U.S failing to monitor millions spent on contract labour

Nov 04 2005 by Nic Paton Print This Article

U.S employers spend millions of dollars each year on contract labour, but rarely monitor whether it is money well spent or even how much it is costing them, a report has suggested.

Talent management company Taleo looked at how a cross-section of Fortune 500 companies were recruiting and managing their contract workforce.

It found that contractual workforce management is an increasingly complex and unmonitored area of expense throughout large organisations.

Many organisations could not answer critical questions about the use and impact of contractual labour on their organisations.

For instance, just under a quarter (21 per cent) could not estimate their company's current annual spending on contractual labour, while 18 per cent could not estimate the number of suppliers currently providing contractual labour.

Yet many firms were spending an average of seven per cent of their overall company revenue on contractual labour, typically representing hundreds of millions of dollars.

"The findings indicate that major opportunities exist for organisations looking to achieve greater returns on contractual labour by leveraging centralised contractual workforce management technology," it concluded.

Contractual workforce management practices varied greatly throughout organisations.

Contract workers could also become an extremely problematic and expensive area if not managed properly, it added.

Other key findings included 92 per cent feeling inconsistent costs and a lack of price control were a primary "pain point" with their current contractual labour workforce.

More than two thirds (69 per cent) were highly concerned about their organisation's compliance with industry regulations such as Sarbanes-Oxley.

Much the same figure (66 per cent) were highly concerned about employee misclassification and co-employment risk.

Half did not know if their company had ever defended itself against a lawsuit associated with contractual labour.

A third could not report which, if any, department held primary responsibility for minimising their company's risk and liability as it related to contractual workforce management.

Taleo Research founder and president Yves Lermusiaux said: "The findings in this report are further proof that significant opportunities exist for organisations to gain control of contractual labour throughout the enterprise.

"The impact of improved contingent workforce management can be substantial when supported by comprehensive technology solutions that provide control and visibility into the process," he added.