More than 60% of hiring managers believe their future team will be more remote, and three out of four plan to maintain or increase their engagements with independent talent. With so many companies engaging with contingent workers, should your company do the same? Here is how to decide.
What is a contingent worker?
A contingent worker may refer to various types of workers, but a common thread is that they are hired on a non-permanent basis to perform certain specific tasks required by the company. Freelancers and independent consultants are two categories of contingent workers.
Whatever type of contingent worker you use, the defining quality is that their relationship with a company is typically based on short-term business needs. Both the business and the contingent worker can decide to part ways once the project is completed. The precise details of the arrangement depend on the particular circumstances, but generally, the company often has no obligation to provide training or employment benefits like Medicare, minimum wage protection, Social Security, or worker’s compensation.
The contingent workforce is made up of people with diverse skills and expertise. It encompasses temporary employees provided by an outside staffing agency, as well as independent talents like freelancers and independent consultants.
Why do companies use contingent workers?
As the business world evolves and becomes more competitive, companies are constantly looking for innovative and cost-effective means to complete tasks, streamline workflows, and remain profitable. Since employee expenses significantly contribute to the company’s overhead cost, leveraging the contingent workforce can be a viable supplement.
Some reasons why companies use contingent workers include:
- Reduce operational costs: Money that would’ve been spent on providing employee benefits, training, and certain work equipment, like computers, can be channeled to other aspects of the business.
- Enjoy access to workers with diverse skill sets, expertise, and experience: Companies can easily access highly skilled workers, like software developers, creative designers, and consultants, among others.
- Take advantage of a faster and cost-efficient hiring process through a work platform like Upwork: With contingent workers, the recruiting and hiring process and the costs associated with it can be reduced since a platform like Upwork already provides some level of identity verification. This makes for a faster and more cost-efficient hiring process.
- Access to a fresh perspective and creativity thanks to a non-static workforce: Companies can gain a fresh perspective or outlook that may drive change in operations. Full-time workers might be accustomed to a particular way of doing things.
- Add flexibility to better respond to rapidly changing market conditions: A company’s operation is influenced by market conditions. A contingent workforce can provide an avenue for companies to easily hire workers to handle new projects or tasks to meet prevailing market conditions. And once the project ends, the contract is over. This makes for a high level of flexibility in a fragile economy.
- Assess business or organizational needs on an ongoing basis: A contingent workforce provides an ideal opportunity for companies to assess their needs on an ongoing basis. Instead of committing to a permanent worker, your business can hire contingent workers to perform specific roles only when the need arises.
Types of contingent workers & categories?
It’s important to understand the various types of contingent workers so you can determine which makes the most sense for your team’s needs.
Freelancers and consultants
A freelancer is a self-employed individual or entity who offers services to your business on a contract basis. Because they are either operating a business that sells goods and services or are self-employed individuals, you are not responsible for providing them with company benefits, and they are responsible for their taxes in line with IRS guidelines.
You also often hear the term “consultant.” The term consultant refers to a freelancer with specialized skills that works with a business to help solve a specific problem—for example, mining through a company’s data and internal workings to identify inefficiencies. A consultant typically offers professional advice and solutions but is not usually involved in the execution of the work.
Businesses can find freelancers in a variety of ways, including online platforms, word of mouth, on their own, or through a consulting or another firm. Consultants and freelancers span a variety of professional fields, and examples include:
- Marketing consultant
- Financial consultant
- Human resources consultant
- Software developers
- Digital marketers
- Accountants
Temp workers
A temporary worker (or temp worker) is retained when a company needs a specific position filled for a defined period, either to meet seasonal demand or when an extra hand is needed to complete a specific project.
These workers are usually employed through a staffing agency and placed with your company for the time needed. As the employer, the staffing agency is responsible for providing payroll taxes and any required benefits. The staffing agency charges the client company a fee, typically a percentage of the worker’s hourly rate, to source and provide temporary workers.
Positions filled by temp workers often do not require extensive training. Examples include:
- File clerks
- Warehouse workers
- Retail associates
Leased employees
A leased employee works for a company based on an arrangement between the company and a private employer organization or PEO. Leased employees are similar to temporary employees in that they are often brought on for basic or ongoing roles. Many industries use leased employees and some examples include:
- Hospitality
- Education
- Financial services
- Retail
More about Professional Employer Organizations (PEO)
A PEO co-employs leased employees with the company where they are placed. The PEO can assist a business with HR functions associated with the leased employee, including benefits, payroll, worker’s compensation, and compliance.
PEOs work with a variety of businesses across many industries, including:
- Health care
- Finance
- Construction
- Retail
On-call workers
As the name implies, on-call workers wait for work from their respective employers. Typically, these workers can stay at home while they wait and generally are not paid until they are needed.
The level of skill offered by an on-call worker varies depending on the industry. Examples of on-call employees include:
- IT technicians
- Doctors
- Firefighters
- Repair workers
Difference between contingent workers and full-time employees
Contingent workers (which does include some types of employees) differ from full-time corporate employees in several ways. For starters, contingent workers are hired on-demand for a specific period or project, whereas full-time employees work within your organization on an ongoing, regular basis, whether they have a full workload or not.
In addition, because contingent workers are not with your organization for an extended period, you may not incur the cost of worker benefits or insurance, like retirement plans, Medicare, or Social Security.
Another big difference between contingent workers and full-time employees is that contingent workers enjoy more flexibility in choosing when they work, how they work, and with whom they work. They are simply told what needs to be done and produce the agreed-upon deliverables with minimal training and supervision.
Advantages and disadvantages of contingent workers
Engaging contingent workers has immense benefits and can help companies scale production, maximize workflow and increase revenue.
Advantages
There are many advantages to hiring a contingent worker, including:
- Additional support when needed: Contingent workers help companies in times of need when there is an increase in demand. If you find your team short-staffed for a specific project, a contingent worker can help fill any gaps until the project is completed. Another bonus? Once the work slows down again, you do not have to keep paying an employee who no longer has a full workload (or, worse, lay the person off).
- Cost-efficiency: Unlike full-time employees, contingent workers generally do not work with you for extended periods and do not receive benefits. You also don’t need to supply them with equipment like you would a full-time employee.
- More flexibility: Contingent workers bring their expertise and creativity to your team, which enables your business to scale up operations faster to adapt to changing market conditions more quickly.
- Fresh perspective: Contingent workers can bring in a fresh perspective that can revolutionize your company’s approach to business. This is partly because they work with multiple companies, often in various industries. So, they have a very broad perspective to draw upon. In-house teams can get accustomed to thinking inside the box, whereas an outsider may see things clearer and offer solutions that may increase productivity and efficiency.
- A reservoir of experience: A contingent workforce allows you to pull individuals from specific fields. Their wealth of experience in a particular area can help your team’s projects. Relying on someone else’s expertise can also be a more cost-effective route instead of paying to train someone in-house who may only need a certain skill for one project.
- Fast and low-cost hiring processes: It’s often quicker and easier to hire a contingent worker than an FTE. Unlike full-time employees who may need a series of interviews, you can visit online platforms to find top independent talent that is already vetted, so you know you’re getting what you need.
Considerations
Some considerations of hiring contingent workers include:
- Specific paperwork requirements: When working with someone like an independent contractor, you’ll want to be sure they fill out the correct paperwork, so you don’t have a surprise when tax season rolls around.
- Hand off the project: After providing the individual with what they need to complete a specific task or project, you simply wait for them to deliver the work and answer any questions they might have along the way. Depending on how independent they are, they might not ask about some of your company’s more nuanced guidelines—something a full-time employee would know.
Contingent workers FAQ
Here are some additional questions you might encounter in deciding whether or not a contingent workforce is right for your business:
Is an intern a contingent worker?
Interns are generally not considered contingent workers, so the company may be responsible for their taxes and other important paperwork. An example is someone from college who interns at a marketing agency for a summer before heading back to their fall semester.
How long can you engage a contingent worker?
The length of time you use contingent labor can vary from a few hours to months depending on the engagement. The key is to make sure that you set a defined limit for their contract.
Do contingent workers get benefits?
Generally, contingent workers do not get employee benefits or perks from your company. They may receive benefits from their own company, or the staffing agency or consulting firm if they are engaged by one.
Conclusion
Contingent workers range from consultants to administrative assistants. So, whether you’re looking for someone on a project basis or a few hours from someone who can help streamline some of your internal processes, we’re here to help connect you with the talent you need to get the job done.
