The rapid development of technology has changed the nature of work in many industries, and businesses are having to play catch-up. Already, governments are gearing up for the so-called fourth industrial revolution – an age characterised by a fusion of technologies that are blurring the lines between the physical and the digital.
Numerous reports and surveys have attempted to study the impact of technology on the future of work. Whatever their conclusions, accelerating technology change has led to the constant need for companies to retrain their staff and has given rise to a talent mismatch in many industries. Increasingly, companies in Asia — a key driver of global growth – are tapping into a contingent workforce to cover skills gaps while striving to attract and retain the best talent.
According to Deloitte’s Global Human Capital Trends 2016 research, almost half of 7,000 executives surveyed expect to increase or significantly increase the use of contingent workers in the next three to five years. The survey was based on responses from companies in over 130 countries, including those from Asia Pacific.
The report says businesses have dramatically increased their use of contingent workers over the past decade as they struggle with rising labor costs and the need for a workforce that can quickly adapt to market conditions.
Indeed, rising costs and volatile financial markets have led businesses to turn to contractors for short-term assignments and projects. Overseas expatriate postings are becoming shorter in duration, according to PWC’s Talent Mobility 2020 Beyond report. As millennials enter the labour market, more are also expecting to work flexible hours, or a mixture of regular hours with some flexible work arrangements. This is likely to aggravate the skills mismatch in Asia.
While technology and social media platforms such as Linkedin have made it easier for companies to source quality hires, the management of the non-employee workforce is complex and challenging.
As noted by Deloitte’s Global Human Capital Trends 2016 report, while the contingent workforce segment is growing in importance and size, many organizations may not be skilled at managing it effectively. Major challenges include the lack of an integrated workforce management strategy, ad hoc (and at times high-risk) managerial behavior, poor data management, and inadequate technology. These shortcomings can expose companies to significant business, financial, and public relations risks. Additionally, the lack of an integrated solution across these areas can inhibit an organization’s ability to make decisions about what type of talent to deploy where.
“As more companies understand the issues associated with contractors and manage them well, they can benefit from improved operational performance, lower labor costs, informed staffing decisions, more organizational flexibility, and stronger HR alignment with business objectives,” says the report.
Conversely, poor management of contingent workers can negate many of their potential benefits. One risk can be legal and regulatory challenges when governments pursue companies that misclassify contingent workers, it adds. In Asia in particular, a global company hiring contractors in the 10-member states of ASEAN for instance, will be dealing with ten different employment contracts and varied government reporting models and compliance risks.
Consolidating and channelling new contract personnel requisitions and administration to one source – a Contractor Management Organisation (CMO) – may be the solution and could bring about many benefits.
For multinationals requiring contract workers in multiple jurisdictions, managing offshore labour typically isn’t a core competency. A key benefit to using a CMO is that it manages the employment and payment risks and ensures that the administrative services such as pay roll and salary packaging remain efficient and compliant, not only to the company’s practices but also to the law. This allows the company to focus on the management of skills and talents. Recruitment companies that are deploying staff on behalf of their clients may also benefit from the services of a global CMO, which could help with the onerous task of dealing with a minefield of local labour rules, red-tape and tax regulations. Specialists CMOs often provide these services at a fraction of the cost charged by recruitment agencies. CMOs provide specialist knowledge and have advantages of scale, making the consideration of this specialist role important for any organisation with a large overseas work force.
As technology advancements and global mobility lead to increased use of contingent workforce, HR departments will progressively see contractors as part of the corporate business strategy. Outsourcing the management of contingent workers to a CMO may be the solution to help companies achieve their goals and profitability.