In the dynamic talent landscape, most companies engage a contingent workforce to satisfy their need for talent. As such, we understand the challenges and possibilities associated with this from our years in talent acquisition and recruitment process outsourcing. This article, therefore, is to act more or less like a guide to estimating the ROI of your contingent workforce and hence measuring success.

Understanding ROI in the Context of a Contingent Workforce

ROI is that one metric that will help the organization know the amount of efficiency and profitability an investment holds. When referring to the contingent workforce, ROI would be the value derived from the temporary, freelancer, or contractor worker against the cost incurred by them. Organizations could base decisions regarding staffing strategies on performance and cost efficiency using such analyses.

Key Components of ROI Calculation

Direct Costs

The most overt aspect of the return-on-investment computation is direct cost. This component presumes to quantify all compensations that are payable in terms of wages, benefits, and any other form of direct compensation payable to the contingent workers. In addition, it can factor in all the costs incurred throughout recruitment, on boarding, and training.

Indirect Costs

Indirect costs refer to expenses not directly linked to the contingent workforce but that are still incurred in their integration into the workplace and their productivity. These could include such costs as management overhead, workspace, technology, and administrative support.

Productivity and Performance Metrics

You will have to measure productivity and performance in your contingent workforce to assess this ROI. The KPIs—maybe some real benefit will be seen in measuring the effectiveness of your contingent staff when you look at output quality, project completion times, or even basic measures of customer satisfaction.

Cost Savings

One of the major benefits associated with a contingent workforce is cost savings. They can result from reduced overtime, limited training costs, and the flexibility of bringing workers when demand increase and inverse when it decreases. These savings need to be quantified accurately to properly calculate an ROI.

‍

Read full article here