Companies are increasingly employing more external employees. This requires structural adjustments and often the use of intelligent software.
Companies are increasingly employing more external employees. This requires structural adjustments and often the use of intelligent software. The requirements in this regard depend on the number of external workers and the available budget.
According to the SAP study “External Workforce Insights 2018”, 65 percent of those responsible say that external employees make an important contribution to the company’s success. In the past, only ancillary services were outsourced. Nowadays core knowledge is often brought in through external employees, or important services are provided by external vendors. According to the SAP study, 44 percent of company personnel expenses can already be traced to external employees. Such a trend is emerging in Switzerland as well. This is shown in a Deloitte study entitled “The Workplace of the Future”. For example, 25 percent of employees do project-based, temporary or additional work in Switzerland. And another 25 percent will do so in the future.
This development is being driven by workers and employers alike. On the corporate side, a large number of external employees pose various challenges. Do you know how many external employees and service providers work at your company? Can you quantify their personnel costs? Do you know who has access to your corporate buildings or to your systems? If you answered no to these questions, you are not alone. 75 percent of executive board members lack information about external employees and service providers. Very few companies have digitised in this respect. There is a lack of transparency, compliance and consistent processes, while existing HR and purchasing systems are increasingly reaching their limits.
Employee lifecycles for external and internal employees have many parallels. However, process synergies between external and internal employees are rarely exploited in companies. A so-called vendor management system (VMS) could promote such synergies. This can be illustrated by a fictional example.
“Roman needs a business analyst for his project. Because it is a temporary job, the position needs to be filled externally. Roman enters all the necessary information in the VMS about the vacant position and initiates the budget and head-count approval process stored in the system. Once this is confirmed, the recruiting process begins and the job is published on previously defined recruiting and matching platforms and released for selected recruiters.
Suzanne works as a freelance business analyst and is assisted by a recruiter in finding a new job. After Roman's recruiter has received a job request via the VMS, he forwards it to Suzanne. Suzanne thinks the job sounds exciting. She tells the recruiter that the job and salary are a good fit. Now Suzanne's profile is presented to Roman through the VMS.
Roman receives the information in real time and looks at Suzanne's documents. He compares the different candidates, interviews them and stores all the information. Ultimately he chooses Suzanne because she has already worked for various departments in his company and there is very positive feedback in the VMS about her. Roman now informs the recruiter that he intends to hire Suzanne through a simple click in the VMS. With that click, he has already submitted all the contract information that was specified in the job posting. He now only needs to send the printed contract out to be signed.
Then Suzanne can start the automatic onboarding process, which is handled by the VMS or an HR onboarding system. This includes background checks, the collection of required information and hiring preparations. On her first day of work, Suzanne receives her badge and can immediately log in to the systems. Online training on time tracking and data protection is already made available. In order for Suzanne to receive her salary properly at the end of the month, she is asked to record her working hours in the VMS starting on the first day. The company policy states that expenses are paid within the budget without additional approval. If required, and after approval by Roman, expenses will be remunerated via the VMS. At the end of the assignment Roman has to ensure the transfer of know-how to his colleagues or Suzanne's successors. Suzanne’s recruiter also asks Roman for feedback in order to create an employment report after the contract ends. The recruiter then stores the employment report in the VMS in the same way that Suzanne’s other assignments have been documented. As with the onboarding, Roman initiates the offboarding process via the VMS or HR system. This determines which accesses are blocked and which work equipment Suzanne must return. On the last day, Suzanne returns her badge and Roman can complete the offboarding process.”
Unified external workforce management is important to any business, whether it is covered by a VMS, existing systems, or another tool.
Companies usually pursue the following objectives when introducing a VMS: creating transparency, compliance, cost savings, standardised systems and digitisation. The main objectives need to be defined when choosing a VMS. The effort surrounding implementation also plays a key role in deciding on a system. That is because acquiring a VMS or building their own is not worthwhile for every company. It requires a certain number of external employees. Following the total workforce management approach, the VMS also has to fit into the IT landscape of the company.
The sheer number of terms shows how complex the topic is: external workforce, total workforce management, external employees, service providers and vendor management systems. These terms have to be defined clearly in order to ensure common understanding.
An external workforce is made up of people who perform temporary or limited-term work in a company. On the one hand this includes external employees who are integrated with the customer and subject to their instructions and are employed by a personnel lender or their own company. On the other hand it includes employees of a service provider or freelancer with a service contract who work remotely or locally at the customer and are relevant for the customer in terms of personnel. This means, for example, that they need badge access, a time recording tool and access to computer systems.
Total workforce management is the umbrella term for planning, managing, and monitoring a company's entire workforce. These can, for example, include permanent employees, external employees and service providers. It is crucial that the corporate strategy or HR strategy is applied to the entire workforce and that all workforce groups are incorporated into the corporate strategy or HR strategy. Companies that fail to integrate external employees face consequences. When “gig workers” at Google demanded equal treatment last year, it meant bad publicity for the company.
A vendor management system (VMS) is usually a web-based or cloud solution that supports the procurement and management of external employees and service providers. It combines the customer, supplier or personnel lender and external employee/service provider in a single solution and tracks the end-to-end process.
¹ SAP and Oxford Economics: External Workforce Insights 2018: The Forces Reshaping How Work Gets Done.
² SAP and Oxford Economics: External Workforce Insights 2018: The Forces Reshaping How Work Gets Done.
³ Deloitte: «Der Arbeitsplatz der Zukunft: Wie digitale Technologie und Sharing Economy die Schweizer Arbeitswelt verändert.»
Published: 16. April 2019