Leave it to the Pros: Why Contingent Labor is Better Managed through an MSP
Leveraging highly specialized workers for increased efficiency is not a new concept. In fact, this division of labor was introduced by Adam Smith in his 1776 book, “The Wealth of Nations.” In his book, Smith illustrated how dividing labor among workers into highly specialized, segmented tasks could increase productivity. The increased production derives from:
- Allocation efficiency – utilizes each worker’s best skill
- Technical efficiency– reduces transition time between tasks
One key to unlocking this specialized success? Contingent workers.Although this theory has been popular since its conception, the more recent focus on hyper-specialization is giving it some added face time. According to a 2011 Harvard Business Review, “we are entering an era of hyper-specialization – a very different, and not yet widely understood, world of work.” Embracing this hyper-specialization is one way businesses can keep up with the changing tides of economic and technology trends.
Contingent workers are defined as “a provisional group that works on a non-permanent basis” such as freelancers, independent contractors and temporary contract workers. Unlike regular employees, contingent workers are utilized as part of a strategic business plan, usually on a project basis or as a certain percentage of the overall workforce. This creates a more stable permanent workforce that is protected against cyclical changes by allowing for quick downsizing of contingent labor if necessary.
In the past, contingent labor was popular during times of economic downfall. Now, contingent labor is being increasingly utilized on an on-going basis. An Oxford Economics study sponsored by SAP found that 83 percent of executives indicate they’re increasingly using contingent workers.
Key Benefits of Contingent Labor
- Cost savings
- Increased efficiency
- Administrative savings
- Broad talent pool
When a company has a need for specialized workers, they look to various staffing vendors to supply top talent. While companies can take on the management of these staffing vendors internally, it can be very costly and time-consuming. Standardized pay rates, intellectual property rights and contract consistency all need to be properly managed when hiring contingent labor. Delegating this work to a managed service provider (MSP) can alleviate some of the administrative burden associated with these factors.
MSPs serve as strategic business liaisons between suppliers and clients, managing the entire process from finding qualified candidates to properly administering 1099 status and much more. One benefit of using an MSP is their ability to leverage their vast supplier network to compare wages and make sure their clients are offering a fair and competitive rate. The relationships that MSPs have with their suppliers give them quick access to top talent which is critical when trying to fill specialized positions.