Managing risk
contingent labour
Asia-pacific region
Tatiana Ohm

/02
As economies in the Asia-Pacific region
continue their rapid growth trajectory, the
reliance on contingent labour to meet skill
demands is more prevalent than ever.
Global companies in particular are increasing
their reliance on contingent labour, but may
be failing to use the same checks and balances
they apply to traditional workers.

Introduction
/03
According to a 2012 Aberdeen Group survey, the average company’s
workforce is currently 26 per cent contingent.
However, many calculations of ‘contingent’ workers do not take into consideration
offshore projects or BPO workforces, nor often program offices that run specific
projects. So, the real proportion of contingent workers may well be much, much higher.
Indeed, some predictions see them comprising up to 50% of the workforce in the
foreseeable future.
The advantages of contingent workers are clear. Contingent workers are generally highly
skilled and experienced, they offer lower fixed costs and a higher degree of structural
flexibility. Yet, as companies expand their dependence on outsourcing and third-party
labour, organisational limitations become apparent.
Suddenly, HR processes and management practices that were set up with permanent
employees in mind are no longer robust enough to manage high volumes of different
worker categories. Most internal processes and systems are typically not adequate to
manage the inherent risks of a contingent labour force, not to mention extract maximum
value from this critical resource.
Does this sound like it
could be true for your
organisation? If yes,
these are our tips for
getting the most out
of this labour category
while mitigating the
potential risks of
misclassification and
management.

Top 9 markets for contingent workforce
engagement in the Asia-Pacific region
/04
Contingent workers can be:
Temporary workers
HONG KONG
3.60
Interns or alumni/semi-retired
NEW ZEALAND 3.54
Consultants or independent
AUSTRALIA
3.22
contractors and freelancers
SINGAPORE
3.19
MALAYSIA
3.17
THAILAND
3.08
INDIA
3.03
CHINA
2.94
PHILIPPINES
2.92
Offshore workers
SOW-based projects
IT service providers
Maintenance services
On-site service providers
(e.g. cafeteria, mailroom)
Outsourced services,
delivered on-site such as:
• BPO/RPO
• Clinical trial outsourcing
• Finance/Accounting/
Legal outsourcing
Source: Manpower Group

/05
Only 27% of
employers surveyed
said they screened
contingent workers.
HireRight’s 2011 Employment Screening Benchmark Report1
1
http://www.hrotoday.com/content/5165/contingent-labor-checkup
Just 48% conduct
background
checks.

/06
Legislative
variation2
2
Baker & Mackenzie, The Global Employer: A Global Flexible Workforce: Temporary and Other Contingent Workers

Legislative variation
Asia-Pacific is a diverse legislative region. For this reason it poses
a greater level of legislative risk for companies seeking to engage
temporary labour across geographical boundaries.
/07
China
Philippines
Vi
China
Contingent workers and independent contractors are not official employee categories
under Chinese legislation introduced in 2012. Contract labour is only supplementary,
shall ONLY be practiced for’ temporary’, ‘auxiliary’ or ‘substitute’ positions.
• ‘Temporary’ only refers to those positions with tenure of no more than six months.
• ‘Auxiliary’ positions are those enabling functions that only provide support to
positions created around main business areas.
• ‘Substitute’ positions refer to those needed when current employers are away on
non-pay study leave or vacation.
Aust/NZ
Japan
Indonesi

Legislative variation
/08
This significantly limits the ways in which companies can hire staff through agencies.
Staffing agents can ‘second’ their employees to work for client companies under what
is termed a ‘labour dispatch‘ arrangement, but there are restrictions on the length of
China
Philippines
Vietnam
the assignment and on the proportion of staff that individual companies can hire via this
method. Often, contingent workers have significant entitlements in China and therefore
are less flexible than they can be in other countries. And, contract labour has the right to
receive equal pay for equal work within the same job category and job scope.
Aust/NZ
Indonesia
Japan
Indonesia
Widespread labour protests have prompted Indonesia’s Manpower Ministry to issue a
decree to restrict the use of temporary and contract workers.
China
Philippines
Vietnam
Vietnam
The new Labour Code, which took effect in May 2013, will legalise the practice of subleasing workers —a hybrid of temporary staffing and labour outsourcing—and add
protections for the sub-leased workers.
Aust/NZ
Japan
Indonesia

China
Philippines
Legislative variation
V
/09
China
Philippines
Vietnam
Philippines
A Senate bill seeks to penalise employers or recruitment agencies that make a person’s
age the basis for employment. It is hoped that this will end age discrimination and
provide greater opportunities for older workers.
Aust/NZ
Japan
Australia
Some 29 per cent of Australian workers are employed on a contingent basis. The new
Workforce Gender Equality Act focuses on fostering gender equality in the workplace by
promoting equal pay between women and men, and helping eliminate discrimination on
Aust/NZ
the basis of family and caring responsibilities.
Japan
Indonesia
Indones

/10
41% of companies
surveyed believe
they face increasing
risk related
to managing
contingent labour.
3
Aberdeen Group
56% reported their top
2012 priority was to
improve visibility of
contingent workforce
management3.
How many have
actually done so?

/011
Key risks
in managing temporary
and contingent workers
01
Regulatory and compliance risks
02
Access and security risks
03
Visibility and analytics risks
04
Technology risks

01
Key risks in managing temporary and contingent workers
Managing regulatory & compliance risks
Multinational organisations have a difficult time tracking third-party labour through a
single checkpoint, and can unwittingly take on high levels of risk, particularly in diverse
regions such as Asia-Pacific.
A company that misclassifies workers may be subject to audits and penalties, which
vary country by country. For example, significant fines exist for misclassifying workers or
terminating contracts early.
Multinational companies that rely on contingent labour should (theoretically) establish
consistent on-boarding procedures supported by processes and technology. This will
enforce a standardised set of processes and procedures for all contingent workers,
regardless of category of work, pay scale, or geography—yet, this is rarely how
companies actually do things.
On-boarding risk
On-boarding contingent workers remains a difficult issue. Most companies do not clearly
assign which department ‘owns’ the process, and protocols are typically decentralised
and non-standard.
/12
This will enforce a
standardised set
of processes and
procedures for all
contingent workers,
regardless of category
of work, pay scale,
or geography.

Key risks in managing temporary and contingent workers
When hiring managers do not understand all of the legal and compliance obligations
that apply to talent, the risk can be significant. For example: a worker claiming a violation
of labour laws—such as not receiving overtime—may hold both the staffing agency and
the client company responsible due to ‘co-employment.’
The solution to this ‘gap’ will likely involve a combination of new processes, technology,
and greater accountability. An audit of on-boarding processes for contingent workers will
help you identify gaps and inconsistencies, and the likely cause of each. Is the gap related
to technology? Lax processes? Lack of ownership? A combination of many factors?
When completing an audit it is important to consider how each problem is related to
others. For example, a particular location may require a standard set of documents
completed and ‘signed off’ for each worker. Yet, because there is no single point of entry
for contingent labour, dozens of managers are responsible for sign off and compliance is
low because no one area is auditing compliance.
To ensure new processes and procedures are sustainable, map out stakeholders in the
on-boarding process—including your internal risk mitigation and compliance office—and
ask them to participate in the early stages of benchmarking and review. This team will
help to drive and support changes to on-boarding policies and procedures, and help to
solidify early and ongoing adoption within your enterprise.
/13
Because there is no
single point of entry
for contingent labour,
dozens of managers
are responsible
for sign off and
compliance is low
because no one area is
auditing compliance.

Key risks in managing temporary and contingent workers
Ultimately, you will need to assign an outsourced compliance support team to
ensure that clear processes and protocols, as well as technology to reinforce those
elements, are in place. Define and enforce how compliance will be measured over
time (i.e. who ensures audits are conducted and findings acted upon?). Some companies
hire a dedicated ‘contingent workforce manager’ to monitor the use of contingent
labour and ensure compliance. However the end goal is achieved, a strong on-boarding
process is defined by its ability to funnel all new contingent workers through a single
initiation point.
Companies must ask:
How are on-boarding
How widespread is ‘maverick’
How are our contracts
compliance requirements
buying (i.e. purchasing
structured? Does the staffing
managed and enforced for
contingent labour from
vendor assume the legal
third-party labour? Are those
vendors that are not qualified,
risk in any case where an
processes consistent across
poorly vetted)?
employee is misclassified?
the organisation?
/14
Some companies
hire a dedicated
‘contingent workforce
manager’ to monitor
the use of contingent
labour and ensure
compliance.

02
Key risks in managing temporary and contingent workers
Managing access & security
Many companies impose less stringent security standards on contingent labour than on
employed labour without considering the consequences. Conducting background checks
is a routine occurrence when on-boarding employees, but still infrequently imposed on
elements of the contingent workforce.
Map entry points
To improve compliance and visibility, companies must first map all entry points of thirdparty labour. Then, they must assess and define the appropriate level of access (e.g.
physical access and access to systems) for each category of worker. Remember, while
access protocols will vary among different types of worker categories, your organisational
processes and procedures for vetting and on-boarding new workers should still be
consistent across all categories.
Once you’ve defined your access and clearance categories or ‘tiers,’ align these with your
supplier base so that all resources have the appropriate access-level profile.
/15
Organizational
processes and
procedures for vetting
and on-boarding new
workers should still
be consistent across
all categories.

Key risks in managing temporary and contingent workers
Ensure contracts are consistent
Supplier contracts and on-boarding requirements should remain consistent within
each supplier agreement. Ensure that your company has a consistent and timely audit
schedule of its supply base to ensure the following are in place:
• Clearly defined and consistent screening standards for all contracts with third-party
labour vendors (e.g. criminal background checks, drug testing, employment and
education verification)
• Regular vendor audits on samples of workers to ensure your vendors are consistently
screening workers per agreement
• Indemnification clauses in all staffing, project and service agreements.
/16
Ensure that your
company has a
consistent and timely
audit schedule of its
supply base.

Key risks in managing temporary and contingent workers
/17
Companies must ask:
Who has physical access to
What systems (e.g. computer
What other assets were issued
How do you ensure service
Best-in-class contingent
your company sites?
networks) should these third-
to third-party resources?
providers have adhered to
worker management is not
• What level of access do
party resources have access
• How was the provisioning
their contractual obligations
so different from permanent
regarding background checks
employee management.
and certifications?
In both cases it includes
workers have and is it
to?
appropriate?
• How does the company
• How long should they have
access and how do you
‘de-activate’ access?
• How are access badges
controlled? Extinguished
upon termination?
determine who is active?
• How well does the
process initiated?
• Are those assets being
properly tracked? Have
they been returned if
company protect
the resource is no longer
‘intangible assets’, such as
actively supporting your
intellectual property?
company?
Do you have multiple nonstandard on-boarding
processes? Do your business
managers often scramble to
ensure third-party resources
are fully on-boarded and
integrated?
effective on-boarding (e.g.
establishing building access,
assigning resources) to
improve time-to-productivity,
and off-boarding (e.g. taking
inventory of physical property)
to protect physical and
intangible assets.

03
Key risks in managing temporary and contingent workers
Managing visibility & analytics
Many companies have significant difficulty assessing the amount of third-party labour
supporting their company at any given point in time. Typically, when audits of workforces
and contracts are conducted, significant issues are found, including expired contracts,
workers that have ceased working for the company but still have access to buildings
and systems and more. Being able to optimise the labour-force of any one organisation
requires reliable data that can be analysed for gaps and opportunities. However,
sometimes it is even difficult to ascertain where employed individuals are located
(geographically and by job category), particularly as flexible working arrangements, as
well as workforce mobility and virtualisation arrangements, increase.
Data visibility
Even companies with good intentions are stymied because they lack an integrated
technology solution that can align finance, procurement, HR, legal and regulatory
requirements. And without an integrated solution, visibility is typically poor and can have
serious consequences for risk control and compliance.
/18
Without an integrated
solution, visibility is
typically poor and
can have serious
consequences for
risk control and
compliance.

Key risks in managing temporary and contingent workers
Companies must ask:
How accurate is our
Are processes automated
What visibility and
reporting regarding
such that non-compliance
reporting are you able
selection, on-boarding and
is immediately visible?
to provide to ensure
performance of employees
security and compliance/
and contingent labour?
risk management?
/19

04
Key risks in managing temporary and contingent workers
Managing technology
Without an integrated solution to manage vendors, to track workers, and HR-related
spending, organisations are ill-equipped to make the strategic decisions necessary to
deploy contingent labour efficiently and safely.
Vendor Management Systems
Most large organisations with third-party services and outsourced workforces will
ultimately weigh up the benefits of technology partners, in particular VMS tools. A 2012
survey by Aberdeen Group found VMS solutions in use 58 per cent more often within
best-in-class organisations than in all others.
A VMS offers significant efficiencies and risk controls during on-boarding and beyond.
VMS tools allow users to incorporate a centralized and automated on-boarding protocol
including user and category specific on-boarding checklists. They also have the ability
to incorporate elaborate headcount approvals to ensure the appropriate controllers are
reviewing and approving headcount and access as needed.
/20
A VMS offers
significant efficiencies
and risk controls
during on-boarding
and beyond.

Key risks in managing temporary and contingent workers
The VMS tool can also integrate with a company’s backend security system to:
• Initiate the badging process
• Provide visibility/acceptance to security personnel that all on-boarding criteria
has been met
• Enforce access criteria for contingent workers based on their role and location.
For example:
• Defined physical access parameters integrated with the company’s access badges,
• Computer network access parameters integrated with IT;
• Provisioning (e.g. laptops, workspace) integrated with procurement and facilities.
A VMS tool is also a critical tool for real-time reporting of security and compliance
issues. Using it, management can keep a consistent view of high-risk compliance areas,
such as contract compliance, on-boarding policies, third-party certifications, safety
training, induction compliance, NDAs, security clearance, drug tests and
related background checks.
/21
Using it, management
can keep a consistent
view of high-risk
compliance areas.

Key risks in managing temporary and contingent workers
What’s more, technology solutions give executives better insights into how third-party
labour is currently being used and how to extract maximum value going forward.
For example, which suppliers is the company using category-by-category across the
enterprise? Which sourcing or supplier strategies are missing?
Finally, identify automation opportunities. Ensure technology offers, from a visibility
standpoint, a fully ‘auditable’ approval process. Visibility should include on-demand
access to the full range of required documentation for each category of resource
(e.g. drug tests, background checks and signed NDAs) and the ability to visually verify
reports were reviewed and signed.
/22
Ensure technology
offers, from a
visibility standpoint,
a fully ‘auditable’
approval process.

conclusion
Companies continue to expand their utilisation of third-party labour and outsourced
services, even while governments across the globe ramp up their scrutiny and regulation
of contract labour. With risk from outsourced talent on the rise, companies are looking for
quick, efficient risk-mitigation controls—controls that deliver standardisation, visibility and
compliance across a corporate enterprise.
Centralisation, standardisation and automation are the three key components to a
successful identity management solution—and companies ultimately need to decide
whether it makes sense to in-source or outsource the management of these processes.
Either way, taking the necessary steps to funnel all labour categories through a single onboarding and off-boarding solution will help ensure policy and regulatory compliance, as
well as contain these resource categories to their appropriate and relevant access levels.
/23

REFERENCES
http://www.bakermckenzie.com/files/Publication/239b0876-00a4-4195-8af6-00f898e60cd1/
Presentation/PublicationAttachment/67c3be49-d0d6-4767-963e-01cd2d0716c4/bk_employment_
globalflexibleworkforce_may13.pdf
http://manpowergroupsolutions.com/manpowergroup-solutions/Home/resources/7d6a1050-0632-4a78a5f7-9533a32abd51/CWI_2013+Global+Analysis_9.9.13.pdf
http://www.bls.gov/mlr/1995/10/art2full.pdf
Is the full-time job dying? (BRW Magazine, 16 July 2013), Fiona Smith
/24

For more thought leadership go to talentproject.com
About the author
tatiana ohm is Senior Director, Global Solutions, Professional Experience at Kelly Services.
Tatiana is currently managing the Global Solutions organisation for the Asia-Pacific region. She is a
practitioner who ensures that Kelly programs deliver above-and-beyond results to the customers
across the region. Her international experience, deep understanding of the global market drivers
and insight into emerging customer needs help her to create competitive solutions for our
global customer. Tatiana started in the recruitment business in 1996 in Russia and has held various international
roles since then. She launched the Professional and Technical offering for Kelly Services in 2002 in Germany
and launched and managed the first outsourcing programs in the German speaking market. Prior to moving to
APAC, Tatiana held a dual role: managing the Business Process Outsourcing Practice and the strategic accounts
relationship in EMEA region. Tatiana graduated from St. Petersburg State University with a Masters degree in
Biochemistry. Tatiana is based in Singapore.
About Kelly Services®
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