‘Percent of spend under management’ is widely used as a pricing model for VMS solutions. Like other SaaS-based software, this is a transaction-based model in which the fee is based on the number of workers sourced and managed using the system. The fluctuations usually found in the way companies utilize contingent workers makes this an ideal approach, flexibly responding to surges and cutbacks in the use of contingent workers.
Many companies are wrapping up their 2014 budgets as the New Year approaches. Most companies have robust and dependable workforce planning methods in place for their permanent hires, and their budget projects hires and payroll costs by quarter. However, when it comes to contingent workforces, it is quite likely that an examination of these budgets would not show a line-item for contingent labor expenses. If industry analysts are right, and temp labor now accounts for nearly a quarter of many companies’ talent, then this is a major oversight. However, we find that many companies cannot even come up with a reasonable estimate of their actual spend on any category of temporary labor.
Can companies really have a plan in place for its flexible workforces? Is it really possible to do so? Is it played purely as a guessing game? Or can companies actually predict the number of contingent workers they plan to employ during a given year and actually work out the projected expenditure on this worker type? If you are one of those companies where the dependence on contingent workers and their share in the total workforce is growing slowly but steadily year-on-year; it is necessary for you to plan your spend on your contingent workforce with as much attention and care as you would allot to your full timers. Employers need to be aware of what these workers mean to their organization, and strategize to set the right processes around recruiting, training and developing and managing them well.
The industry’s best Vendor Management Software (and we include our Smart Track product in this category) includes functionality that tracks actual spend and compares it to budget at every transaction. It provides reports on usage and costs associated with temporary labor. It allows you to overlay market data with your actual data, identifying areas where you may be over- or under-spending. Finally, it provides modeling tools that helps you to determine the best type of worker – permanent, agency contractor, or SOW-based project team – for each assignment. If you aren’t currently using Vendor Management Software, a reliable vendor will assist you in conducting a census of your current usage, establishing a baseline.
With this assistance, you can extend your internal labor utilization models to develop comprehensive workforce plans. Your budgets can accurately project costs. And, as midcourse corrections to your hiring plans and budgets occur over the course of the year, you can quickly evaluate the impact of each potential change. If organizations make consistent plans for the use of contingent workers as well as employees, they can take full advantage of the flexibility and cost advantages offered by the uses of contingent workers. A well-considered plan helps to improve the control one has over the use of contingent workers and provides more visibility into their use and cost.
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