Many organizations have too many buckets into which their workforce potentially fits, often leading to confusion and the wrong engagement behavior by hiring managers.

With the impending private-sector implementation of the UK’s IR35 off-payroll working rules — which go into effect in April — corporations around the world that do business in the UK are critically assessing the classification of any worker where there is a personal service company in the chain. (PSC refers to the limited company used by a contingent worker to provide their services to the end client.)

As a result, my team and I are having numerous discussions with procurement, HR and talent acquisition leaders around the topic of worker types, and it has become apparent to me that many organizations have too many groups into which their workforce potentially fits, often leading to confusion and the wrong engagement behavior by hiring managers. And while this realization may have started with discussions surrounding IR35, it pertains to all CW programs.

IR35 notwithstanding, there really needs to be just three worker engagement models for any organization — assuming that for the time being we are referring only to carbon-based humans! — within which more finely tuned descriptions can reside.

The three types of worker engagement are:

  1. Permanent/traditional workers
  2. Staff augmentation workers
  3. Statement-of-work consultants (or workers)

SIA’s definitions of these worker types can be seen below (taken from The SIA Global Lexicon of Terms).

The worker types that constitute permanent and staff augmentation are generally perceived to be straightforward; however, I often see worker types that belong in staff augmentation categorized under SOW.

Permanent workers. These are workers engaged on a permanent (or fixed term) basis and who enjoy all the contractual benefits associated with permanent employment. This is probably the most straightforward worker type, although there is sometimes confusion as to what constitutes a fixed-term employee. Put simply, this is an engagement under the same terms as a full-time employee, except that the employee has a defined start and end date.

Staff augmentation workers. Typically, these workers are hourly, daily, weekly (or any other shorter or longer duration), are generally named individuals and work under the supervision and control of the end client. A classic engagement such as an IT contractor engaged for six months and paid an hourly rate belongs within this worker type.

This worker type can also include other short-term engagements, such as scientists and other industry professionals, who are engaged on an ad hoc basis for a one-off time period such as an hour lecture, a two-day training course or a three-day piece of consulting. The time period is irrelevant, the key thing here is that regardless of the piece of work, these individuals (assuming they are named resources) are being paid on a time & material basis and under the supervision and control of the end client. This worker type is often categorized under SOW, or worse still, not categorized at all because the purchase is made locally by the hiring manager sometimes even billed on expenses. This latter worker type is often set aside by organizations, creating a further grey area, which this article seeks to remove.

Statement-of-work workers. Typically, we refer to this category as SOW consultants, but for the purposes of this article, I am using the term SOW workers, because the term consultant can often be misunderstood, leading organizations to categorize any (generally highly paid) professional external consultants within statements of work.

The SOW is the contractual agreement between two organizations and does not refer to the workers themselves. SOW workers are those individuals engaged by the SOW provider — which may be delivering on a fixed-price project or providing an ongoing service such as catering, cleaning or call center — as part of their B2B contractual arrangement to deliver preidentified outcomes, generally, with associated milestones, fixed-term deliverables and penalty conditions. These workers are generally not listed by name nor supervised or controlled by the end client. The end client may require knowing details of the individual worker for such things as access to buildings and systems, but otherwise, this worker type should be under the supervision and control of the SOW provider.

It is possible for individuals to be provided under a time-and-material-based SOW. For example, a firm of accountants might be engaged to provide revised audits going back several years and the work effort to deliver this task is an unknown. There is still a fixed outcome (audited accounts), within a timeframe, with elements of time and materials billed according to the work effort required.

Another example could be where the end client has a B2B SOW framework agreement to deliver training services (maybe with a value or time based cap), with an external provider that fulfills its obligations with resources of its choosing, logging the time and material expenses incurred against that framework agreement.

Regardless, every worker type within the organization can be placed in one of these three overarching buckets.

As you look to build on this idea, you may find it challenging to put certain worker types under one of these three major headings. If that is the case, please do reach out to me as I would appreciate hearing your thoughts.

  1. Permanent Placement 

The bringing together of a job seeker and a prospective employer for the purpose of effecting a traditional employment relationship, for a fee. Also refers to the process of arranging such a relationship. This term is now falling out of favor (in the US) because the use of “permanent” can connote a guarantee of employment that is generally misleading for a typical “at-will” employee. In the US, “direct hire” is more commonly used. (See also: placement, direct hire.)

  1. Staff Augmentation

Staffing services that supplement internal staffing teams where either part of the talent acquisition process is managed by an external supplier or a segment of the organization is supported by the external supplier, however the supplier is often using the company’s internal recruiting processes rather than its own processes to manage the staffing activities. IT staff augmentation services entail allocation of dedicated technical resources, usually offshore, hired as overseas development extensions of in-house application development teams on fixed or flexible terms and conditions. Using IT staff augmentation services provides a one-window solution to companies who might require application development across diverse technology verticals.

  1. Statement of Work (SOW) Consultant

Any consultant performing work on a project under a statement of work arrangement. In contrast to agency consultants, SOW consultants are typically, but not always given a regular, consistent salary by their employer and continue to receive this salary when off project assignments (i.e., “benched resource”). While SOW consultants are typically employed by consulting firms, a host of technology and other staffing firms have also entered the solutions space for its greater premium margins (the theory being that you are paying for the firm’s proven methodology and chemistry of the team). At times “rogue” managers have used an SOW arrangement in order to avoid restrictions on the use of temporary workers or agency consultants (See also: Statement of Work.)