Business Case Development:

Contingent Workforce Management

Solution

Trevor Vas

September 2015

Objective

• Provide a framework

for developing a

compelling business

case to implement a

Contingent Workforce

Management model

Discussion

• How will you approach

base-lining the current

Cost and Risks

associated with your

organisation’s

Contingent Workforce?

Do I….

Detailed

Approach Gather the details of ALL Contingent Workers, their pay rate, the charge

rate, the margins, and all the on-costs, and the supplier details?

Use a Sample

Gather the details of a sample of Contingent Workers, including their pay

rate, the charge rate, the margins, and all the on-costs, and the supplier

details. Then, use this information to estimate the volume and cost of

Contingent Workers across the whole organisation?

Work

Backwards

Use a sample of Contingent Workers, review existing supplier contracts,

and work backwards to calculate the margin?

Broad Brush

Approach

Estimate the costs and risks associated with the Contingent Workforce

based on market knowledge, benchmarks and organisational knowledge?

Steps to Develop the Business Case

1. Review last Successful Business Case

2. Stakeholder analysis

3. Identify and define business drivers

4. Understand and baseline current state

5. Define solution options aligned to the

business drivers

6. Develop the business case for the

preferred solution option

Stakeholder Analysis

STEP 1

Identify

Stakeholders

STEP 3

Prioritise

Stakeholders

STEP 2

Understand Key

Stakeholders

Who are our stakeholders?

Who is affected by the project? Who

are the likely users, suppliers,

decision markers, deliverers and

influencers?

Who has the power to block or advance our project?

Who has influencer or power over

the project’s outcomes? Who has an

interest in its success or failure?

Understanding the needs and actions of stakeholders

How are they likely to feel or react to

the project? What information and

support do they need?

Typical Business Drivers for a Contingent

Workforce Solution: Years 1 & 2

Reduced Costs

• Consistent Pay Rates

• Consistent Supplier Margins

Reduced Risk

• Increased Visibility of the Total Workforce

• Standardised Contracts

• Managed and Consistent WHS Policies

Improved Quality

• Improved Supply Chain

• Improved Monitoring and Reporting

• Re-use of Contingent Workers

Improved Efficiencies

• Centralised Contingent Worker Procurement

• Automated Invoice and Payroll Processing

Where you start is where you will end

Towards competitive Advantage: Years 3 and Beyond

Cost Analysis

Variable Costs:

• Supplier Margin: Can vary

immensely across different

suppliers

• Workers Compensation

Insurance: Can vary from

1.5% to 4.5%+ depending on

the supplier’s claim history and

worker classification

• Pay Rate: Once rates are

standardised across job

families. Standardised pay rate

will impact superannuation

Super

Public Liability

Insurance

Payroll Tax

Worker Pay Rate

Workers Comp

Supplier Margin

Components of the Total Charge Rate

Cost Opportunities

Cost Component Conservative

Savings

Expected

Savings

Best Case

Savings

Supplier Margin 1% 2-3% 5%

Workers Compensation 0.2% 0.5-1% 1.5%-2%

Standardised pay rates 1-5% 5-10% 15%

Selling it to the Business Units

Potential Internal Charging Models

1. Market price: Equivalent to what an MSP would charge

for the service

2. Cost price: Direct salaries, technology and overheads

3. Usage: Similar to 1 or 2, based on number of hires by

department

4. Set charge based on head count by department:

Quarterly charge based on the number of contractors as a

percentage of the total contractors

What’s the Risk? Evidence Risk

Non-standard contracts • Exposes the organisation to legal risk, where

contracts are not favourable

Contingent Workers that ‘look’ like permanent

workers (e.g. long tenure, training is provided,

they wear company uniform, they are invited

to employee functions)

• Employment claims leading to unpaid leave

entitlement claims

• Unfair dismissal claims

Do you have visibility on the Visa status of

your Contingent Workers?

• Under the Employer Sanctions Legislation,

the Dept. of Immigration can impose a fine of

$15,300 for each person in breach of visa

conditions. This can rise to $76,500 per

worker if they decide to take the business to

court.

Are all of the licenses up to date for your

Contingent Workers?

• If a worker’s license expires, say to operate a

fork-lift, and there is an injury, this could

adversely impact your workers compensation

insurance

Are adequate background checks conducted

on your Contingent Workers?

• Exposing the business to potential fraud

• Potentially engaging workers who are not

medically fit to perform the role

Are your Contingent Workers adequately

trained in relation to OHS requirements?

• Impacts workers compensation insurance

should their be a work place injury

Independent Contractors • Claims for superannuation

• The ATO may seek unpaid payroll tax

Efficiency Opportunities

• Providing simplicity for Line Managers through:

– A streamlined supply chain – moving from multiple and unmanaged

suppliers, to standardised supplier contracts, with metrics and SLAs

– Documented and governed processes

• Use of technology to streamline and automate the workflow

and approvals, and to provide reporting capability

• Reduction in timesheet and invoice processing, through:

– VMS technology

– Reduced Suppliers

– Consolidated invoicing

– Standardised payment terms

The Power of Business Drivers

• Cost, Risk and Efficiency gains are not always enough

• Think about Business Drivers for the following types of

organisations:

– Distributed management or siloed business units where managers

are given a high level of autonomy

– Safety conscious (e.g. mining, manufacturing)

– Low margin, high volume workers (e.g. retail, contact centre)

– Professional services, bidding for projects that require ready access

to specialist qualifications

– Government organisations requiring transparency and compliance

The Contingent Workforce Model MUST satisfy the specific Business Drivers of

the organisation for the model to be successfully implemented

Components of a Contingent Workforce

Solution

• Internal Recruitment Function

• Panel of Suppliers

• Managed Service Provider

• Recruitment Process Outsourcer (RPO)

Talent Acquisition

• Contractor Management Organisation (CMO)

• Managed Service Provider (MSP)

Contractor Management and Payroll Services

• Vendor Management Solution

• Technology provided by the MSP, CMO or RPO (e.g. Time-sheeting and Reporting)

Technology

• Internal Project Office

• Talent Acquisition Manager, HRD, or CFO

Strategy and Governance

Model Option 1: MSP and CMO

Model Option 2: Internal Recruitment Function

and CMO

Model Option 3: Managed Services Provider

Option 4: Supplier Panel and CMO