Over the last decade many organizations have become more proactive about their recruiting, developing candidate pipelines and shifting towards a “just-in-time” hiring model. Forecasting human capital needs and having a bench of qualified candidates available upon request offers companies the ability to be agile, fast, and lean in uncertain economy, while providing other benefits such as increased customer satisfaction and employee morale.
Temporary workers, by nature, are a perfect fit for an organization looking to build a just-in-time workforce. These skilled workers are available as needed for as long as needed to fill positions that may arise from seasonal demand, innovations, or shifts in business cycles.
What is a Just-in-Time Workforce?
Just in Time (JIT) is a commonly used production strategy that serves to improve a company’s return on investment by reducing inventory and associated carrying costs. When applied to the creation of a product, natural resources, raw materials and components required to create a finished product that is delivered to a final customer are made available exactly when needed in the production cycle, reducing the need to carry large inventories. A human capital supply chain transforms relationships and data (ad responses, resumes, social profiles) into candidates that are delivered to a final customer, the hiring manager.
Traditionally, companies have relied on a “reqs per recruiter” planning model for their HR needs. However, in a changing environment, where companies both need workers on demand and want to cut costs, a just-in-time hiring model makes more sense as a planning tool.
Why are Temps Essential to JIT Workforce?
Building a bench of talent that is available just in time requires skilled candidates who are not committed long-term to current positions and are flexible towards the tenure that the type of work requires. Temporary workers are very well suited to this model. The strategic use of contractors can result in access to top talent, as many skilled professionals enjoy working on a project basis, as it allows them to contribute meaningfully to exciting projects and keep their skills current. The cost of temp workers is less due to a lower burden of payroll taxes, benefits and perks. Plus, carrying costs of having non-needed workers on the payroll are eliminated completely. Since temp workers are hired on a contractual basis, there is no reputation risk of layoffs. And when using a contracting firm who is the “employer of record”, many legal risks associated with full-time workers are mitigated.
For companies competing in a global market, temporary workers are ideal, as they are increasingly mobile and borderless. Advanced technology for collaboration allows workers and organizations to be unaffected by regional constraints.
“To compete in the future, organizations will need to push talent management beyond the confines of the enterprise wall to include the new extended workforce: a global network of outside contractors, outsourcing partners, vendors, strategic partners and other nontraditional workers.” ~Accenture, 2013 Rise of the Extended Workforce Report
A Model Growing in Use
Companies are relying more on freelancers to help them deal with the rapid changes and innovations in the global economy. The monthly reports from the Labor Department consistently show that companies are focusing less on longer-term hires and more on filling short-term needs. In effect, employers are turning to a “just-in-time” model for staffing.
Various sources show that 20 to 33 percent of the American workforce consists of independent workers, and worldwide, companies are spending an estimated $300 billion per year on contingent labor. In some industries such as oil and gas, up to 77 percent of the workforce is outside of the core operation.
A survey by Elance, conducted by Tower Lane Consulting, found that 60 percent of companies plan to increase their freelance hiring in 2014. According to the survey, “75 percent of companies surveyed used freelancers because they need a wide range of specialized skill sets at different times.”
The freelance workforce is booming with nearly one-third of the U.S. workforce (approximately 42 million workers) considered independent workers, according to the Freelancers Union. By 2020, freelancers are expected to comprise 40 percent of the overall workforce. In September of 2013, earnings for freelancers topped $6.8 million, a growth of 72 percent from 2012. Freelancer hourly wages increased by 5 percent, which is ten times faster than traditional wages.
”For 90%, the decision to hire freelancers is primarily made by individual departments as their demand requires, further confirming the strong need for specialized, short-term labor.” ~Tower Lane Consulting, ‘Surveying the New World of Work’ Report