
Labour Procurement – What to Expect in 2025 with the Rise of Contingent Workers
As we approach 2025, the UK's workforce is undergoing a significant transformation, with contingent workers becoming an increasingly vital component of the modern company. This shift isn't merely a trend but a strategic response to evolving market conditions and regulatory changes that are changing how organisations approach labour procurement.
Key Regulatory Changes Driving The Market
The surge in contingent workforce adoption is being driven by several significant regulatory shifts in the UK employment landscape. The government's crackdown on non-compliant Umbrella companies is introducing stricter oversight and enhanced due diligence requirements. Simultaneously, the reduction in the Employment Allowance threshold for employers' National Insurance contributions is creating a financial incentive for businesses to explore alternative workforce solutions.
Most significantly, the Labour Party's proposed removal of the two-year continuous service requirement for unfair dismissal claims represents a fundamental change in employment rights. This potential reform would allow workers to bring unfair dismissal claims from day one of their employment, substantially increasing the risk profile of permanent hires. For most companies companies, this change could make contingent workers an increasingly attractive option for project-based work and variable staffing needs.
The Compliance Challenge
With more contingent workers potentially entering the workforce, organisations face increased compliance risks. Each contract worker brings their own set of regulatory requirements, from IR35 considerations, Umbrella compliance to workplace safety regulations and more. Managing these compliance obligations across a growing contingent workforce can quickly become overwhelming, particularly for teams already stretched thin after a year of challenges.
The Cost Factor
While contingent workers can offer cost advantages in terms of flexibility and reduced long-term commitments, the complexities of contractor pay rates can lead to spiralling charge rates. We recently covered supplier margin’s in more detail here and highlighted the importance of a transparent supply chain to aid in cost reductions. The administrative burden of managing multiple workers and suppliers can also lead to hidden costs. Without proper management systems in place, organisations may find themselves dealing with inconsistent pricing, duplicate efforts, and inefficient procurement processes.
The Solution: Contingent Workforce Solutions
Contingent Workforce Solutions, typically consisting of managed services(MSPs) and neutral vendors, are becoming increasingly valuable, even for smaller organisations. These solutions offer a centralised approach to contingent workforce management, providing several key benefits:
- Streamlined compliance management across all contingent workers
- Standardised pricing and consolidated billing
- Access to pre-vetted supplier networks
- Reduced administrative burden on internal teams
- Enhanced visibility into workforce spending and utilisation
What's particularly notable is that these solutions, traditionally associated with large enterprises, are becoming more accessible to mid-sized. This democratisation of managed services is allowing smaller organisations to achieve the same level of procurement sophistication as their larger counterparts.
Looking Ahead
As we move into 2025, organisations that proactively address these challenges through structured contingent workforce solutions will be better positioned across the board. The key is to recognise that managing contingent workers isn't just about filling immediate labour needs, it's about building a sustainable, compliant, and cost-effective procurement strategy.
For procurement professionals and those responsible for contingent workforce spend, the message is clear: there is no better time to evaluate and implement robust management solutions. The regulatory and market changes on the horizon will only make such systems more crucial for maintaining competitive advantage and ensuring compliance in an increasingly complex labour landscape.