Expert Advice for Medium and Midsize Businesses

How to Manage Contingent Labor in the “Gig Economy”

The “gig economy” is a new trend that’s affecting how small to midsize employers manage both part-time and contingent labor.

With the growing use of flexible part-time workers, many SMBs are finding it easier just to go ahead and enter profiles for all classifications of workers directly into one system of record across everything—including time, HR, payroll, accounting and finance. When you need to leverage limited resources, this approach offers multiple advantages.

This wasn’t always the case. Smaller employers tend to be less confident that they understand and adhere to the latest labor laws and regulations governing how workers are classified. Many employers try to avoid confusion or misinterpretation by keeping the profiles of contingent workers outside of any electronic system of record. This is a superstition that persists—though there is no real justification for doing so, other than that it has always been done it that way. 

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Even today, many employers who rely on a steady stream of contingent workers still take time each day to sort out who shows up to work, get their paperwork squared away and assign temporary punch and security badges. This practice has always been inefficient and time consuming, often delaying start times and affecting productivity.

As the “gig economy” increases the ebb and flow of part-time workers that need to be managed and tracked, it makes more sense to manage all labor profiles in a single system of record, including those of contingent workers. This is especially true for seasonal employers that need to re-hire (or avoid re-hiring) workers from previous seasons.

Better Visibility Into Labor Costs

The bigger benefit of having a single system of record, beyond efficiency and accuracy, is reporting visibility—not just for line-of-business sales and operations, but for payroll, accounting, finance, and company owners. Visibility helps managers make informed decisions in critical areas like project and job costing. Labor is typically the highest operating expense.

Many SMBs have no idea what they pay for contingent labor—let alone how much they pay to any one supplier or across time periods. Many use spreadsheets to track labor and expenses. Visibility improves negotiating power with agencies and suppliers of contingent labor.

There is no evidence that tracking contingent labor profiles outside of a company’s HR system of record makes any difference in the eyes of government auditors. With the growing trend of using part-time workers in today’s “gig economy,” and the constant pressure for small-to-midsize companies to do more with less, it makes sense to manage and control all labor costs in one consolidated system of record.

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