||Analysis of the managing contingent workers at an outsourcing system |
–A case study of the China Steel Corporation and its subcontractors
Nowadays, employment flexibility and Labor Cost Reduction are highly emphasized in the competitive business environment. As the job design becoming more and more specific and professional, the labor cost becoming higher and higher, companies cannot but change their operation style, and contingent workers have become an important source of competitive advantage. This case study was intended to understand the mutual relationship between China Steel Corporation and its subcontractors: why it uses subcontractors, and how it manages them. This study also explored the benefits and working conditions of contingent workers to find out the potential problems of outsourcing.
This study has the following preliminary findings. First, Two factors are important determinants on outsourcing decisions: Strategically, the goal is to reduce labor cost and enhance the employment flexibility. Technically, the demand of professional skills, rudimentary skills and special facilities can be satisfied through outsourcing. Second, the relation between China Steel Corporation and its subcontractors has changed after its privatization. According to China Steel Corporation, their interaction has become better because of the flexibility gained after privatization (for example, the budget is no longer controlled by legislative yuan.) But from the subcontractors’ point of view, their interaction has become more difficult because the elimination of their profit and increasing constraints on outsourcing projects. Third, the employees of China Steel Corporation enjoy better wages, benefits, working conditions and training opportunities than employees of subcontractors. Fourth, among the two kinds of employees of subcontractors—permanent and temporary— permanent employees have better wages than temporary ones. As for training, there is not much difference. Fifth, safety is the most serious problem on contingent workers management. The reasons include highly dangerous work environment, workers’ unfamiliarity with the environment, and being recklessness about the work environment rules. One other important management issue for China Steel Corporation is that outsourcing does not necessarily reduce labor cost. High turnover rate among contingent workers and low quality resulting from insufficient skills are combined together to increase the labor cost of China Steel Corporation on supervision, coordination, and quality control.
Key words: human resource management, contingent working arrangement, outsourcing, subcontractor, temporary workers.