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M.M., Global HR Services, Agilent

“I joined the CWP Association to keep up to speed in the industry and learn how other companies are reacting to changes in health care reform, contingent labor and taxes. It keeps my finger on the pulse.”

V.B., Kaiser Permanente

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J.U., Global Process Owner, Oracle

Project Term Definitions

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

C

Contingent Workforce: A contingent workforce is a provisional group of workers who work for an organization on a non-permanent basis, also known as freelancers, independent professionals, temporary contract workers, independent contractors or consultants.

Contingent Workforce Management (CWM): CWM is the tactical and strategic approach to managing an organization's contingent workforce in a way that reduces the company's cost in the management of contingent employees and mitigates the company's risk in engaging them.

Contingent Workforce Outsourcing (CWO): Denotes a provider who facilitates clients' ability to aggregate and track spending, billing, and performance of more than one type of non-W-2 worker. This includes traditional temps and independent contractors and consultants.

CWO has evolved to handle the non-W-2 business wave. As contingent workers continue to grow at a double-digit annual pace as a percentage of the overall workforce, companies are feeling an ever greater need to have tools to manage this quickly-growing phenomenon. Capturing and managing data that allows managers to see and control their entire contingent and full-time workforces is a complex task that is now possible with contingent workforce management tools.

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E

Employment Contract: An employment contract is an agreement entered into between an employer and an employee at the commencement of the period of employment and stating the exact nature of their business relationship, specifically what compensation the employee will receive in exchange for specific work performed.

Employee Benefits: Employee benefits and (especially in British English) benefits in kind (also called fringe benefits, perquisites, perqs or perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries. Where an employee exchanges (cash) wages for some other form of benefit, this is generally referred to as a 'salary sacrifice' arrangement. In most countries, most kinds of employee benefits are taxable to at least some degree.

Fringe benefits can also include but are not limited to: (employer-provided or employer-paid) housing, group insurance (health, dental, life etc.), income protection, retirement benefits, daycare, tuition reimbursement, sick leave, vacation (paid and non-paid), social security, profit sharing, funding of education, and other specialized benefits.

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H

Human Capital: Refers to the stock of productive skills and technical knowledge embodied in labor. Many early economic theories refer to it simply as labor, one of three factors of production, and consider it to be a fungible resource - homogeneous and easily interchangeable. Other conceptions of labor dispense with these assumptions.

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I

Independent Contractor: Is a person, business or corporation which provides goods or services to another entity under terms specified in a contract or within a verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when required. Contractors often work through a limited liability company which they themselves own, or may work through an umbrella company or staffing agency.

In the United States, any company or organization that pays more than $600 to an independent contractor in one year is required to report this to the IRS as well as to the contractor, using form 1099-MISC. Often contractors are referred to as 1099’s. It is important to realize the distinction between an “un-incorporated 1099 contractor” and an adequately incorporated individual or entity.

IRS reclassification: Reclassification occurs when persons claimed as (or claiming to be) independent contractors are re-categorized by the Internal Revenue Service (IRS), or by state tax authorities, as W-2 employees. The reclassification can result in the imposition of fines, penalties, and back-taxes for which the employer is ultimately liable in the event the individual is not. These amounts can cost businesses large sums of money. The U.S. Government Accountability Office (GAO) (formerly known as the General Accounting Office) reports that the IRS claims to lose millions of dollars in uncollected taxes because of misclassification of independent contractors by taxpayers. According to IRS Commissioner Mark W. Everson in a statement made November 3, 2005, IRS audits of small business organized as corporations increased from 7,294 in 2004 to 17,867 in 2005.

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M

MSP, or Managed Service Provider: Manages vendors and measure their effectiveness in recruiting according to the client's standards and requirements. MSPs generally do not recruit directly, but try to find the best suppliers or vendors according to the client's requirements. This, in essence, makes the MSP more neutral than a VOP in finding talent because they themselves do not provide the labor.

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O

Outsourcing: Is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of labor, capital, technology and resources. Outsourcing became part of the business lexicon during the 1980s.

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P

PEO: A professional employer organization (PEO) provides outsourcing of payroll, workers' compensation, human resources and employee benefits administration. It does this by hiring a client company’s employees, thus becoming their employer of record. It then leases them back under contract to the original employer. This practice is known as co-employment, employee leasing, or staff leasing.

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V

Vendor: Is literally a person or organization that vends or sells contingent labor. Specifically a vendor can be an independent consultant, a consulting company, or staffing company (who can also be called a supplier, because they supply the labor or expertise rather than selling it directly).

Vendor Management System (VMS): Is an Internet-enabled, often Web-based application that acts as a mechanism for business to manage and procure staffing services temporary, and, in some cases, permanent placement services, as well as outside contract or contingent labor. Typical features of a VMS application include order distribution, consolidated billing and significant enhancements in reporting capability that outperforms manual systems and processes.

VOP or Vendor on Premise: Is a vendor that sets up shop on the client's premises. They are concerned with filling the labor needs and requirements of the client. The VOP does this either by sourcing labor directly from themselves, or from other suppliers, whom may be their competitors. Also, the VOP manages and coordinates this labor for the client.

Early history VMS and MSP’s: VMS is a fairly recent advancement in managing different types of contingent labor spend. VMS is an evolution of the Master Service Provider (MSP) / Vendor-On-Premise (VOP) concept, which became more prevalent in the late-1980’s to the mid-1990’s when larger enterprises began looking for ways to reduce outsourcing costs. An MSP or VOP was essentially a master vendor who is responsible for on-site management of their customer’s temporary help, contract worker needs. In keeping with the BPO (Business Process Outsourcing) concept, the master vendor enters into subcontractor agreements with approved staffing agencies.

In 1993, one company recognized the contingent labor spend management niche as an immense opportunity – Geometric Results Inc. (GRI). At its origin, GRI was a wholly owned Ford Motor Company subsidiary and it was GRI who developed one of the first significant VMS applications in the industry, PeopleNET. Originally starting out as a manual process, some system automation was introduced in 1995. A year later, PeopleNet became an automated VMS system and its’ customers included Ford, Ford Credit, Fordland, Mazda, Jaguar, Ford UK and Visteon. Overall, GRI managed nearly $200 million in spend at Ford. Then in 1997, MSX International purchased GRI and, with this acquisition, become the MSP/VMS market pioneer and Ford’s first external Master Vendor.

MSX later launched a new proprietary Internet software - b2bBuyer, and the program continued to grow with the expansion of MSXI's European operations to include Volvo Car Corporation (VCC) in Sweden. Their success is achieved through best in class processes and technology supported by a vendor neutral model. MSX created a 51/49 minority-owned subsidiary and repackaged its web-based application as “Tech Central” to service former GM parts supplier, Delphi Corporation.

The first company to innovate a vendor neutral VMS solution for human capital management was Procure Staff whose application was rolled out in 1996. Procure Staff, Ltd., spun off as a subsidiary of it’s' parent company, Volt Information Sciences to address the glaring need for vendor neutrality in the procurement of this commodity. Procure Staff implemented a vendor-neutral model for its first client, a global telecommunications company, because it promoted competition by opening requisitions up to a larger number of pre-qualified staffing suppliers without bias or favoritism. The benefits realized to the customer included reduced cycle times and lower overall contingent labor spend.

It was not long after this time that other companies, eager to capitalize on Procure Staff’s innovation entered the fray, such as Chimes, Inc. Although Chimes was a wholly owned subsidiary of Computer Horizons Corp., the key differentiator between it and other VMS providers that were emerging was that it positioned itself as a “vendor-neutral” provider of Business Process Outsourcing (BPO) services instead of just a technology company that licensed its’ VMS software. Chimes value proposition was it would create and staff a Program Office (PO) that integrated with the customer’s business Purchasing, HR, and Accounting processes. That is, Chimes realized that simply licensing its software to its customers was a strategy that could not guarantee a successful implementation and realization of the benefits of the VMS concept. Fiscal improprieties led to the unexpected implosion of Chimes (ECG) and its parent company Axium in early 2008.

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