By April Clark, SPHR

How to do both and succeed in the recovery.

The current economic crisis has changed the employment landscape. There is heightened pressure to execute business strategy and meet goals, yet most companies reduced their workforce during the recession. Employers may not be ready to add staff, but they need to figure out how to manage in an improving business climate. How can you do both?

One approach to this challenge is to develop a more flexible workforce comprised of contingent labor, also known as temporary employees, contractors, outsourced workers and consultants. This will keep fixed costs low, while helping to achieve business goals in a more strategic way.

Benefits of a Contingent Workforce

Cost savings is one of the most critical aspects of managing in today’s environment. To understand the cost savings of contingent labor, begin by understanding the employment costs of your permanent staff. Based on June 2009 data from the Bureau of Labor Statistics, wages and salary account for approximately 70 percent of employers’ costs while benefits account for the remaining 30 percent. Keep in mind that these figures are not inclusive of hiring costs that a company faces when they hire a permanent employee, which typically average $4,000 per hire. For permanent staff, you absorb the total employment costs (salary and benefits) as well as the hiring costs. With contingent workers, the employment service provider absorbs the hiring costs as well as the cost of benefits. The result can be a significant cost reduction.

For those looking to rebuild their workforce when the time is right, contingent staff is particularly beneficial. Many contingent workers can transition to permanent staff, allowing an employer to reconstruct the workforce with minimal risk, at the right pace and at a reduced cost.

A contingent workforce can also be beneficial for either maintaining baseline tasks while permanent employees address strategic needs, or for bringing new/niche skills sets to a project. By partnering with a contingent workforce provider early on, you can be sure to have the people required, when and where you need them—whatever skill sets are required.

The ability to evaluate a worker on the job before formally hiring the person permanently is another great benefit. The best way to get a good understanding of skills and capabilities is to see that person in action. Observing the individual in your environment significantly increases your ability to predict their success.

In an effort to reduce costs, some companies outsource functions that are not core competencies or aligned to key business strategies. In this case, a contingent workforce can easily add value. The secondary aspects of your operations can be performed by outside experts seamlessly and cost efficiently. In addition, there are some cases when former or retired employees can transition to the partner company providing the outsourced solution. This is just one more way to ease the burden of reducing the permanent workforce while retaining the required skill sets and institutional knowledge while also maintaining morale.

Remain Agile in the Recovery

As the economy improves, challenges will continue. Businesses have to remain agile. A contingent workforce allows you to seamlessly adjust during the economic recovery by gradually and efficiently rebuilding permanent staff while responding to market demands. This ultimately allows your organization to manage costs and invest in the critical talent required to drive the business to heightened levels of success.