It doesn’t matter which reports you read, the use of contingent labor (defined as all types of workers that are not full-time employees) is increasing year over year. According to the Meridian 2023 Executive Survey, 65% said they would increase their reliance on contingent workers in the next two years. This is a trend that I expect to continue for many years to come, and therefore HR and TA (Talent Acquisition) executives cannot ignore contingent labor.
It is not surprising the use of contingent workers will increase when you take a step back and look at the state of the labor market in the US and globally today. After the massive hiring peaks and troughs over the last 3 years many executives are looking for flexibility, they need agility in the workforce. They have a need for the resource but are thinking more and more about the type and make up of the workers, they are not sure what is happening in the wider economy and flexibility is now a strategic driver. This bodes well for higher numbers of contingent workers over the years to come.
In addition to the need for flexibility there are several other dynamics at play. Words such as “total talent” and “skills based hiring” have also started to circulate on Teams or Zoom meetings. It is also a trend that we at AMS have started to see and talk to our clients about more and more. What does this mean? In general terms organizations are starting to embrace the idea that hiring for skills is key, how the individuals are engaged (full time or contingent) is less of an issue, as long as they have the skills. The workers can be contractors employed by an Employer of Record, in business on their own account operating as an Independent Contractor, or of course they can be employed by the organizations themselves.
There is another trend that we have also started to see and one that I firmly believe is a major disrupter in terms of contingent labor hiring in the US, and that is contingent labor Direct Sourcing or Contingent Process Outsourcing (CPO) as I like to refer to it. This is the practice of an organization leveraging their own brand to source and attract contingent workers for a percentage of their hiring needs rather than leveraging the traditional route of a staffing agency. Another benefit of this model is that in order to source contractors leveraging your brand, a talent pool is needed. This talent pool becomes your asset and suddenly contractor skills can be categorized and curated, organizations have the power to attract good workers leveraging their brand. There are many benefits of this emerging model including substantial cost savings, better quality, ability to tap into certain skills and a better candidate experience. At AMS we have successfully launched a number of contingent labor direct sourcing solutions over the last 2 years and we see this as a major trend. AMS has a heritage in RPO (Recruitment Process Outsourcing) where we leverage our clients brands to attract great talent, and we are now applying this to the contractor market to great effect.
There is one final trend that we are starting to see, and that is that more HR and TA executives are starting to get involved with contingent labor. Procurement, the traditional home for contingent labor, is still very much involved in the management of non permanent workers, but overall strategy is starting to transfer to HR and TA. In the last 12 months, we have observed several of our large Fortune 100 clients change strategic ownership from procurement to HR. According to our own client base, 40% now have HR/TA strategic ownership and I predict this number will increase to over 50% in the next 12-24 months. This is actually a fairly dramatic change for all of us that operate in the contingent labor ecosystem.
An HR executive has plenty to keep them occupied in 2024, and now they need to add contingent labor to their to do list. Organizations cannot afford to ignore this hugely important and growing population of available talent. They need to learn how to attract and gain access to the skills that they will need to grow their business. 2024 is indeed the year that HR and TA executives need to view contingent labor differently, it is now a strategic imperative as opposed to a procurement management task.
