UK & Europe: How contingent workforce tenure policies optimise cost and mitigate risk

Cost optimisation to enable growth: reassessing your approach to contingent workforce tenure

Workforce management in the UK and Europe is currently facing a multitude of challenges, driven by regional economic uncertainties, evolving employment laws, and the rise of remote and flexible working arrangements.

Organisations are wrestling with acute skills shortages, particularly for Science, Technology, Engineering and Maths (STEM) skill-sets, which complicate hiring processes and increase dependency on the contingent workforce.

Tenure policies can be an integral part of optimising the cost and risk management surrounding use of contingent workers, yet our recent research shows that over half of organisations have no existing tenure policies in place. However, these organisations have said that they plan on targeting and reviewing opportunities in this area as a key priority in the short term (next 12 months).

Here is an introduction to tenure strategies and policies, as well as three key initiatives for procurement leaders to drive cost optimisation through workforce tenure.

What is contract tenure and tenure policy?

Contract tenure refers to the length of time that a temporary worker has been on an assignment for your organisation. Tenure policies are enforceable conditions an organisation puts in place to monitor and control contract tenure.

Where we see this working most successfully, it is combined within a broader tenure strategy, defining:

An accelerated sign off process, where if a contingent worker reaches key thresholds of time, a more senior manager or panel needs to sign the extension off.

Assessment of business criticality of roles and workers (key intellectual property, specific projects or where the roles are revenue generating), to support with extension and approvals.

A defined maximum length of time that you can keep a contingent worker without making them permanent or finishing their contract (this may include exceptions where the role or worker is deemed business critical)

Why you should you consider a tenure strategy and policy?

A strategic approach to tenure policy prevents organisations from relying on contingent workers for years on end without ‘pause for thought.’ A deadline on how long a contingent worker can work for the organisation in that capacity or putting in place regular stage gate reviews at higher levels ensures workforce costs are assessed, managed, and optimised.

Controlling costs

One of the key reasons for having a tenure policy is to manage cost and spend. Some Contingent workers can be expensive, due to their often-scarce skill sets, intellectual property, and the flexibility and agility they offer organisations.

Introducing proactive management policies such as a tenure policy can ensure that the contingent workforce is utilised efficiently, enhancing value, and preventing unnecessary extensions and potential cost overruns.

Strategic approach to contingent workforce utilisation

A tenure policy optimises procurement processes by providing a structured approach to managing contingent workforce engagements. By setting clear guidelines on the maximum duration a worker can be employed on a temporary basis or requiring higher-level approvals, organisations can more effectively monitor and evaluate their spending.

Additionally, regular reviews and adherence to tenure policies enable organisations to re-assess their workforce needs, align procurement decisions with strategic goals, and maintain a balanced and cost-effective mix of temporary and permanent employees.

Control attrition risks of Intellectual Property (IP)

A tenure policy establishes a clear framework for transition and knowledge transfer. By managing the duration that contingent workers can be engaged for, these policies compel organisations to systematically plan for the transfer of critical knowledge and IP to permanent employees.

This ensures that valuable insights, methodologies, and specialist skills do not remain solely with temporary staff, who could potentially leave the organisation abruptly.

What are organisations doing to influence contingent workforce tenure, and enhance value, in the short and long-term?

There are a number of approaches that organisations can take to influence contingent workforce tenure optimising spend to enable growth, both in the short and long-term. We’re seeing organisations drive contingent workforce value through 7 key initiatives to optimise cost and manage risks, using tenure policies and strategies.

Here are three of the key tenure strategies we’re working with procurement leaders on, to deliver cost optimisation.

Enhanced governance and approvals processes

This is where additional steps or requirements are put in place around when a contingent worker can be requested or extended. Typically, these are set at specific tenure thresholds that can be anything from 3 months to 3 years. Often when a contingent worker reaches a set point, a panel of approvers is required to allow for the contract extensions.

This ensures an increased ability to control the length of contingent worker tenure and manage loss of worker IP risks, alongside additional business justification of longer-tenured contingent workers to manage and reduce costs.

"In navigating the complexities of workforce management, it is essential to strike a balance between cost-efficiency and talent retention. By implementing strategic tenure policies and innovative contractual engagements, organisations can optimise their workforce while ensuring the seamless integration of non-permanent and permanent talent." Nat Jackson, Sales Director at Guidant Global

Front end triaging to enable best-fit contractual engagements

More organisational control of “best routes to market,” help hiring managers find and attract the skills and resources they need across all workforce channels, helping to deliver the right skills at the best cost.

Organisations might identify opportunities to either move long-tenured contingent workers into other contractual engagements such as Statement of Work or use this as an initial approach. This gives more flexibility than just automatically using traditional contingent approaches or moving workers into permanent roles, as it can include deliverables-based contracts.

This will lead to reduced organisational spend on agency and supplier costs, with reductions coming into force at specific thresholds put in place in advance. It can also give better visibility of value output and deliverables, where long-tenured workers are moved onto deliverables-based SOW project contracts.

"Where costs have risen globally, most businesses cannot afford to lose any productivity at all. In leveraging the strengths of a temporary worker while seeking a permanent hire replacement, organisations ensure that the wheels of productivity keep turning without missing a beat.

But this must be a strategic approach where you’re not only bridging the short-term skills gap but also enriching the recruitment process, allowing for a measured and precise integration of long-term talent.” Jamie Eaton, SVP Customer Strategy at Impellam.

Strategic approach to temp to perm pipeline

Temp to perm means targeting specific tenure thresholds to review whether contingent workers would be interested in moving into a permanent role.

Organisations are recognising potential duplication of effort and an inefficient process, where existing contingent workers could fill new and open permanent vacancies instead going out to market, and thus avoiding talent attraction costs.

"Temp to perm is the most common approach we see for mitigating long term contingent worker costs. This is especially true of where organisations require niche skills or specific experience that they find in a temporary worker, that they know they’ll struggle to find elsewhere. STEM industries are a classic example, where competition is high, and the skills pipeline is looking worrying globally.” Karina Townley, Managing Director, Guidant Global

For more practical information on how to assess, reassess, or optimise tenure contracts and policies for your organisation, contact us, we’ll be happy to help.

About Guidant Global

Guidant Global is a workforce solutions provider that specialises in delivering comprehensive talent management and sourcing strategies for organisations around the globe. We offer a range of services, including RPO, MSP and SoW solutions, ensuring that clients can optimise how they attract, engage, and retain the best talent in the market.

With a focus on innovation and strategic workforce planning, Guidant Global helps businesses navigate the complexities of talent acquisition and management, fostering sustainable growth and operational excellence.