How straightforward contractor governance could save you millions

How straightforward contractor governance could save you millions

Posted October 25, 2023

In most situations, the idea that your company could save 50% of the cost of the exact same asset, in the same place, at the same time would be laughed off incredulously.  

However, in the world of contingent workforce management, this is possible, and it needs CFO attention. We’ve seen it happen: the same contingent worker, for half the cost. Not just someone similar. Or someone working half the time. The exact same person. Doing the same work. 

How can this be possible? Cameron Robinson, Talent’s Head of Enterprise Solutions, shares his insights: 

Let’s summarise how this scenario can play out. 

A senior manager needs specialist external support to plug a skills gap on a critical project. 

Commonly, managers will have a network of trusted contacts they can call upon for times like these. So, the manager speaks to someone from their network, offering them the chance to join the organisation as a contractor. 

The manager informally asks their contact what the rate should be. The contractor chances their arm and throws out a high-ball offer. If the manager has used the contractor before, bias creeps in and they don’t even stop to question the rate. In any case, the manager believes they’ve got the budget, so the conversation progresses. 

The manager follows the agreed internal process to onboard this contractor, which involves engaging their Managed Service Provider (MSP) partner, who is responsible for the onboarding and management of the contingent workforce on behalf of the customer.  

Prior to issuing contracts and onboarding anyone, the MSP benchmarks the market pay rate for that skillset, at that time, in that location, and for that contract term. This time, they find that market rate is in fact only half of what the manager has been proposed by their network contact. 

Armed with this reliable data, the MSP quickly and effectively renegotiates the pay rate directly with the contractor – which they accept – before compliantly onboarding the contractor in time for their required start date.  

The company gets the same worker, doing the same work, for half the price.  

So, what’s the point here?  

That’s simple: If you haven’t got an MSP who knows your market and knows what ‘good’ looks like to govern your contingent workforce, then you may be paying too much! 

With the average enterprise workforce mix now containing upwards of 20% contingent workers (and growing), the scenario above could be happening often within your business.  

But first things first, what is an MSP when it comes to contingent labour and contractor recruitment? A Managed Service Provider is responsible for the end-to-end management of your contingent workforce. So, without an MSP effectively managing an internal process for you, benchmarking rates and controlling your costs, you could be missing out on precious cost savings. 

Let’s be real, you might not see savings as high as 50% every time but, in our experience, an average of 5-10% savings is achievable through good governance. This missed opportunity could be costing you millions of dollars each year.  

Save millions: the benefits of MSP for your contingent labour  

If you could secure the exact same office space for half the rent you’d jump at the chance. You’d likely have no hesitation if a permanent employee accepted a job for half the advertised salary. Why let these savings opportunities pass you by in your contingent workforce too, where the largest cost component will always be the pay rates themselves?  

Get in touch with one of our contingent workforce experts to learn more about how you can save millions while still preserving access to the same high-quality contractors your business needs to succeed. 

Solving the invisible contingent workforce problem that’s standing right in front of you

Solving the invisible contingent workforce problem that’s standing right in front of you


CFOs, imagine you’re in your next board meeting and you’re asked the question “How much have we spent on the contingent workforce this financial year?”.  

How would you feel facing this question head on?  

Are you confident because you’ve already got figures to hand? 

Are you relaxed because they’re reliably only ever the click of a button away, or taken aback because you don’t know and typically haven’t needed to know? 

Do you feel daunted by the task of retrieving the data and uncertain about the validity of what you might find? 

If you don’t know the answer upfront, you might glance towards your CHRO, hoping to catch their eye in a pleading call for back-up. Chances are they can’t save you though.  

Talent’s Head of Enterprise Solutions, Cameron Robinson delves into this scenario and shares his top tips on what you can do to get ahead: 

What’s the problem? 

For all of the rigour and governance that goes into tracking and managing the costs of permanent workforces to meet financial goals and satisfy shareholders – like reviewing compensation, policing salary bandings, implementing hiring freezes, right-sizing the workforce – there is regularly a huge irony with how the contingent workforce is managed. 

Your contingent workforce is often literally right in front of you. Temporary workers, independent contractors and external consultants, make up more than 20% of the average organisation’s workforce, according to Staffing Industry Analysts. They’re probably working in project teams you’re a part of. Or almost certainly providing critical expertise and filling skills gaps on high profile, transformative projects you’re aware of.  

You could be missing out on millions 

Yet, even though contingent workforce costs are estimated to be as high as 42% of an organisation’s total workforce expenditure, as revealed in an SAP and Oxford Economics survey of 1,000 executives, some CFOs allow the true cost of this critical asset to remain largely invisible, and therefore uncontrolled. 

Delegating budgeting responsibility – and the authority to spend – to hiring managers, individual P&L owners and project leads may seemingly create operational efficiency through autonomy. But without centralised governance and control in place, the ‘if-you’ve-got-budget-you-can-spend-it’ approach it is fraught with the danger of becoming a multi-million-dollar missed opportunity.  

There’s a solution 

The good news is that answering the question of “How much have we spent on the contingent workforce this financial year?” can genuinely be the click of a button away. In fact, even easier than that, it could be waiting in your inbox, in an automated, freshly prepared report the morning of each board meeting if you wanted it to be.  

You could even compare this financial year to last. Or forecast how much you might spend next financial year too.  

This isn’t too good to be true. It’s part and parcel of a Talent managed service program (MSP) – a program built specifically for you to centrally manage and report on all aspects of how, who, what, why, when and where you’re spending money on your contingent workforce. The MSP brings the cost benefit of price negotiation at scale and subsequent centralised financial compliance in line with the contingent workforce margins you should be paying. Think of it as an embedded squad of experts who are an extension of Finance, Procurement, HR and Talent Acquisition all rolled into one.  

Why should you consider an MSP? Hint: there are a wealth of benefits 

If you’re reading this and hoping you don’t get a left-field contingent workforce question at the next board meeting, then get in touch with our contingent workforce management experts to learn more. 

Controlling spend first starts with capturing it. Let us help you uncover and shine a spotlight on your (soon-to-be former) invisible contingent workforce spend and start capitalising on the huge opportunity right in front of you.