & other compliance issues.

GROWTH REASONS

Rise in Jobs Provided By The Temporary Staffing Industry

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Contingent Workforce Costs

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Staffing Suppliers

Contract Workers

Indep. Contractor /

1099

Outsourcing Service

Providers

SOW

Project-Based

Workers

‘Self-Sourcing’

Internal Resources

Alumni & Previously

Used Workers

Referrals

CONTINGENT WORKER SOURCING METHODS & COSTS

Milestone

Payments

~25% Markup

*Markups are generally charged on the pay rate of each worker

40% Markup

10% Markup

WORKFORCE COSTS

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Self-Sourcing

Workers

STRATEGY 1

STRATEGY 2

STRATEGY 3

Fixed Rates for

Worker Recruitment

STRATEGIES FOR CUTTING COST

Transparent Statutory

Employer Costs

WORKFORCE COSTS

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SELF-SOURCING

WORKFORCE COSTS

• Leverage Existing Recruiting Resources

• Utilize Company Alumni or Previously

Used Resources

• Ask for Internal Referrals

• Engage Project Based Recruiters

• Create Your Own Talent Community for

Contingent Workers

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Unemployment

Tax Limit*

Maximum

Rate**

Federal $7,000 0.6%

AZ $7,000 6.38%

CA $7,000 6.20%

CO $11,700 5.40%

DC $9,000 7.00%

FL $8,000 5.40%

GA $9,500 8.10%

IL $12,960 9.45%

NY $10,300 8.90%

OH $9,000 9.10%

PA $8,750 10.58%

TX $9,000 7.58%

TRANSPARENT STATUTORY EMPLOYER COSTS

Most staffing suppliers do not lower their

rates when a W-2 worker hits their

Federal and State unemployment tax

limits.

Example for Federal UI Tax Limit

• $10 Hour = 700 Hours / 17.5 Weeks

• $25 Hour = 280 Hours / 7 Weeks

• $50 Hour = 140 Hours / 3.5 Weeks

• $100 Hour = 70 Hours / ~2 Weeks

* Tax limit based on payroll of worker

** 2013 Rate WORKFORCE COSTS

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Traditionally staffing is bundled, unbundling allows for cost savings

FIXED RATES FOR WORKER RECRUITMENT

Traditional Temp

Staffing

40%

Unbundle

Recruiting

10%

Employment

25%

35%

• Limit Recruiting Fee Hours

• No Direct Hire Conversion Fees

WORKFORCE COSTS

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Contingent Workforce Risks

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• Co-Employment

• Compliance & Regulations

• Worker Safety

• Worker Misclassification

• Intellectual Property

WORKFORCE RISKS

WORKFORCE RISKS

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CONTINGENT WORKFORCE LITIGATION ON THE RISE

WORKFORCE RISKS

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CONTINGENT WORKER CO-EMPLOYMENT

Co-employment could mean that

the client company may be held

liable for the decisions and

mistakes of the staffing supplier –

and vice versa…

“It is common to see both clients and providers

of temporary staffing both identified as defendants.”

-Staffing Industry Analysts

WORKFORCE RISKS

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EMPLOYMENT COMPLEXITIES

WORKFORCE RISKS

Can your suppliers

(AKA co-employer)

effectively handle

employment complexities?

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STRATEGIES TO LIMIT RISK

• Supplier Qualification - ensure staffing suppliers are

financially stable & compliant

• Supplier Agreement - clarify roles, responsibilities, &

indemnification

• Internal Policies - ensure managers understand key

contingent workforce policies

• Sourcing & Selection - make sure suppliers take proper

steps before selecting the worker

WORKFORCE RISKS

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SUMMARY

• The contingent workforce is

expanding rapidly and can help your

company save money and be more

flexible.

• With proper management companies

can save 20-40% on contingent

workforce costs.

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Q & A

.

Bill Inman

binman@emergent.com

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THANK YOU!

.