External workforce management

External workforce management refers to the strategic process of overseeing and optimising non-traditional workers, such as freelancers, contractors, and temporary staff, who are not permanent employees of an organisation. This comprehensive approach encompasses sourcing, onboarding, managing, and evaluating external talent to enhance operational efficiency and achieve business objectives.

Understanding external workforce management

As the global labour market continues to evolve, businesses are increasingly relying on external workers to supplement their permanent workforce. This shift has given rise to the need for robust external workforce management strategies. According to a study by SAP Fieldglass, external workers now make up 42% of the total workforce spend for the average organisation (SAP Fieldglass, 2020).

Key components of external workforce management

Effective external workforce management typically involves several key components:

• Talent sourcing and acquisition
• Onboarding and offboarding processes
• Performance management
• Compliance and risk management
• Workforce analytics and reporting

The importance of external workforce management

External workforce management plays a crucial role in achieving organisational agility and cost-effectiveness. Here are some key reasons why it's important:

1. Flexibility and scalability

External workforce management allows organisations to quickly scale their workforce up or down based on business needs. This flexibility is particularly valuable in industries with fluctuating demand or project-based work.

2. Cost optimisation

By effectively managing external workers, companies can reduce overhead costs associated with full-time employees while still accessing specialised skills. Research by Deloitte indicates that organisations can save up to 30% on labour costs by strategically leveraging external talent (Deloitte Global Human Capital Trends, 2019).

3. Access to specialised skills

External workforce management enables businesses to tap into a global pool of talent with specialised skills that may not be available in-house. This is particularly crucial in fast-evolving fields such as technology and digital marketing.

4. Compliance and risk mitigation

Proper management of external workers helps organisations navigate complex regulatory landscapes and mitigate risks associated with misclassification, intellectual property issues, and data security.

Challenges in external workforce management

While external workforce management offers numerous benefits, it also presents several challenges:

1. Visibility and control

Maintaining visibility over a dispersed external workforce can be challenging. Organisations often struggle to track performance, costs, and compliance across multiple external worker engagements.

2. Integration with permanent workforce

Balancing the integration of external workers with the permanent workforce while maintaining clear distinctions can be complex. It requires careful management to foster collaboration without blurring legal and operational boundaries.

3. Technology and data management

Managing an external workforce often requires sophisticated technology solutions to handle sourcing, onboarding, time tracking, and payment processes. Ensuring data security and compliance across these systems can be challenging.

4. Global compliance

For organisations operating across multiple jurisdictions, staying compliant with various labour laws, tax regulations, and worker classification rules can be daunting. A study by Ernst & Young found that 49% of organisations have faced compliance issues related to their contingent workforce (Ernst & Young Global Contingent Workforce Study, 2018).

Best practices in external workforce management

To overcome these challenges and maximise the benefits of external workforce management, organisations can adopt the following best practices:

1. Implement a centralised management system

Utilising a centralised platform for managing all aspects of external workforce engagement can significantly improve visibility, control, and efficiency. Modern solutions offer features such as automated onboarding, time tracking, and compliance checks.

2. Establish clear pPolicies and processes

Developing comprehensive policies for engaging, managing, and evaluating external workers helps ensure consistency and compliance across the organisation.

3. Focus on data-driven decision making

Leveraging workforce analytics can provide valuable insights into external workforce performance, costs, and trends, enabling more informed strategic decisions.

4. Prioritise compliance and risk management

Regularly reviewing and updating compliance processes, particularly for global operations, is crucial. This includes staying abreast of changing regulations and implementing robust worker classification procedures.

5. Foster a positive external worker experience

Creating a positive experience for external workers can lead to better performance, increased loyalty, and access to top talent. This includes providing clear communication, timely payments, and opportunities for skill development.

The future of external workforce Management

As the gig economy continues to grow and organisations increasingly rely on flexible talent, external workforce management is set to become even more critical. Future trends are likely to include:

• Greater integration of AI and machine learning in workforce management systems
• Increased focus on skills-based talent acquisition and management
• More sophisticated analytics for workforce planning and optimisation
• Enhanced emphasis on diversity and inclusion in external talent pools

At YunoJuno, we understand the complexities of managing an external workforce in today's global business landscape. Our platform is designed to address these challenges, offering features such as automated onboarding, global payment solutions, and real-time reporting to help organisations effectively manage their external talent across 150+ countries.

Conclusion

External workforce management is no longer just a tactical consideration but a strategic imperative for organisations looking to thrive in a rapidly changing business environment. By embracing best practices and leveraging advanced technologies, companies can harness the full potential of their external workforce, driving innovation, flexibility, and competitive advantage.

As the external workforce continues to grow in importance, effective management of these valuable resources will be key to organisational success. With the right strategies and tools in place, businesses can navigate the complexities of external workforce management and unlock new opportunities for growth and innovation.