Why Procurement Must Improve Awareness of Worker Classification

Experts predict the managed services market will nearly double over the next five years, reaching a whopping $193 billion by 2019! Now more than ever procurement and contingent workforce managers must begin to understand and prepare for the challenges facing proper management of managed services as an element of an overall workforce plan. By better understanding their contingent workforce and becoming a more significant part of the process, Procurement will gain greater access to the information they need to deliver high financial impact; contributing to their organizations’ bottom line. Part of this financial impact are the often unseen but no less important savings captured by cost avoidance. Particularly as it relates to worker classification challenges while using managed service providers to source and administer ICs.

Proper worker classification matters at all levels of procurement – even entry-level positions.  Most Procurement organizations innately understand the value of getting top people in the door from the start. Fewer understand the value of ensuring these workers have been vetted and properly classified. Because Procurement is relatively new to the nuances of managed services for sourcing ICs, many departments may still not enjoy the highest levels of awareness surrounding proper classification of recruits in the areas of finance, marketing, consulting or software development. Closing the gap between procurement needs and human resources begins with the planning and design of the talent management function.

Here are some questions to pose to Procurement Services to foster greater engagement with worker classification best practices within their organization:

• How well equipped is the procurement organization to work with stakeholders – in their language and on their level?
• What aspects of a procurement system should procurement staff run?
• Should procurement personnel manage partnerships with outside solutions?
• How should procurement be involved in talent development and management?

Leaders in the procurement function – as well as those overseeing it – must invest time to both map responsibilities and understand how contractors are classified throughout the organization. 

Bloomberg BNA has recently released its 2016 Labor Outlook.  In the report, authors refer to the ‘‘fissured workplace’’ which refers to the practice of companies shedding their own workers in favor of temporary staff or other contracted labor for functions that fall outside of core competencies. From a procurement standpoint, worker classification rulings could significantly affect the established contingent workforce supply chain, potentially leading businesses to re-evaluate and possibly modify their use of supplier-provided contingent workforce. If yours is one such organization, now is the time for procurement to begin to examine the regulatory contours of this emerging new market for services.