It’s not just about physical location - what about the way workers are employed?
Everyone’s talking about “hybrid working”, which is seen as that controversial dichotomy of remote vs office-based employees. But while the topic of physical location is dominating the discourse, there is a shadow discussion lurking just under the radar - one that could have even more impact on the future of work.
An equally seismic shift is underway concerning the way people are contracted to do the work, not just in where they do it. We’re seeing a move from mainly permanent employment contracts towards increased outsourcing to third parties such as consultants and contractors, with contracts gathered under a Statement of Work (SoW).
From 2000 to 2010, the Global 1000 companies followed the 80-20 rule: 80% of their workforce were employed, with 20% sourced from third parties - think consulting, outsourcing, and contracting. In 2021, accelerated by Covid-19’s impact on the business world, the proportion of external workers skyrocketed to 40%. Some research even estimates that large companies may reach a 50:50 split between their permanent and external workforces – all within the next five years.
Flexible workforces for uncertain times
This kind of labour contracting can seem like a good answer to the need for flexible workforces in uncertain times - rather than add to headcount and associated liabilities, instead add to outgoings by paying consultant invoices - but the reality is most companies are not equipped to govern and manage this type of hybrid working on such a large scale. In pushing forward with more hybrid working, they’ve been caught by surprise with questions of risk, modern slavery, and diversity.
How do you account for risk in a flexible workforce? What happens to responsibilities for the gender pay gap when half of your contracted workforce sits in third-party suppliers? With procurement starting to take an outsized role in managing people and the external workforce, what impact does that have on the wider organisation and governance?
Then there are legal questions. What does it mean for your annual modern slavery statement? Who is responsible for employment rights and tax treatment? How does the work fall in regards to IR35 or post-Brexit working regulations?
Outsourcing any activity, whether to a freelance consultant or a third-party firm, can expose you to risks of delivery, conduct and reputation, yet there is no denying this is part of the future of working - remember that looming 50/50 resource split. Sometimes you might need specialised skills for a short period of time, or it’s a matter of seasonal bolstering of the workforce.
Project and scope clarity is key
As more companies understand the benefits (and risks) of a larger external workforce, procurement has an increasingly important role to play: from creating overarching contracts to lists of approved suppliers. The work is then managed under a project-specific Statement of Work. Staffing Industry Analysts found that businesses worldwide spent over $500bn on SoW projects in 2019, with the US accounting for nearly half of that amount.
In this environment, the SoW is instrumental in answering those questions of risk and compliance as well as establishing the clarity of your project. And so, the impact of not having a digital SoW becomes critical. Without easy access to your SoW, you run the risk of cost overruns, scope creep and project failure - and the risk is real; it’s well-established that up to 70% of change programs fail.
A digital SoW enables more effective collaboration, bringing clarity to roles and responsibilities, and avoids the dreaded scope creep. Too often external workers are governed by a contract buried in the shadows: left and forgotten about in a filing cabinet or shared drive.
By digitising the SoW, all parties have better visibility, communication becomes simpler and importantly, the work is clearer. Let’s bring the discussion about hybrid workforces out of the shadows and into the light.
We’ll be posting our next article soon. But if you can’t wait until then and you want to chat to us about the Future of Work, you can email us at firstname.lastname@example.org.