Manish Speaks-August 2020: ‘CONTRACT FOR SERVICES’: WHY YOU NEED A CONTINGENT WORKFORCE

When global companies enter new markets, securing manpower is always number one priority. As opposed to hiring fixed-term talent, large multinationals are always scouting for staffing options that are variable, cost-effective and don’t involve much paperwork.

Exploring workforce augmentation strategies through umbrella organisations can offer global companies an edge over managing contingent workers themselves. It has also widened the scope for global companies to locally access a wider talent pool so that they get the right people for the right job.

Besides being able to manage mission-critical projects end-to-end, this key outsourcing model is a viable option that helps companies develop a leaner and smarter approach to expansion. So, what exactly is the nature of hiring and how does it differ from the normal kind? To understand this, we must first understand two very important recruitment terms - ‘Contract of Service’ and ‘Contract for Service’.

What is ‘Contract of Service’?

A Contract of Service is a legal contract of employment where one offers services (employee) to an entity requiring those services (employer). This is a fixed-term contract drawn on the rules set by the Labour Ministry of the country where the agreement is set.

This kind of contract is legally binding on both parties and acknowledges duties the employee and employer owe each other. This includes insurance cover, provident fund contributions, mandatory leaves, annual variable pay and other support services.  

Labour laws surrounding ‘Contract of Service’ also make it obligatory on the part of the employer to fulfil hiring requirements such as visa application, immigration formalities and health clearance. Employers also need to make sure that rewards are also drawn on government-set salary slabs according to labour type.

What is ‘Contract for Service’?

A ‘Contract for Service’ agreement is where there is no legal employee-employer relationship. This kind of contract is drawn for temporary work such as short projects or other independent work. Usually the client would have a certain project in hand and would need manpower to finish that work within a deadline. Contingent workers take up these projects, finish them at the desired timeframe and bill them for the project.

It’s important to note that there is no legal binding on these kind of contracts as the client and contingent workers collaborate according to projects or assignments which are settled immediately or periodically. This kind of hiring mostly works on the principle of ‘demand and supply’ in the labour market and is easy to manage if the client does not want to legally add headcounts into the organisation for the intendent project.

Why ‘Contract for Service’ is Gaining Pulse?

Multinationals enter new markets aiming to launch innovative products and strengthen their brand presence. It’s only when they move in and kick-off operations that they discover a shortage of skills or manpower. Sometimes, the demand is almost immediate and requires them to start at the earliest. Being based in a foreign country, such staffing issues can be frustrating and distracting.

So where does one get access to staff augmentation services?

These days, employee mobility solutions firms act as hiring companies and manage contingent workers on behalf of the client. While the firm does all the background check and draws up the contract, the client specifies its talents requirements and project deadlines. Once manpower is hired, the employee mobility solutions firm manages all expenses, bills and issues payroll periodically.

Hiring contingent workers relieves global entities from long-term deployment as these contracts can be terminated with prior notice. Absence of employment benefits, severance pay and other liabilities make this a sought-after model of hiring, especially as the gig economy gains popularity.

In South East Asia where the gig economy is rapidly emerging, contingent workforce are dominating hiring preferences as regular employment is becoming even more difficult to secure. Analysis by Ernst & Young shows that the rate of hiring of full-time employees among S&P 500 organisations since 2009 has slowed sharply compared to the pre-recession period.

Sourcing talent becomes tough with the ebb and flow of the economy. The rise of digital capabilities has also made it easier for talents to pick and choose the jobs they want to do even if permanent employment is not always possible or for that matter, available.

At Propay Partners, we help global brands with hiring contingent workforce based on their projects and capabilities. From contracting, invoicing and issuing payroll, we provide a whole set of employee mobility services on cloud and mobile apps to enable talents to create groundbreaking results.