Main insights:
- Many of the difficulties businesses run into with contingent workers come from structural gaps rather than mistakes or poor execution
- Leaders globally point to visibility, governance, and role clarity as the areas where contingent workforce management falls short
- As companies rely more heavily on temporary staffing, the risks naturally rise too, especially when there’s no single framework
- Technology helps, but it only really works when the people using it understand the market, the context, and when to apply human judgement
- Businesses that treat contingent workforces as part of a wider talent system make stronger long-term decisions
Businesses have leaned more on staff augmentation, temporary staffing and specialist contractors to keep projects moving and cover skills gaps, but what hasn’t kept pace everywhere is how these workforces are managed. As external hiring expands, many find that workforce visibility, consistency, risk, and control become more challenging. Tracking costs becomes increasingly difficult, and different teams often interpret regulations in their own way, which means risk can build quietly in the background.
Research by the Economist Impact shows just how quickly reliance on external workers has risen, with usage climbing from around half of businesses in 2022 to well over 90% a year later, making contingent labour far more central than it used to be.
At this point, the question isn’t really whether organisations should use an external workforce. It’s about whether your contingent workforce management model gives you the visibility and control to manage costs, compliance, and quality today, and to build talent pipelines that still work in two years’ time.
Here are the top 5 challenges:
1. Limited visibility of contingent workforce spend and deployment
One of the biggest issues isn’t overspend itself, it’s simply not being able to see where the money is going: who is being paid, for what kind of work, and through which channel. Different teams, such as procurement and HR, often bring contractors in through their own processes, which means the data ends up scattered, and no one has a clear overall picture.
Because of this, it’s common for senior stakeholders to struggle to answer straightforward questions with confidence:
- How many contingent workers are engaged globally?
- Where are they deployed, and for what type of work?
- Are we paying consistent rates across regions, suppliers, or roles?
This lack of visibility has become a priority for senior leaders, with 69% naming it as something they want to get on top of in the next few years, and for good reason. Without a consolidated view, even basic benchmarking and forecasting can become unreliable.
2. Unclear worker classification and inconsistent engagement rules
As contingent workforce programmes grow, job definitions and engagement rules often drift, with similar roles treated differently across regions or business units. Over time, this creates confusion for hiring managers and increases the risk of worker misclassification.
Misclassification is still far more common than most organisations realise and becomes harder to manage when HR policies for contingent workers aren’t clearly communicated or understood across the business. It carries direct consequences for workers’ pay, benefits and legal protections, while also shifting tax liabilities onto the individual and exposing employers to penalties. Misclassification can be financially damaging for workers in widely used roles, reinforcing the need for a clear and consistent approach.
3. Governance gaps and unmanaged compliance risk
Programmes without clear ownership and controls invite cost and compliance issues. The risks can come from several directions, including:
- Deemed employment exposure
- Third-party tax and statutory liabilities
- Insurance and indemnity gaps
- Breaches in data protection or occupational safety requirements
The Staffing Industry Analysts (SIA) have noted that regulatory frameworks governing contingent labour are becoming more complex and overlapping, requiring businesses to move from reactive compliance to proactive risk management.
A lot of organisations don’t have the internal capability to monitor regulatory changes across different regions, especially while also trying to stay on top of supplier performance and day-to-day operations. It’s usually around this point that leaders start questioning whether their current setup is actually sustainable, particularly after moments that expose weak spots, like a merger, expansion into a new country, or an internal audit that flags inconsistent processes. When internal capability is already stretched, bringing in external advisory support or an MSP (Managed Solutions Provider) can centralise oversight and supplier performance.
4. Technology adoption without workforce context
Vendor Management Systems (VMS) and direct sourcing tools have made it easier to manage external workforces by bringing reliable data and automation to scale, but even the most advanced platforms only work when the fundamentals are already in place.
We often see technology rolled out without:
- clear global work type definitions
- an agreed governance model
- market-aligned rate frameworks
- change management for hiring managers and suppliers
Organisations still struggle when work types aren’t clearly defined, when rates don’t reflect the market, or when hiring managers lack the context to use these tools effectively. Technology on its own can’t resolve workforce complexity - the data still relies on human judgement and market expertise to make sound decisions.
5. Misalignment between contingent strategy and long-term talent needs
Decisions about flexible staffing ripple into future pipelines. More than 80% of employers have shifted to skills-based hiring in the past two years, yet contingent workers are too often treated as a short-term fix, which means businesses miss opportunities to build talent communities and retain specialists.
Integrating contingent workers into wider workforce planning - mapping critical skills, strengthening direct‑sourcing communities, and addressing the DEI gap where only a quarter of leaders prioritise diversity for external workers - helps build more sustainable talent pipelines. NES Advantage can help you achieve this by giving organisations a clearer, data‑driven understanding of their workforce through diversity diagnostic reporting, as well as salary and rate benchmarking that supports consistent and transparent pay decisions. Research by PwC shows workers are more motivated when they feel secure in their pay and job stability, reinforcing the value of transparent, market-aligned rates to reduce attrition.
How NES Advantage can support
NES Advantage supports organisations at every stage of contingent workforce maturity, from early reviews of current practices to the design and delivery of full MSP programmes. We uncover the underlying issues that typically sit behind cost, risk, or visibility challenges, bringing together specialists to close gaps that your internal teams don’t have the bandwidth or tools to address.
Our core services include:
- Contingent workforce diagnostics, providing a clear view of spend, risk, and governance gaps
- Salary and rate benchmarking, grounded in real market data across regions and skill sets
- Diversity diagnostic reporting, identifying inclusion gaps for fairer hiring practices
We can help you pinpoint what’s working, what isn’t, and what to prioritise next. With decades of experience across sectors including energy, infrastructure, life sciences, manufacturing, and professional services, NES Advantage can help you gain a clearer, more confident view of your workforce.
FAQs
How do I know whether my business actually needs an MSP to support our contingent workforce?
If contingent labour is now material to delivery and you can’t see true headcount, cost variance or supplier performance, you’re ready to assess an MSP. A brief contingent workforce diagnostic will confirm whether advisory support alone is enough or whether you’ll gain more from a full managed programme.
What are the potential risks of using contingent workers?
Contingent workers can introduce several risks, especially when engagement rules aren’t applied consistently. Issues like misclassification, tax or statutory exposure, deemed employment concerns, data security problems, and reputational damage tend to surface when governance and oversight aren’t clear.
Why are contingent workers a challenge for corporate HR departments?
Most HR functions are built around permanent employment structures. Bringing in external workers means dealing with different legal requirements, pay setups, and lifecycle processes, which often call for additional capability and technology that traditional HR models don’t naturally accommodate.
What signs indicate that our current approach to temporary staffing or staff augmentation is no longer working?
Warning signs usually show up in the data and day‑to‑day operations - rising cost variance, recurring audit issues, too many suppliers, slow or low adoption of workforce systems, and frequent exceptions to engagement rules. Major business changes, such as mergers or moves into new countries, often make these gaps even more obvious.
How can we ensure our contingent workforce strategy supports long-term talent needs?
Mapping skills, including contractors in DEI reviews, and using market data to understand where to build versus buy capability all help create stronger pipelines. Benchmarking and diversity diagnostics then turn that insight into clearer pay decisions and better retention.
