When it comes to the services industry, it is essential to get a good ERP solution to manage the large contract workforce
There is no denying that the gig economy is steadily growing, and as much as it is influencing the worldwide economy, it is equally impacting workforce dynamics and payroll. The underlying fact would be that the number of contract workers is increasing. A 2017 report by Upwork pointed that close to 57.3 million Americans, or 36% of the workforce, are now freelancing. Last year, the number of contract workers in Google exceeded the number of direct employees for the first time in its 20 years of existence. That reflects today’s trend. Be it tech companies, transportation network giants, hospitality companies or construction labor suppliers, a lot of companies look to hiring contract workforce to cut down on HR costs and hire temporary on-demand skills.
Contract workforce consists of a labor pool whose members are hired by an organization on an on-demand basis from different staffing suppliers. It is crucial to ensure mapping the right talent for the right job, paying them on time and also ensure compliance with the local statutory needs according to their contract labor law; among other aspects. A good Contract Workforce Management System (CWMS) helps the principal employer in managing the contract workforce. The payroll and statutory remittances pertaining to the contract worker is generally done by the relevant staffing company which has supplied the resource. While maintaining this contract workforce, the principal employer faces the following challenges:
- Who is the supplier of the contract employee? How many employees are supplied by a staffing supplier?
- Is the supplier charging the right amount for the supplied workforce?
- What would be my expenditure relating to the workforce? Am I being billed twice for the same worker or am I being overcharged?
- Does my supplier send resources that have been blacklisted in another plant or unit?
- Has the staffing company remitted statutory dues pertaining to a contract employee correctly?
- How to reconcile this 100%? The volume is too much so only sampling seems to be feasible.
A good ERP for the services industry will address these problems and also go beyond that to help organizations save costs and manage their contract workforce efficiently.
- No duplication of records: Services Resource Planning (SRP) CWMS brings onboard an employee tagged to a supplier and work order. This will facilitate easy retrieval of information. For instance, the system will not allow assigning the same employee against another work order thereby removing the possibility of duplication.
- Right hire: Contract employee who has been blacklisted should be marked in the system and brought to the attention of principal employer during re-hire.
- Accurate attendance: The principal employer should be in a position to manage assignments and record the attendance of contract workforce. Based on attendance recorded, or as per the agreed terms of the contract between the staffing company and principal employer, expense invoice can be generated. The billing terms should be configurable in the system. The billing configurator must be dynamic enough to handle the ever-changing billing models of this industry.
- Clear-cut payroll: SRP CWMS HCM payroll engine will have to simulate payroll and use that for cost-plus based billing simulation. The simulated expense invoice can be used for reconciliation when the supplier sends the actual invoice. This avoids cost leakage. Also, the statutory remittance receipts can be obtained from the staffing company. The data can be parsed into the system and reconciled with the wage simulation. Mismatches and exceptions should be highlighted so that the principal employer looks into it.
This helps the principal employer meet the statutory obligations to make sure that the staffing supplier has remitted its dues properly under various statutes. The reconciliation is automated thereby removing any manual intervention or sample checks.
All these are some important pointers. One must choose the right solution to manage its contract workforce. Ramco’s CWMS is a tailor-made solution for organizations whose workforce comprises contract labor. It covers the lifecycle of contract labor right from onboarding to separation and also covers the contract with staffing supplier until its billing and expense payment.