People sometimes associate the role of procurement with ordering equipment or purchasing office supplies which is, of course, only part of the description.These functions are often referred to as direct procurement. What's often overlooked is indirect procurement, which is where the contingent workforce costs fall and just so happens to be procurement’s largest spend category. Some large companies estimate that up to 30% of their procurement spend goes toward contingent workers.

We often overlook the cost of things we need. Think of your home budget: you need to eat so the amount of money you spend on groceries and eating out is overlooked out of necessity. The same goes for the need of contingent workers. Nearly 60% of all contingent labor is left unaccounted for when it comes to financial planning, forecasting and budgeting. This doesn’t have to be the case for your contingent labor budget, though.

 

Nearly 60% of all contingent labor is left unaccounted for when it comes to financial planning:

 

Gain Market Intelligence

95% of businesses view the contingent workforce as a key element to developing and running a successful business. When contingent labor programs experience dramatic increases in spend, it is often due to a lack of awareness regarding current market rates. Get ahold of your spending by first gathering the market data needed to make the best decisions on labor.

Having this knowledge enhances your ability to negotiate and purchase at the market rate as rates often fluctuate. This data also gives you the ability to better understand your competition and what they may be paying their workers.

With this insight into your competition, you can focus on your focus on your own key differentiators to pull in talent. Consider the established perks your employees already enjoy, like an on-site gym, the unique company culture, the cafe on the grounds, employee discounts, internet reimbursements, etc.

Data Optimization

Once you’ve gained knowledge of the market, align this information to what’s going on inside your organization. It’s important to know the different patterns in your company such as busy seasons that require more contingent help and slow ones that allow you to scale back.

 

How to address the largest spend category in procurement, indirect procurement:

 

It’s also good to standardize special project needs and instances that occur across the organization. Knowing the exact number of sales representatives needed for the next project will help you avoid having too many cooks in the kitchen or not enough. Apply standardization across the board for each role in your contingent workforce line-up including job titles, descriptions, etc. Once your catalog has been updated, you can then streamline different decisions with customized rate cards for your jobs. These include pay, bill and markup rates for every role.

Get Control of Your Spend

With this new found knowledge and data from external and internal resources, you can now gain control of your spend and know what is reasonable when it comes to the contingent workforce. Having the insight on market rates gives you the ability to negotiate rates from staffing agencies and know whether you’re getting the best price. As standardization spreads throughout contingent labor in your organization, you’ll be able to build smarter statements of work (SOW) with KPIs and specific goals to each position, giving you a benchmark and better control of your contingent labor performance.

Contingent workers like freelancers, sole proprietors, and consultants are being utilized more by companies as the contingent workforce continues to grow. While this practice becomes more popular, the costs start to add up for the procurement department. Start cutting costs with these tips today so that more money can be spent internally.

Learn more on how to expertly navigate rates to generate cost savings, manage agency markups and fees, and keep your business on the right track with our procurement guide: