An increasing number of professionals are working outside the traditional payrolls, and companies are looking for ways to maximize efficiency and cut costs to increase profits.
Labor is the most considerable business expense, so its natural organizations will look for innovative ways to get more work done efficiently at lower costs, giving rise to the contingent workforce.
Contingent work has risen in the last decade and will not slow down anytime soon.
Out of six workers in a company, one is a contingent worker.
If you’re starting your contingent workforce journey and do not fully understand the breadth of the options available, here is everything you need to start.
- What Does Contingent Mean?
- What Is a Contingent Worker?
- Is a Contingent Worker an Employee?
- What Is the Difference Between a Contingent Worker and a Temporary Worker?
- Examples of Contingent Workers in Today’s Labor Market
- Why Do Companies Use Contingent Workers?
- How Much Do Contingent Workers Usually Make?
- Contingent Workforce Management
- Wrapping Up
What Does Contingent Mean?
Merriam-Webster explains the word means that something will happen on the condition something else does.
In the labor world, contingent labor is an alternative work arrangement.
Contingent employment means the worker’s position in the company is temporary.
What Is a Contingent Worker?
We also know contingent workers as consultants, independent contractors, freelancers, and other non-permanent and outsourced workers.
These workers lend their skills and expertise to an organization on a short-term or project-by-project basis.
A statement of work provision details the job required and how long it lasts.
At the end of the work statement, the contingent worker leaves their role and is available for hire by another company or the same one.
The workers get a 1099-M form at the end of the calendar year for tax purposes, and the income derived is subject to self-employment taxes.
What Is the Role of a Contingent Worker?
The contingent employment role has traditionally been in low-value positions such as back-filling for leaves of absence, light general labor, or administrative support.
However, the contingent worker today fulfills many roles, including:
- Highly technical positions that require expertise on a per-project basis
- Roles companies are struggling to fill
- Creative roles such as audio production, graphic design, or writing
- Customer service management to supplement permanent staff during peak seasons
- Seasonal hires
What Skills Do Contingent Workers Usually Possess?
Contingent workers can meet the skill requirements of most organizations.
These include drivers and maintenance staff to IT specialists and expert consultants.
They can help organizations complete critical seasonal tasks such as stock-taking.
For example, a Fast-Moving-Consumer-Goods (FMCG) company can bring in expert marketing management to cover for an employee on maternity leave.
Is a Contingent Worker an Employee?
No, a contingent worker is not a W-2 employee.
Contingent workers work at completing specific tasks under the statement of work.
As such, the business owner has no responsibility to offer continuous work permanently.
What Is the Difference Between a Contingent Worker and an Employee?
The largest difference between contingent workers and regular workers is that they aren’t considered company employees.
A company hires a regular employee to work daily at completing the tasks set out.
Contingent workers work on a contract or temporary basis.
Employees get an hourly range while the contingent worker receives a specific payment with the possibility of a commission after completing the job.
The contingent worker doesn’t receive benefits such as profit-sharing, vacation pay, or insurance.
They are also responsible for their taxes compared to company employees who have taxes taken from each paycheck.
Contingent workers don’t receive directions on how to complete the job.
The hiring company only wants the job done and within a schedule.
Contingent workers are usually highly skilled and don’t require instructions.
The Fair Labor Standards Act sets specific guidelines for workers belonging to the contingent workforce category.
What Is the Difference Between a Contingent Worker and a Temporary Worker?
A temporary (temp) worker comes in on an hourly rate or a fixed contract and must track their time through monthly, bi-weekly, or weekly timesheet submissions.
We might consider these workers an augmentation of the company staff, bringing in extra support.
Also known as contract workers, we source temporary hires from staffing suppliers at standardized rates according to classification.
The workers are also often on W-2 tax status, so the staffing agency or vendor employs them with regular payment terms.
Contingent workers are not subject to the tax requirements and payment terms of temporary workers.
Is an Intern a Contingent Worker?
We do not consider interns contingent workers.
When an intern works for an organization, instead of shadowing staff, they become a worker under the same legal status as a full-time employee but on a fixed-term contract.
Such interns are liable for taxes like other employees.
Plus, interns are almost always under an employer’s direction, control, and supervision, so they can’t be considered to be doing business for themselves.
Examples of Contingent Workers in Today’s Labor Market
Contingent workforce opportunities are available in most industries, but the most common jobs for contingent workers include:
- Creatives such as videographers, photographers, event planners, and graphic designers
- Retail field services such as maintenance services, merchandising support, retail construction, and fixture installation
- Writers and translators
- IT field services such as maintenance of hardware and software resources, security services, and repairs that require expertise
- Brand ambassadors who represent and advertise a business and talk about the brand at physical locations, on blogs, and social media
Why Do Companies Use Contingent Workers?
Contingent workers help businesses adapt in response to the market’s demand.
Tapping into the contingent workforce enables organizations to get work done while mitigating risk, improving cash flow, and increasing the value of work.
However, businesses can’t realize the full benefits of hiring a contingency workforce without an effective talent management strategy.
What Are the Advantages of Hiring Contingent Workers?
This brings us to the benefits of bringing in contingent workers.
1. Cost Savings
The employer is not paying the contingent worker an annual wage or salary; they only pay for the services provided.
Employers don’t pay for employee benefits such as sick days and other costs.
2. Improved Operations
A strong contingent workforce system has processes that help manage and mitigate the risks of bringing in the workers.
Such a system harnesses the power of the best-in-the-industry skills without the added processes of bringing in new hires.
3. Access to a Large Talent Pool
An employer can access a broad talent pool to choose the best candidates.
The strategy is often beneficial when a company is undertaking critical short-term projects or requires individuals with a specific skill set to fill positions employees can’t.
4. Stronger Compliance
Partnering with a staffing agency for contingency worker requirements helps shift the compliance burden to the agency.
The staffing agency is responsible for mitigating the risks associated with the contingency workforce and ensuring compliance.
5. Increased Flexibility
Organizations need to adapt and respond to market conditions quickly.
A contingent workforce allows businesses to engage the resources they require on an on-demand basis.
6. Bridge the Skills Gap
Businesses also gain greater access to expertise.
The organizations can find the experience and skills required for specific projects or contract positions they’d otherwise not access internally.
How Much Do Contingent Workers Usually Make?
Contingent workers earn $51,705 a year on average.
The figure accounts for the basic annual salary of $34,225 and $17,480 in addition to pay commissions, cash bonuses, and tips.
Who Pays a Contingent Worker?
The company may pay the staffing solutions organization that provides them with the contingent worker.
However, the business may also pay the contingency worker’s own company for services without the costs attributed to recruitment, benefits, and training of employees.
The contingent workforce is responsible for covering their benefits and taxes.
Contingent Workforce Management
Contingent workforce management involves onboarding, vetting, managing, rating, and paying the contractors at scale.
For example, attracting the right contingent worker is different from the process of hiring employees.
Typical hiring involves posting the open positions for candidates to apply for and identifying the best applicants to interview and hire.
Recruiting a contingent worker may involve using a third-party firm to identify talent with the right skill sets.
Businesses can hire contingent workers based on recommendations or previous work done.
How Are Contingent Workers Typically Managed?
Managing a contingent workforce varies depending on the industry, corporate culture, and business operations.
However, here are six best practices that serve as a guide when implementing an effective contingent workforce:
- Defining and documenting guidelines, policies, and policies for contingent workers
- Onboarding your contingent workers and permanent employees the same but with a few differences
- Making the contingent worker feel part of the company
- Educating, training, and communicating with managers about the contingent workers’ hiring process
- Implementing technology to automate contingent worker processes
- Bringing in external resources to manage and secure a contingent workforce and specialized talent
Do Contingent Workers Normally Work in Teams?
It depends on the task at hand.
Some projects require a specialized temporary team, while others require highly skilled individuals.
Can Contingent Workers Unionize?
Universal rights that apply to all workers, including contingent workers, include protection against:
- Wrongful termination
A landmark ruling by the National Labor Relations Board requires unions to organize non-traditional employees and include them in collective bargaining units with other employees.
The contingent worker is here to stay, especially in the current global workforce state.
To meet their staffing requirements, businesses will continue tapping into the market for on-call workers, freelancers, contractors, and others.
It’s a good idea to keep the best practices for an excellent contingent worker experience in this article in mind to benefit from a contingent workforce.
If you have questions about the topic, leave a comment below.