One trend many companies have adopted to survive in the post-pandemic environment is hiring contingent workers. As of April 2020, 14.9% of workers in the U.S. were displaced from work. Small businesses were the most affected.
From difficulties with securing office space to supply chain challenges, it was a daunting task to keep businesses operational during the onset of the Covid pandemic. This is one of the reasons contingent workers have become indispensable for many businesses. Here is a look at who contingent workers are and the pros and cons of hiring them.
Who is a Contingent Worker?
Many people are often confused with contingent workers meaning. A contingent worker is different from a conventional employer relationship. Contingent workers act as independent enterprises. They do not work directly for the person who hired them to perform a task. Contingent workers are temporary outsourced employees. Examples of contingent workers include freelancers and consultants.
Contingent Workers vs. Core Employees
Core employees are hired to hold a permanent position in a company for a couple of years. On the other hand, contingent employees are temporary. These workers are hired for specific, seasonal, or short-term projects. They also stand in place of core employees who have taken a leave of absence or have fallen ill.
Contingent workers are less expensive compared to core employees. First, they do not last in a position for a long period to warrant a pay raise. Also, they execute the same duties as core employees but at lower payment rates.
Additionally, many employers do not provide their contingent workers with medical or retirement benefits. They also do not get contingent workers' compensation like core employees. Additionally, employers do not remit federal and state taxes when dealing with contingent workers. Furthermore, they are not responsible for Medicare and Social Security contributions for contingent workers. This is because contingent workers, like contract workers, are responsible for filing and paying their taxes.
Since contingent workers are not compensated with salaries, they receive commissions or payment for the work done. Furthermore, these workers cannot be instructed how to complete a project because they work for themselves. When a company hires a contingent worker, they are interested in the work results and not how the work is being done.
Contingent Workers vs. Contractors
A contractor is an independent entity that provides goods, equipment, or services. These workers provide an invoice for the services they provide. The difference between a contractor and contingent worker is that a staffing firm supplies contingent workers to the company that needs a specific project to be completed. On the other hand, contractors are not employees of a staffing firm or a company.
However, like contingent workers, contractors work on a freelance basis. Contractors work through a franchise or limited company, which they own. They may also work through an umbrella company. Examples of industries where independent contractors operate include actors, lawyers, artists, authors, and security guards. Also, like contingent workers, independent contractors make their own business rules and do not answer to supervisors.
Contingent Workers Pros and Cons
Pros of Working with a Contingent Workforce
Speed
One of the primary advantages of hiring contingent workers is speed. With a contingent workforce, you can fill vacancies and scale your business faster than any other option. Contingent workers can start immediately and come with the necessary skill sets. This amounts to huge savings on recruitment time, training, and onboarding.
Contingent labor enables you to call a workforce solutions firm anytime and immediately request employees for a specific project. A workforce solutions partner accelerates or decelerates your workforce on demand.
Flexibility
Another benefit of contingent labor is flexibility. Using a temporary workforce makes it easier to adjust the size of your staff depending on business requirements. You can hire a contingent workforce based on the project at hand.
This allows you to bring in the right number of people for a specific project. You can also choose whether to keep a temporary workforce or let it go when the project is complete. This is a good way to manage the resources dedicated to a specific task.
Fresh Perspective
Working with a contingent workforce exposes you to a larger pool of professionals with a specific skill set. Normally, these knowledge workers have skills you cannot find in-house. Engaging these workers is a great way to fill skills gaps in the organization. A contingent workforce also allows you to source the experience you cannot find in your employees.
Ultimately, contingent workers bring a fresh perspective to your organization. This is because of their unique skillset and because they have done business with multiple companies in different industries. Therefore, they have a broad perspective to draw upon. Core employees can get used to standard policies and procedures, whereas a contingent worker will see things clearly and offer solutions that increase efficiency and productivity.
Cost Savings
Hiring a contingent workforce comes with huge cost savings. These savings are experienced in four areas: recruiting, benefits, human resources, and marketing. Recruiting employees involves huge costs. The contingent workforce can help you make recruitment savings by eliminating the need to vet candidates and cutting interview time costs.
The obvious benefit of savings is in the form of medical payments. The average cost for healthcare is $11.80 per hour. This translates to almost $25,000 for an employee working 2080 hours a year. Apart from health benefits, there is also sick time and paid-time-off, and holidays. The contingent worker receives benefits from their workforce solutions firm and not the company that hires them.
Another form of cost savings is in the human resources department. The human resource duties involve employee management, benefits processing, tax accounting, overhead costs management, and payroll processing. When working with contingent workers, the workforce solutions firm eases the duties of your HR department by partnering with them to determine the positions that need attention and choose a strategy best suited for your organization.
The workforce solutions partner also decreases onboarding, recruiting time, legal processes, benefits processing, timekeeping, layoffs, payroll support, and employee management. As a result, any contingent worker added to your team requires minimal oversight from your human resources team.
Last but not least, working with a contingent workforce helps you achieve marketing savings. If you are marketing vacancies in your company on various business networking sites and job boards, you no longer have to worry about this when working with a contingent workforce. A workforce solutions partner will handle the advertisements and marketing roles. This translates to huge savings on posting on job boards and social media ads.
Cons of Working with a Contingent Workforce
Cohesion
Your core employees can make your contingent workforce feel like outsiders. You should be willing to integrate the contingent workers with your core employees. Remember, contingent workers also want to have a sense of belonging in your company.
For your contingent workforce to work as hard as your core employees, you should treat them the same way you treat your core employees. To ensure cohesion is not a problem, communicate with your internal employees and ensure they understand the importance of liaising with your contingent workers to achieve the company’s goals. Make sure they foster an environment of teamwork and acceptance.
Trust
Since starting a project with a contingent worker takes less time than hiring a full-time employee, many companies forget to screen the people they are working with correctly. Even though you will be sourcing your employees from a workforce solutions partner, you should screen them to determine whether they are trustworthy.
Contingent workers will often have access to your systems and sensitive information. If you do not vet these workers, they could cause real damage. For example, it takes one worker to handle data improperly and ruin your company's reputation. Also, since contingent workers are not loyal to any company and will go wherever their expertise is required, failing to vet them could mean leaking information to your competitors.
In Conclusion
Many companies have realized the many benefits of working with a contingent workforce. The burden of advertising vacancies in a company and interviewing prospective employees can take a toll on your company’s marketing and human resource department. Also, increasing your workforce because you lack specific skills will also increase the cost of labor.
One of the best alternatives to these challenges is working with a contingent workforce. However, you should ensure your current employees can accommodate the temporary workers. Make sure they work together to complete the project at hand. It is also important that you vet the contingent workforce to avoid security breaches or other related incidents.
FAQs
What are contingent workers, and how do they differ from permanent employees?
Contingent workers are individuals hired on a temporary or non-permanent basis, often for a specific project or a set period. They may include independent contractors, temporary workers, and freelancers. Unlike permanent employees, contingent workers tend not to receive traditional employee benefits such as health insurance or paid time off. They are often engaged for specialized skills or to fill temporary skills gaps and are paid only for the work performed.
How can a business owner benefit from hiring contingent workers, and what are the potential cost savings?
Hiring contingent workers can offer flexibility, cost savings, and access to specialized skills. Contingent workforce management often results in reduced administrative overhead, as businesses may not need to pay payroll taxes or provide benefits like full-time employees. This approach can be particularly cost-effective for short-term projects or fluctuating business needs, allowing business leaders to scale the workforce as needed.
What are the considerations for engaging contingent workers in industries like construction or maintenance services?
When engaging contingent workers in industries like construction or maintenance services, considerations include defining the scope of work, ensuring compliance with employment laws, and verifying qualifications and certifications. An employment agreement outlining responsibilities, compensation, and safety protocols is essential. Coordination with staffing agencies specializing in these fields can streamline the hiring process and ensure that all legal and industry-specific requirements are met.
How do staffing agencies assist in hiring contingent workers, and what are the advantages of using a staffing agency?
Staffing agencies specialize in recruiting and managing contingent workers for various industries and roles. They handle administrative tasks such as screening, interviewing, and payroll, reducing the administrative costs for businesses. By using a staffing agency, companies can quickly access a pool of qualified candidates, fill temporary positions efficiently, and ensure compliance with relevant regulations.
What are the responsibilities of independent contractors, and how do they manage their own taxes?
Independent contractors are responsible for providing specific services or completing particular projects as outlined in their contracts. Unlike regular employees, they manage their own taxes, meaning they must track income, expenses, and pay self-employment and income taxes directly to the government. Independent contractors are considered business owners and must adhere to tax regulations, including quarterly estimated tax payments, to avoid hefty fines.
How do businesses pay contingent workers, and what are the differences compared to full-time workers?
Businesses pay contingent workers based on the terms agreed upon in the contract, often on an hourly or project basis. Unlike full-time workers, contingent workers typically do not receive benefits such as health insurance, paid time off, or retirement contributions. Payment methods may vary, and businesses must ensure proper tax reporting for independent contractors, as they are not subject to payroll taxes withheld by the employer.
What are the challenges and risks of contingent workforce management, especially concerning employment laws?
Contingent workforce management presents challenges such as ensuring proper classification of workers, compliance with employment laws, and maintaining clear communication. Misclassifying an employee as an independent contractor can lead to legal issues and fines. Additionally, managing a mix of contingent and permanent employees requires careful coordination and alignment with company culture and goals to maintain a cohesive work environment.
How can contingent workers be utilized for security services or other specialized roles at physical locations?
Contingent workers can be hired for security services or other specialized roles at physical locations on an as-needed basis. This approach allows businesses to access skilled professionals without the commitment of full-time employment. Proper screening, training, and clear guidelines are essential to ensure that contingent workers meet the specific needs and standards of the business, whether for a one-time event or ongoing support.
What role do human resources play in hiring and managing contingent workers, and how does it differ from hiring employees?
Human resources (HR) play a vital role in hiring and managing contingent workers by defining requirements, coordinating with staffing agencies, and ensuring legal compliance. The process differs from hiring employees as contingent workers are often engaged for short-term needs, and HR must navigate different contractual arrangements, compensation structures, and benefit considerations. Effective HR management ensures that contingent workers align with business objectives and contribute positively to the organization.
