Digital transformation and the deconstruction of work have emerged as among
the most disruptive forces to traditional business models. These trends are
largely due to the Fourth Industrial Revolution’s rapid advances in artificial
intelligence (AI) technologies and the democratisation of work. We expect the
workplace of the future to be a more specialised and democratised environment
that will be heavily reliant on both workers, who are equipped specialist
skills, and leaders, who possess a broad set of enabling capabilities and can
orchestrate the new ecosystem of work. The talent of the future will perform
more innovative and creative work, alongside AI-powered processing systems that
take on a majority of the predictable, routine work. Such professionals will
demand a high level of flexibility and remote working arrangements, and will
most likely even prefer to be engaged on a contractual basis.
In fact, we have seen alternative working arrangements grow in popularity
over the last few years thanks to advancing technology and evolving workforce
attitudes. Our 2016 Global Talent Management and Rewards Study found
that 54% of the largest employers around the world intend to change more of
their process and systems over the next three years to increase their
flexibility. Many companies have also begun to take stock of their
organisational model and human capital strategy to embrace this new plurality of
means for work, beyond traditional employment, as they look to optimise skill
shortages and surpluses.
Currently, organisations are responding to this imbalance of skills through
increased use of highly-skilled contract-based specialists, particularly as it
relates to accessing digital talent. Twenty-four percent of managers globally
have at least one independent contractor on their team today. This practice is
expected to grow to at least 50% by 2018 in response to the global skills
The imbalances in today’s talent landscape require HR professionals to
maximise their creativity in ‘getting the work done’ beyond meeting the talent
needs of the organisation. Creative solutions can also reduce labour costs and
develop a more agile working environment.
The question right now is – is your organisation ready to align your HR
strategies to this new reality? Can your organisation capably and efficiently
manage non-traditional talent?
Skills based pay
Our 2016 Global Workforce Study shows that base pay is the number
one attraction and retention driver for talent – this includes employee and
non-employee talent. However, while the science of rewarding employees is well
established, many organisations today have yet to identify appropriate methods
for compensating non-employee or contractual talent. Willis Towers Watson’s
Contingent Workforce and Crowdsourced Pay Data Report confirms that a
traditional approach to pay still prevails – at least 65% of respondents said
they extrapolate the pay levels of contract workers based on compensation data
for full-time employees.
Traditionally, compensation for a contractual role is based on the full-time
equivalent and the specific skills required for that job. These are of course
dependent on the function/discipline/career band and global grade within the
organisation. However, the hiring process, scope of work, and employment
duration of a contractual worker is very different to that of a permanent
employee. Particularly, when a contractual worker is hired to undertake a
specialist project that must be completed within a defined time frame. While
some full-time employees may be capable of performing the same job, specialists
often have unique skills that set them apart, which could justify the need for a
more attractive compensation package.
For these reasons, employers who engage contractual specialists need to move
from a job-based pay system to a skill-based pay system. This means rewarding
them for the skills that they bring. It is difficult to benchmark such jobs,
which is why the default practice is to compare them to the closest full-time
equivalent. This practice may suffice when there are only few such arrangements.
However, as we move towards the aforementioned plurality of means for work, the
need for more accurate benchmarking becomes crucial.
A skills-based approach is considerably different and it may be difficult to
even know where to start. Forty percent of respondents in the Contingent Workforce and Crowdsourced Pay Data Report recognised the importance
of having access to pay rate data for contractual workers and best practices for
procuring and managing this talent. This demonstrates that an increasing number
of organisations are looking for more precise approach to pay benchmarking for
Such benchmarks need to be based on specific skills, contract duration,
experience and past recommendations, among other factors. This can create a
challenge for even the most seasoned compensation professionals. But evaluating
contractual workers based on their skillset will help organisations find the
best fit for critical jobs, both now and in the future. As business structures
continuously change, organisations need talent that can easily adapt and be
readily available to take on new work.
Contractual workforce management
The fleeting nature of the contractual workforce makes it very difficult to
manage. One issue is the minimal or lack of benefits offered to contract
workers. Another question is the on-boarding process for contractual employees –
is it necessary to orient them to a company’s culture and goals? Many companies
assume that since contract workers may only be team members for a short time,
there is no need to invest in performance or career management.
In the U.S. alone, contract workers already comprise 35% (around 55 million)
of the total workforce.2 The rapid growth and utilisation of this workforce
segment, across virtually every industry, makes it all the more essential to
have an effective Contractual Workforce Management (CWM) strategy in place. This
will enable employers to understand the complexities of managing contractual
talent and improve operational performance to effectively lessen labour cost.
Without a proper CWM, employers might face potential legal and regulatory risks
that negate the benefits of engaging contractual workers. Poor management of
these employees could increase baseline costs without a discernible increase in
A CWM strategy can enable your organisation to effectively leverage
contractual talent to help realise your business objectives. One effective
action is to extend a comprehensive Statement of Work that clearly defines your
expectations from contractual talent, including their role and goals. This can
ultimately lead to saving time, effort and cost for complex projects.
An undervalued and often neglected activity with contractual workers is
providing feedback and evaluation after the job has been completed. An
increasing number of these individuals now request feedback for their work. Did
they meet what was expected of them? Did they finish the job professionally and
on time? These are just some of the things contractual workers want to know. The
Statement of Work can form a sound basis for this feedback.
HR taking charge
Managing contractual workers may appear complex because it is still a largely
unfamiliar process. The undefined role of HR and hiring managers in this process
can add to the confusion. The task of hiring and managing contractual workers is
often handed over to procurement, as they are traditionally deemed as vendors or
suppliers. However, the rising prevalence of contractual workers has created a
shift towards redefining them as human capital. HR professionals need to
identify and clarify their role in this process.
Among the HR professionals in our survey, 58% admit that they have no
involvement in managing contractual workers and have limited clarity on their
role in such arrangements. Their responsibilities are usually limited to
identifying where to post job openings and recommending pay rates. But they are
often not informed as to when or why contractual workers are needed. Hiring
managers are often relied on to trigger these needs and to oversee the process.
There are often no checks and balances to justify the time and costs of
recruiting this talent.
There is a clear gap in the current situation that explains why there are
problems with determining appropriate pay and benefits for contractual workers.
Not to mention a risk of overlooking the communication of company guidelines and
values while ensuring compliance with legal and regulatory policies. These are
among the important reasons why HR is best placed to take leadership of the
management of the contingent talent process from end to end. Although transient,
contractual workers can comprise a significant part of an organisation's
business and goals.
A key takeaway here is that organisations should realise that dipping into
the contractual talent pool is not simply a way to deal with talent shortages.
There can be far greater long-term gains – if this activity is aligned carefully
with HR and business strategies. When contractual workers are regarded rightly
as an HR responsibility – just as their full-time counterparts are – it could
propel your organisation towards greater innovation and even give you a
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Jasbir Singh is the Global Leader for Willis Towers Watson Data Services, Sambhav Rakyan is the Data Services Practice Leader in Asia Pacific. To connect with Jasbir or Sam, email