Human Capital 5.0: Contract Workforce is the New Outsourcing

The furloughs, layoffs, and unemployment that occurred as a result of the COVID-19 shutdown in March 2020 will have long lasting impacts in the world of staffing and human resources. As the economy continues to start and stop over the next year to 18 months, how many of these jobs return and how many are lost forever will be determined. Business and HR leaders may be more risk averse and slow to hire back full-time employees and instead look for alternatives to fulfill their business requirements.      


Even before 2020, we reached a tipping point in the outsourcing industry, where 5% of skilled 'office' jobs, like paralegals, accountants, financial analysts and administrative employees, were being commissioned to independent contractors. Artificial intelligence and machine learning technologies are allowing companies that once employed people in these professional positions full-time to shift to paying talent as-needed. Automation and technology will drive down the cost of completing routine administrative tasks thus cutting down the need for large back office staff. Savings on support staff can be used to support profit centers, invest in R&D, or help an organization whether economic down times.

Even before the pandemic, we gathered anecdotal evidence suggesting that many Newmark clients are anticipating that 25-30 percent of their professional positions will be contract positions by 2025. The human capital disruptions of 2020 will only accelerate these trends as outsourcing becomes a risk mitigation tool to add back support as needed in the years to come.
From here forward, the transition from an outsourced low-skilled workforce model to a contractor-based professional workforce model is going to unfold rapidly. It's incumbent upon employers, employees and outsource companies to pay attention and plan.
What’s Next
Outsourcing providers that haven't planned will find themselves scrambling to fill a service gap as their clients awaken to the contract workforce model. They'll be under increasing pressure to adapt, to evolve into providers of contract professional-level workforces rather than just an outside source of low-cost offshore labor. The pandemic’s impact on remote work could be beneficial for outsourcing providers to find talent in any market as long as remote delivery is approved by the client.
Outsourcers may actually go into the contract-talent business, employing professionals, like paralegals and accountants, and placing them with a company on a contract basis. They become the owners of a talent-access platform, where independent contractors can find contracts and employers can find temporary employees. Through the platform, the outsourcing company could, for instance, assemble a team of contractors to provide professional-level talent for a particular project and disband the team after the project is complete. These skilled contract workers would most likely be on-shore, but highly specialized contractors could be globally sourced.
Companies will need to consider all the ramifications a higher percentage of contract and, increasingly, virtual employees will have on their workplace and location strategy. Another caution to companies is cultural fit which cannot be controlled for when hiring a contract workforce. If culture is critical for the project or business need, contracting may not be a good fit.
For their part, employees need to develop the knowledge required to establish and market themselves as an independent business. They need to learn technologies that will give them the edge over their competition - every other independent contractor in their field. Even more of an advantage will be dynamic teams who have experience working together and can take on clients and challenges that fit their shared expertise.
For decades, companies have been outsourcing and offshoring routine, repetitive tasks, call centers, customer service and some IT support personnel and functions. Sophisticated technology has automated much of that work, making outsourcing those non-core business functions less and less necessary.
COVID-19 has accelerated this existing trend and the tipping point is here. Outsourcing companies and employers are adopting new models to leverage a contract workforce in the front-office. Long-held paradigms are changing and the inevitable is happening; the contract workforce will soon be what outsourcing once was. Are you ready?
Dunsmore-Madeline-Headshot-2.jpgMadeline Dunsmore
Regional Workplace Manager
Workplace Strategy and the Human Experience

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