As businesses strive to increase agility and get more competitive, building up a solid external workforce has become an essential part of their strategy.
By working with freelancers and contractors, businesses can access in-demand talent exactly when it’s needed, become more responsive to unpredictable changes, lower human capital costs, and increase speed.
But in order to get the full value from these non-payroll workers, external workforce management must be an equally important component of the business strategy.
What is external workforce management?
Before we get into external workforce management, let’s clarify what we mean by “external workforce.”
This is a term that covers a broad range of workers, including freelancers, independent contractors, gig workers, consultants, and agencies. Essentially, it refers to anyone a company hires to do work who isn’t on their payroll.
External or non-payroll talents work on a temporary basis to provide a specific expertise, set of skills, or experience to the hiring company. Arrangements can be as short as a few hours, or last several months or even years.
So, when we discuss external workforce management, we are referring to the processes of hiring, onboarding, paying, and managing these workers.
5 benefits of building up a strong external workforce
Nearly half of all hiring managers (48%) already work with independent talent today, according to UpWork’s latest Future Workforce Report. And there’s a good reason for that. Here are some of the greatest benefits building up a solid rank of external workers.
- Immediacy. Often, hiring managers realize a need to bring on an external worker before they are supposed to launch a new project, or when an unexpected time constraint arises. With plenty of global freelance marketplaces available (such as UpWork and Fiverr), finding and hiring the right talent can be achieved in just a few clicks.
- Access to elite skills. Workers with the most in-demand skills are trending toward the freelance life, as it affords them greater flexibility and control over their schedules. For companies, that might mean working with freelancers could be the only way to access a very specific and in-demand skill.
- Reduced human capital costs. External workers are not entitled to the same benefits as payrolled employees, such as healthcare coverage, paid time off, sick leave, retirement plans, and the non-essential perks employees often receive. So while some freelancers charge a premium price, hiring them can still save your company money.
- Access to skilled intermediate workers. Often, teams that have a vacancy will seek a freelancer to fill a role until they find the right permanent hire. This is a great solution, as freelance work is by definition short-term, and you can enlist a worker with the right skills and experience.
- Greater agility. Agility is a commonly lauded benefit of cultivating a strong external workforce. This is because freelance work can start, pause, and end much faster than onboarding or parting ways with a payroll employee, which makes it easier to adapt to sudden changes to the business strategy.
The importance of effective external workforce management (and the cost of mismanagement)
Having a standardized system for managing your external workforce is fundamental to unlocking the value they have to offer.
Freelance management tools and policies allow you to maximize freelancer value and keep your company safe by helping you:
- Remain compliant with tax and legal requirements
- Centralize all freelancer information, contracts, and payment details for relevant internal stakeholders, suck as legal, finance, HR, and hiring managers
- Pay external workers on time, which is crucial for maintaining positive relationships
- Keep tabs on all ongoing work and stick to deadlines
- Protect your company’s data and sensitive information
- Cover your bases if legal troubles arise
The costs of neglecting external workforce management can be significant. Late payments that sour great working relationships, employee misclassification, legal disputes, and even data breaches are all possible consequences that could undermine the value of utilizing freelance talent at all.
Leverage technology for end-to-end external workforce management
If the list of bullet points above seems like a lot of work, that’s because it is. Manually managing a growing class of freelancers and independent contractors — from sourcing talent to approving invoices to tracking deadlines — is time consuming and error-prone work.
According to our latest survey, hiring managers said every aspect of freelance management poses a challenge. However, that’s likely because most of them (66%) are still relying on Excel spreadsheets and email to do this work.
Fortunately for them, there are digital solutions that can manage all of this for them. A freelance management system (FMS) is a software that is designed to simplify all of the processes related to working with freelancers, contractors, and other external workers. It eliminates manual work, centralizes information for all stakeholders, streamlines onboarding and offboarding, helps hiring managers track ongoing tasks, and ensures prompt payments.
When it comes to managing non-payroll workers, take the easy route
Your external workforce is invaluable. Managing them shouldn’t be a burden. With a holistic, end-to-end FMS, you can rest assured knowing that your external workforce is being managed properly without wasting hours on manual work.