Hiding Headcount
I interviewed a candidate last week who told me a story of how he started contracting a few years ago: His company had a layoff effective on a Friday, and the next Monday he got a call that he would be brought on board as a contractor, indefinitely. He stayed there as a contractor over two more years.
This is an all-too-common practice to “hide headcount” – reduce employees but bring the same people back as contractors. This can be reduced (or at least made more visible) by implementing a VMS, which enforces approvals and shows all contractors, rates and spend.
However, hiring managers can then switch their contractor positions to “statement of work” (SOW) spending, which often can’t be tracked by first-generation VMS systems. So the headcount hiding continues.
Many IQNavigator clients have now implemented SOW spending, so that almost half of IQNavigator’s managed spend is now SOW-based, and rising.
Managing both hourly and SOW spend with your VMS provides control, compliance and visibility over all forms of services spending, and helps ensure that all headcount are approved, visible, and are working on budgeted and prioritized projects.
Great post on this little-discussed issue!
One overlooked consequence to this hiding of headcount is that all too often these workers are engaged as independent contractors, which exposes the client to a host of risks without proper visibility and controls. Worst case scenario.
I can’t tell you how many times, I have heard “We do not engage IC’s” – only to find out later during and internal audit that there were hundreds. Unfortunately without the proper controls and documentation requirements in place, it is no surprise that these hidden contractors are all too often engaged in an employee relationship, exposing the client to tens of millions in potential worker classification penalties and class action lawsuits.