The modern workforce is experiencing a notable transformation with the rise of contingent workers. They have emerged as flexible and dynamic solutions for organizations navigating an ever-changing business landscape.
In 2020, Staffing Industry Analysts reported that the number of contingent workers in the US reached 51.5 million. This number accounted for 35% of the total workforce and generated $1.3 trillion in revenue.
There’s a large market of contingent workers that companies can tap into.
This article explores what contingent workers are, their comparison to traditional employees, and the implications for organizations that hire them.
What is a contingent worker?
A contingent worker is any worker hired on a short-term basis based on the services provided. The term doesn’t refer to any specific type of job but rather the employment relationship between the employer and employee.
Because of their temporary status, contingent workers often do not receive health insurance or vacation time benefits. They’re often enlisted to fill in for temporarily unavailable full-time employees or help lighten workloads.
Examples of contingent worker roles
There are various contingent worker roles that organizations commonly utilize based on their specific needs. Here are some examples:
- Freelancers – These are self-employed individuals who offer their services on a project or contract basis.
- Contractors – These individuals or firms are hired to provide specific services or complete defined projects.
- Temporary employees – “Temps” fulfill short-term staffing needs, like covering for employees on leave or during peak seasons.
- Consultants – Consultants are experts in a particular field who provide specialized advice and guidance to organizations.
- Seasonal workers – They are contingent workers hired to meet the increased demand during specific seasons or holidays.
- Interim executives – These are experienced professionals who temporarily fill leadership positions in organizations during transitional periods. They provide stability in roles like CEO, CFO, or CIO until a permanent executive is elected.
- Gig economy workers – Gig economy professionals perform short-term tasks or gigs on a flexible basis. They can be considered contingent workers because these jobs are frequently only held temporarily.
- Project-based specialists – Companies often hire contingent workers for certain projects that require specialized skills.
Contingent worker vs. Traditional employee
Contingent workers and traditional employees differ in several key aspects.
|Contingent worker||Traditional employee|
|Employment relationship||Engaged on a temporary or project basis||Have an ongoing, long-term relationship with the company|
|Work arrangements||Have flexible work arrangements||Typically have fixed work schedules|
|Benefits and protections||Receive few benefits||Entitled to benefits like health insurance, paid time off, and retirement plans|
|Performance expectations||Evaluated based on specific project deliverables||Evaluated based on a border set of performance criteria, including overall contribution to company objectives|
|Legal and employment rights||Have different legal classifications depending on the type of contingent work||Covered by labor laws and regulations|
Drawbacks of hiring contingent workers
Hiring contingent workers also comes with certain drawbacks. Here are some potential disadvantages to consider:
Contingent workers may lack the long-term commitment and loyalty that comes with full-time employees. Their primary focus is often on completing specific tasks or projects instead of contributing to the company’s growth and development.
Lack of integration
Contingent workers are typically hired for short-term assignments. They may struggle to fully integrate into the company culture and establish strong working relationships with permanent employees. This can hinder effective collaboration and teamwork.
Knowledge and skill gap
Depending on the nature of the work, contingent workers may require additional training or onboarding. They may need help understanding the company’s processes, systems, and industry-specific knowledge.
Their limited familiarity with the organization can sometimes lead to inefficiencies or errors.
Effective communication is crucial for successful collaboration.
Contingent workers may face challenges in staying updated on important information, participating in team meetings, and aligning their work with company objectives. This can impact productivity and hinder project outcomes.
The temporary nature of contingent workers means that turnover can be relatively high, in 2021, Statista reported a turnover rate of 415%. Constantly rotating workers can disrupt project continuity and require additional effort to bring new team members up to speed.
This can potentially affect productivity and delay project timelines.
Legal and compliance concerns
Hiring contingent workers can involve navigating complex legal and compliance requirements. These requirements include ensuring proper classification, adhering to labor laws, and managing tax obligations.
Failing to comply with these regulations can result in legal consequences and financial penalties.
Benefits of hiring contingent workers
At the same time, hiring contingent workers can bring several benefits to organizations.
Here are some advantages of utilizing contingent workers:
Businesses can use contingent workers to grow or shrink their workforce based on changing demand.
Organizations can quickly adapt to changing market conditions, project requirements, or seasonal peaks. Contingent workers can be brought in when needed and released once the work is completed.
Contingent workers can be a cost-effective solution for specific projects or short-term assignments. Hiring contingent workers often eliminates the need for providing long-term benefits such as:
- Retirement plans
- Paid time off
This results in potential cost savings for the organization.
Specialized skills and expertise
Contingent workers can bring specialized knowledge, skills, and expertise to fill temporary skill gaps within an organization. They often possess niche skills or industry-specific experience, enabling businesses to access talent that may be difficult to find or afford full-time.
Fresh perspectives and innovation
As outsiders, contingent workers can bring fresh perspectives and innovative ideas to the table. They offer a different lens through which to approach challenges, contributing diverse insights and promoting creativity within the team.
Reduced onboarding and training
Contingent workers are typically hired for their specific expertise. This often means they require minimal onboarding and training compared to full-time employees.
Their ability to quickly integrate into projects allows for faster ramp-up time, resulting in increased efficiency and productivity.
Contingent workers are often highly motivated to deliver results since their employment is tied to project success. Their focused approach allows organizations to streamline project management and allocate resources to achieve specific goals within defined timelines.
Access to a larger talent pool
Hiring contingent workers provides access to a broader talent pool. Organizations can tap into diverse skills, experiences, and perspectives from professionals who prefer flexible work arrangements.