At The HR World’s recent webinar on Total Talent Management, three experts, Laura Handley, Change & Innovation Lead at RedWizard – the webinar’s sponsor – appeared with Colin Yoshioka-Smith, CW Operations Manager, Keltbray and Harriet Kirkpatrick, Founder/Director of TRIA Recruitment.
Together they explored and explained the details and current advantages of this way of securing candidates in a highly competitive talent market. Following on from that webinar they tackle two more questions here:
1: What is the panel’s view on navigating the potential mine-field of pay discrepancy? Often contingent workers expect a certain level of hourly or day rate, which doesn’t always equate to the same level of rate that a salaried member of the team receives. Of course parity rules/regulations should be a factor, but there are many businesses who still pay contractors higher rates, which can impact relationships with the permanent workforce. Your thoughts on finding the balance?
Laura: This is a common concern, and we’d recommend educating your permanent staff about why contractors are paid a premium. Independent contractors have many other costs which may not be immediately apparent – if they are incorporated, they’ll be paying corporation tax on all their profits alongside income tax on the salary they pay themselves, they’ll have equipment and travel costs, training costs to ensure their skills are up-to-date and competitive in the market, costs associated with networking and marketing their services and of course, they do not have guaranteed work. They often bring specialist skills that are only needed for a short period or work at short notice. If they can also add value to the business by way of upskilling/educating internal teams, then even better.
Using Statement of Work instead of time/materials constructs can help with this issue as there is no direct comparison but the company needs to be mindful that SOW isn’t a way of avoiding IR35. It can be a great way of ensuring a focus on outcomes and business benefits.
Before any worker engagement it’s necessary to consider what type of engagement is needed based upon the work that needs to be done, the skills needed, the timeframe and the budget.
Problems really arise when contractors are used over an extended period, in which case, they should be placed on an employment contract as they are clearly integral to the business.
Harriet: I think it is fair to expect a contingent worker to be paid higher rates as they won’t (shouldn’t) have the same longevity, job security, benefits, training etc that a permanent team member receives, and their higher rate compensates for that. The key factors in ensuring the right balance are firstly to consider at what point do you bring in a contractor (are they there to do a specific project, bringing skills that don’t exist in the permanent workforce, for a peak demand etc); how they are engaged (are they treated differently than permanent employees) and finally how collaboratively you set the two types of worker populations to work together (for example with the opportunity for permanent team members to be upskilled by specialist contingent workers). Problems can arise when you have very long tenure contractors performing exactly the same role as a permanent counterpart. But if there is genuine business need for a contingent worker in my experience it should be achievable to ensure you don’t have friction between the contingent and permanent workforce.
Colin: What many people fail to realise is that pay for employees and contractor is naturally different. So, you need to start by comparing ‘apples with apples’. For example: employees get additional benefits, holiday pay, pension contributions, etc. Contractor rates will look higher, but when you factor in what contractor don’t get compared to employees – you can start to understand the true total cost of one verse the other.
Rather than worry about the complexity, start by understanding the data and what that means to your organisation. You can then see the trends and start to benchmark banding on salaries/costs to hire. Once you have this and if you are still concerned, get 3rd party advice and support on how to solve your challenges.
2: Is Total Talent Management suitable for businesses of all sizes? I get the feeling it really only starts paying back for companies over a certain size?
Laura: Total Talent is for businesses of any size. In fact, getting the right total talent foundations in place while you are still an establishing business is a smart decision and is likely to give you a significant competitive advantage as you grow. It’s about being able to engage talent with the right skills and capabilities at the right time and looking across your total workforce – both permanent and temporary staff, when considering your options to get work done.
This is why the data piece is so key, and if you are a small business, it is a lot easier to establish sound foundations in data standardisation and ongoing data governance across both your perm and temp workforce. Think of Total Talent like a model; where you can utilise a workforce that make sense for your business; engaging the skills needed to flex and meet your customer needs.
For example: RedWizard, is a micro company with five employees working on large global corporate projects. We supplement our core team with a group of associate consultants, who are called upon for short periods of time for their specialist skills. As a small business, being able to adapt our workforce to our needs is crucial and can be very cost-effective. Each engagement needs to be carefully considered bringing a balance of our immediate business need against a long-term requirement. Sometimes, it is easier and quicker to engage a temporary worker, and a cost saving is made on recruitment and long-term worker costs, but we need a core team of employees to keep the business running.
Colin: A Total Talent approach is more about how you choose a talent solution than the size of the business. For example, if you won a project to deliver you could:
- Hire a new per member of the team (hoping for further work and expanding the business headcount)
- Hire a contractor or temp to deliver the project
- Hire an outsourced solution on an SOW – to deliver the project.
This example could be a company with 5 people or 20,005 people – its about looking a the skills needed for your business and what capacity makes the most sense for your needs.
Harriet: I believe for small businesses is it still sensible to take a holistic approach in how you bring in the right skills to your business. In practice it may be that the strategy points towards much less engagement of contingent workers than a larger business, but it would be advantageous to still consider all options for securing the right skills, rather than a blanket assumption that a permanent worker will always be the best and most cost effective solution.
