Building SOW into your talent strategy
A Statement-of-Work (SOW) is a form of contract between a company and a staffing provider or individual that agrees to pay a contract worker for their efforts based on the achievement of pre-determined project outcomes. Typically, these outcomes are formed around project way-points (sometimes called ‘Milestones’).
SOW contracts are growing in popularity because they allow hirers of indirect workforce resources to pay for results, rather than hours worked. It means that departmental managers, with work to be performed, can look to hire specific skills for each competency or activity stream of projects they need to complete. Use of contingent workers and ‘the gig economy’ means that companies can get their work done faster, with no employment risks. SOW turns requirements for workers into ‘jobs to be done’ that can be contracted out by purchasing departments.
We’re seeing a dramatic increase in the fragmentation of jobs into tasks, ready-made service packages and Statements-of-Work (SoW) contracts. These alternative ways of procuring workforce resources mean that organizations are able to sugar-cube their resourcing needs and source best-fit, value-for-money solutions from a large addressable market of talent.
Key attributes of a Statement of Work include:
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SOW contracts are an effective hiring option for companies that have a long list of work to be done that are struggling to source the talent they need, but there are some ‘must-do-well’ aspects that companies considering SOW contracts need to get right.
When SOW contracts are poorly formed, they can lack the level of detail needed to protect both parties from mis-understandings and contract risks. That’s why we recommend organisations that have never used SOW contracts to source good impartial advice on how to design their scheme.
It’s vital that the SOW contract is clear what constitutes the completion of a way-point because any lack of clarity can result in upset should the contractor not be paid. It’s not common but occasionally disputes flair up when parties disagree on the quality of work produced. Being clear on what constitutes completion can help to avoid this.
It’s no good thinking that the hourly rate you pay for a contractor will be anything similar to the hourly rate of a full-time employee. Contractors face a significant amount of downtime between jobs and they have to cover their ‘cost-of-sale.’ They may even have to cover their own expenses if these are not reimbursed. Bear in mind also that contractors are commonly more skilled and therefore expect to be paid for their knowledge and delivery capability. Fail to pay a reasonable market rate for your work and you’ll find your SOW ambitions will soon go awry.
While organizations are used to working through agencies to source their talent, and might opt to do the same for SOW contract relationships, there’s a strong argument that businesses should explore publishing their SOW contract requirements through a serviced technology platform like Simplify TTM. This ready-to-use platform gives businesses. Everything they need to start publishing their SOW contract opportunities. It also includes helpful templates to make sure important aspects of SOW contracts are covered.
A talent portal like Simplify TTM goes beyond the traditional functionality of vendor management systems and on-premise recruiting software. It incorporates Artificial Intelligence technology and offers a series of functional services that help to make SOW contract operations painless and low risk. These include to:
Here are some additional articles and resources on SOW contract operations that may be of interest. The WikiSuite SOW page An example of a Statement of Work contract Department of Defense Handbook on Preparation of Statement of Work (SOW).