De-Risk Your Contingent Workforce Strategy with SAP Fieldglass
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Key Takeaways
⇨ The management of contingent workforces is often transactional, posing significant strategic risks such as diluted brand culture, compliance gaps, and intellectual property theft that can outweigh financial benefits, especially as 92% of companies are increasing their reliance on contingent labor.
⇨ To effectively manage contingent labor risks, executives must address six critical blind spots: regulatory compliance, financial reporting, security risks, strategic challenges, operational issues, and environmental, social, and governance (ESG) concerns.
⇨ SAP Fieldglass serves as a strategic platform by providing automated compliance, visibility into workforce metrics, and processes that mitigate risks associated with contingent labor, enabling organizations to proactively manage their external workforce instead of responding reactively to problems.
The contract or contingent workforce, consisting of freelancers, service providers, and temporary staff, is often managed transactionally. However, the strategic dangers of a poorly governed contingent labor force, such as diluted brand culture, precarious intellectual property, and unforeseen compliance gaps, can dwarf the financial benefits. With 92% of companies increasing their contingent workforce and service labor use, these risks are only bound to increase.¹
The Six Critical Blind Spots
In a recent whitepaper, SAP Fieldglass identified six risks that every executive must understand and mitigate to build a more resilient and future-proof enterprise:
- Regulatory, compliance, and legal: Risks in this area include worker misclassification, co-employment when service providers engage independent contractors, non-compliance with labor laws for geographically diverse companies, and tax compliance.
- Financial Reporting Risks: Companies can also risk budget overruns and cash flow issues, unexpected hidden costs, fraud, ensuring accurate invoice amounts, and non-compliance with financial regulations.
- Security: When contingent workers have privileged access within the company, data, cyber, and physical security can be at risk.
- Strategic risks: These include difficulty in attracting and retaining high-quality talent, inability to identify workforce trends and optimize costs, over-reliance on a single worker or service provider, and reduced power while negotiating potential discounts.
- Operations: For the operations team, contingent worker risks can involve missed customer deadlines, substandard work that can impact business performance, overreliance on a small group of workers, and inefficiencies with invoice management.
- Environment, social, and governance (ESG): The non-compliance of external workforce service providers with environmental regulations, failure to meet social responsibility standards like health and safety standards, a lack of transparency in how contingent workers are managed, and reputational harm from compliance gaps are some of the ESG risks that can harm companies using contingent labor.
How SAP Fieldglass Helps
During a webinar on how companies can offload these risks, Ashleigh R. Koehler, Director Contingent Workforce Strategies Council at Staffing Industry Analysts, and Sara Anfinson, Fieldglass Senior Advisor, External Workforce, SAP, indicated that SAP Fieldglass can mitigate regulatory and legal risks by embedding compliance checks and configurable workflows directly into the system, reducing manual oversight and potential for error.
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They shared examples of how the platform’s configurable and flexible framework allows companies to create different workflows and rules specific to geography to enforce complex requirements and address domestic regulations to avoid fines and liability.
The speakers also emphasized that mitigating financial reporting risk and ensuring accurate reporting were key drivers for adopting Vendor Management Systems (VMS) like SAP Fieldglass which also acts as the single source of truth for financial commitments, preventing the challenges of managing invoices in spreadsheets and emails. In addition, the system enforces financial discipline through automated approval hierarchies based on spend level.
Security risks, particularly data and physical access, are addressed by centralizing processes and automating onboarding and offboarding controls. For example, the system provides a secure, cloud-hosted application where managers, suppliers, and candidates interact. This prevents the insecure exchange of sensitive data via email, mitigating risks like accidentally sending a file with all vendor data to the wrong vendor.
SAP Fieldglass mitigates strategic risks by providing visibility and improving the overall experience. The speakers indicated that 41% of executives don’t believe they have clear visibility over their external workforce. However, the VMS directly combats this issue by providing one comprehensive picture of spend, headcount, and performance.
The speakers also argued that the efficiencies gained from a VMS mitigate operational risk by replacing manual, inconsistent processes with standardized, automated ones. For instance, the SAP Fieldglass decision wizard functionality guides managers through a series of questions at the start of a request to direct them to the appropriate channel, automating policy and preventing downstream issues.
The entire SAP Fieldglass system acts as a governance framework to mitigate ESG risks. The platform also helps reduce social risk by providing visibility into who the company is doing business with. While not a full ESG platform, the ability to track supplier performance, ensure proper worker onboarding, and manage compliance with labor laws allows companies to enforce better working conditions and hold suppliers accountable.
What This Means for SAPinsiders
Reframe SAP Fieldglass as a strategic platform. While many users see SAP Fieldglass through the procurement lens, its core value is mitigating the strategic dangers that can dwarf the financial benefits of using a contingent workforce or services providers. For SAPinsiders, this means championing SAP Fieldglass as an essential enterprise system for mitigating legal, security, and reputational risks that come with a growingcontingent and service labor workforce.
True visibility comes from integrating non-payroll workers into the enterprise core. Over the next three to five years, 69% of C-suite executives are prioritizing more visibility into their workforce¹. and many executives lack clear visibility. The solution lies in enabling a single source of truth that connects to the rest of the SAP ecosystem. For an SAP-centric organization, the power of SAP Fieldglass is its ability to provide a comprehensive picture of external spend, headcount, and performance that can be trusted by Procurement, HR, Finance, and Operations, ensuring that the 35% of operational budget spent on this labor is no longer a blind spot.
Leverage automation for proactive control. Automation is a powerful control mechanism. Features like automated onboarding/offboarding for security, configurable approval hierarchies for financial discipline, and the decision wizard for operational guidance are about embedding compliance and policy directly into the workflow. This moves the organization from a reactive stance of catching errors to a proactive one of preventing them from ever happening.
