The Contingent Workforce: Understand, Hire and Manage Temporary Talent

Flexibility has truly become the essence of the modern workplace.

The economic and technological mechanisms in today’s economy — globalization, restructuring, and information technology — have transformed workplace organization across the board, facilitating employment flexibility like never before.

The seismic rise of the contingent workforce is a powerful, prophetic example of this change. Unlike traditional employees, contingent workers are classified as individuals hired by a company to perform a role or project-based work on its behalf. Contingent workers have redefined what it means to work and support themselves.

Performing a broad spectrum of jobs, including short-term placements through a temporary agency, tutoring, driving passengers, delivering food or other products, short-term renting of personal property, and creative jobs such as acting or writing, this group’s growth is unquestionably in hyperdrive.

According to research carried out by McKinsey and Company in 2022, 36% of individuals in the workforce consider themselves independent workers. The 2023 forecast from Gartner suggests that by 2025, the contingent workforce will represent between 30% and 40% of the global labor force. Furthermore, the 2023 report by Allied Market Research projects that the revenue generated by the global contingent workforce industry will reach $465.2 billion by 2031.

Though it appears the contingent model is catching fire, it’s not exactly a new invention. 

Global economic restructuring and liberalized labor markets over the past 30 years have contributed to the increasing importance of contingent work arrangements. The uneasiness and instability of the 2008-2009 financial crisis catalyzed an economic environment where it became favorable for people to pick up temporary engagements wherever they could. 

These gigs had to be flexible if workers wanted to shore up their income. And if they wanted to maximize their income, they needed to be able to choose their hours as well as their projects.

So, it’s no surprise workers began to embrace autonomy and flexibility, perhaps valuing these qualities even more than the stability of a full-time job. This leads us to the status quo — contingent workers and those with nonstandard work arrangements are here to stay.

However, the lack of understanding of contingent labor models has laid bare many structural and operational weaknesses within organizations. It’s easy to want to hire contingent labor to meet skill requirements for new, varied initiatives; it’s a different matter entirely to execute an elastic, flexible workforce that can move the needle on your business goals.

What is a Contingent Workforce?

Contingent workers, including independent contractors, consultants, freelancers, temps, and gig workers, are hired for temporary assignments or projects where they lend their expertise to one or multiple organizations. 

These people may be engaged through suppliers, staffing agencies, freelance platforms, or directly sourced by a company through their HR or Procurement departments.

Contingent workers provide a diverse range of services. They also come from various backgrounds and encompass individuals of all ages, education levels, and income brackets. However, their specific roles and economic statuses may largely depend on the organizations that hire them. 

The primary distinction lies in their non-standard employment arrangement compared to regular employees. 

Types of Contingent Workers

The term 'contingent' serves as a catch-all phrase for any worker not on the company’s permanent payroll, but at a more niche level, various types of contingent workers operate within the market.

By understanding these nuances, business owners and employers can make informed decisions about which employees are best suited for their talent ecosystem. This can help avoid costly missteps in any workforce management strategy.

1099 and Self-Employed Workers: These workers handle their own taxes and are typically hired on a project or time-bound basis, reporting their income on a 1099 form.

Independent Contractors (IC): Independent contractors work on contract-based projects and are responsible for managing their own business affairs, including invoicing and taxes.

Freelancers: Freelancers provide project-based services and are often engaged directly by the hiring party, offering flexibility and specialized skills for short-term projects.

Consultants: Consultants offer professional advice and expertise in specific fields, often working on short-term projects or providing strategic guidance to businesses.

Temporary Workers (Temps): Temporary workers are employed for a specific period or project, either directly by the organization or through a staffing agency, providing flexibility to meet short-term staffing needs.

Contractors: Contractors work on specific projects or tasks, usually defined in a contract, and may be engaged directly by the hiring organization or through intermediaries like staffing agencies.

Agency Contractors: Agency contractors are managed and compensated by staffing agencies, providing a flexible solution for organizations seeking temporary or project-based resources.

Statement Of Work (SOW) Consultants: These workers are hired to complete a specific project, and their work is defined by a detailed statement of work (SOW) outlining the scope of the project, deliverables, and timelines. They are often highly specialized and have expertise in areas such as IT, finance, or marketing.

The classification of contingent workers can vary widely across industries and businesses, with no strict rules governing their categorization. Keep in mind, that there is notable overlap, blurring the boundaries between different categories.

Factors such as the nature of projects, desired level of expertise, budget constraints, and available resources influence the type of contingent worker you engage. For instance, while some industries may heavily rely on freelancers for creative projects, others may prefer to hire agency contractors for temporary staffing needs. The choice ultimately boils down to what suits your organization best.

Which Industries Use Contingent Workers?

Rising global competition, deregulated employment regimes, a decline in union density, and urgent financial concerns have pushed enterprises in all industries towards non-standard, flexible, and contingent employment. 

According to the US Bureau of Labor Statistics, contingent workers are distributed throughout the major occupational groups. 

Several industries frequently leverage contingent workers, including:

Healthcare: Facilities like hospitals, clinics, wellness centers, assisted living centers, and home healthcare providers rely on contingent workers to swiftly fill skill gaps. This trend surged particularly amidst the COVID-19 pandemic, which exacerbated healthcare personnel shortages.

Manufacturing: Various manufacturing sectors, including food and beverage, apparel, electronics, coal, plastics, and automotive, engage contingent workers due to fluctuating production supply and demand. This flexible labor model enables companies to adapt quickly to changing conditions.

IT: Across diverse business sectors, contingent workers with IT expertise are often contracted as computer network support specialists or hired for software development projects. Their tasks may involve installing new hardware or software, troubleshooting technical issues, performing routine maintenance on computer networks, assisting with coding, debugging, and software implementation, and more. 

Construction: Construction companies may require additional labor for projects exceeding their available workforce or necessitating specialized skills. For instance, a general contracting firm handling a renovation project might encounter unforeseen issues like mold or fire damage, prompting the need for temporary assistance from restoration experts.

Contingent workers are the engine of many, if not all, industries, offering flexible solutions to meet specific demands and fill temporary gaps. Their contribution varies based on each company's unique needs and capacity, making them essential for managing workload fluctuations and addressing specialized projects without long-term commitments.

The Benefits of Embracing Contingent Workers

Contingent workers act as a catalyst for expanding an organization's intellectual horizons and delivering immediate expertise when the need arises.

Embracing contingent talent brings forth a myriad of advantages, such as:

Flexibility and adaptability to market demands

The contingent workforce empowers businesses, government agencies, and not-for-profit entities of all sizes to augment their workforces with seasonal workers during periods of peak demand—such as holiday seasons for retail establishments—and then revert to a leaner core team when workloads stabilize. 

The ability to summon specialized help on an on-demand basis has immense value, says Nigel Wilson, a Leadership Strategist for Forbes—particularly for growing businesses and start-ups. Smaller enterprises may need specialized help for certain occasions, like during a product launch, without the financial commitment of hiring for full-time roles. Plus, with the availability of smart shift scheduling technology, companies can fill their shifts in no time with advanced publishing and automatic filling options – making short-time hiring a breeze.

The availability of contingent workers vastly reduces labor costs and lowers the barriers to starting a business.

From a worker perspective, some say they are seeking better work/life balance; others want to create or forge their careers by choosing the kind of work or projects that nurture a unique set of skills, making them more desirable prospective employees. Contingent models can immerse individuals in a broad variety of challenges, necessitating constant learning and new skills, which make work more interesting for them.

Cost-effectiveness and financial considerations

This is perhaps one of the more obvious advantages of workers employed by contract: hiring for a pre-determined timeframe or on a project-by-project basis is often less expensive than providing salaries and benefits to full-time employees across an organization.

Other cost efficiencies include not needing to pay for health insurance, paid time off, and leaves of absence. Also, many contingent workers require minimal or no training, and often have their own tools and equipment, which can result in additional cost savings.

Access to specialized skills and expertise

Enterprises frequently face challenges in consistently maintaining a permanent workforce equipped with expertise across all areas. Additionally, some skill sets are scarce and expensive, making full-time employment economically unviable at times.

In a contingent model, the employer can hire multiple specialists to complete certain tasks and has the option to select freelancers who are hybrid experts in a desired area. Similarly, the employee gets the flexibility to frequently switch jobs and broaden their portfolio with a wide range of experience.

Plus, since contingent workers are not involved with day-to-day activities in your organization, they can more easily see existing gaps and supply you with necessary insight into essential areas of your business. 

Strategic workforce planning

It’s not uncommon for businesses to find that their headcount shifts rapidly depending on market conditions and the company's growth. Contract workers provide the perfect opportunity to assess organizational needs on an ongoing basis rather than committing to permanent employees.

Plus, if you’re still in growth mode, hiring a permanent workforce without testing the waters can lead to a huge capital loss, heavy debts, liabilities, and other consequences. On the other hand, contingent staff gives you the room to experiment with new and “out-of-the-box” ideas and innovations. 

It’s because you can easily walk away from non-feasible approaches without any long-lasting repercussions.

Potential Drawbacks of a Contingent Workforce 

Despite the buzz around the gig economy and the seemingly inevitable decentralization of work, some hiring managers are still skeptical about employing contingent staff. 

Undoubtedly, the gig economy’s work model presents some challenges, such as building cohesion in a team, creating a sense of belonging for all members, and maintaining strong communication channels. Moreover, these decentralized codifications can sometimes create a lack of congruity in policies and procedures across contingent team members. 

Akin to hyperspecialization, silos can form, and it can be hard for temp employees to see the bigger picture. And of course, talent needs to be intrinsically motivated and driven while working outside the office.

These are some of the major obstacles to plan for if you’re considering hiring contingent staff:

Lack of long-term commitment

It’s hard to keep contingent staff engaged and motivated. While this can be true of any employee, of course, many contingent workers are only in it for the paycheck. Since they don’t receive employee benefits, these employees may not be entirely invested in your company's culture and mission. Because they know that their time with the company might not be long, they don’t build lasting relationships with other members of the organization. This transient nature can impact collaboration and hinder establishing strong, lasting relationships.

Potential for inconsistency

You cannot manage the activities of a contingent worker as well as you might your full-time employee. In many cases, they might choose their time of work and self-manage how their work gets done. Also, you can’t rely on them to be available for all projects, as they can leave at any time unless you’ve signed a contract stipulating how long you have to work together. In addition, since gig employees know they’re only working at this company for a short time, they may be looking for the next opportunity before your project is finished. Some employers have reported a freelancer moved on because of new interests or opportunities and then needed to be replaced.

This is another area that can be managed easily with a staff scheduling platform like Workstaff. The employee knows they can get their next shift through the tool and will be less likely to leave before the job is completed. As the employer, you could instantly know who’s available and interested in working by publishing shifts to your entire staff bank. Or, select specific people depending on your staffing needs.

Legal and compliance risks

Failure to correctly classify contingent workers, that is, incorrectly designating an employee as a contingent worker, can result in compliance issues and expose you to heavy fines and penalties from the government. For example, in the early 2000s, Microsoft became entangled in a class action lawsuit that led to the reclassification of numerous freelance and temporary workers as employees. Despite initially engaging these individuals as temporary staff, Microsoft continued their employment for over a year without providing them benefits. This settlement ended up costing the company $97 million.

Misclassifying wForkers can also tarnish your credibility as a business, potentially impacting your relationships with gig workers and customers. Another important consideration is that since contingent workers are not your employees, the hiring process typically involves less rigor, shorter duration, and fewer background checks. Depending on your recruitment framework, your company could be at risk, as these unvetted workers would have access to company information and resources alongside your permanent employees.

Dependency on external talent

Contingent staff are sometimes deemed as less dependable. The implication is that a temp worker is more inclined to leave their temporary assignment when a full-time offer presents itself, which can leave the employer in the lurch. 

Moreover, when contingent workers wrap up a project and move on, they take with them the knowledge and experience they gained while working with your team. This means your organization misses out on the opportunity to develop those skills in-house. Over-reliance on external talent without fostering internal talent pools can result in a loss of valuable knowledge within the organization. While contingent workers bring valuable skills and expertise, their departure can result in a knowledge gap, leaving the organization disadvantaged.

Finding good talent quickly is a daunting task in and of itself, but relying on external talent means missing out on the chance to develop, operationalize, and maintain areas of expertise over a prolonged period.

One way to mitigate this is to leverage an employee messaging system—like Workstaff— that connects all team members - both permanent and temporary - in a centralized hub, ensuring that everyone on your team is always easily accessible.

Best Practices for Managing a Contingent Workforce

Managing a contingent workforce in this reality can vary according to the industry, business operations, and corporate culture and be influenced by events beyond a company's control. 

However, the following best practices can serve as a guide when implementing and upgrading an effective contingent workforce management strategy.

Clear communication and expectations

With employees working separately in multiple, oft-remote locations, it’s easy to lose track of who is doing what. A clear workflow and breakdown of responsibilities allow clarity of processes and prevent duplication of efforts. By creating a flowchart that includes regular touchpoints with different team members, both full-time and contractors, you can help avoid working in silos and design a clear structure on how work needs to be done.

Consider using tools that streamline employee communications - Workstaff's staff communication features enablexf managers and workers to bypass the need for multiple personal networks to stay connected. They can handle timesheets, files, and reminders/notifications all within the same system.

Integration into company culture

If your team is spread out geographically, it is important to go the extra mile to bring them together and ensure all employees feel they belong to the team. 

Regular team-building events that bring people together physically can be a great starting point. Virtual events can also be used to connect regularly with the teams spread across locations. Also, recognition is just as important with contract employees, so a structured approach to recognition can ensure contractors are getting positive feedback regularly. 

Something as simple as arranging for all employees to have a company email address and be encouraged to represent the organization at events and conferences encourages inclusion and builds trust. Lastly, a great way to recognize the good work of project-based employees and bring them all to one table can be through learning opportunities. 

Continuous learning is part of the team members’ journey and assures them that you value their contribution and are invested in their growth.

Effective onboarding and training

When new team members are contracted, their orientation is often minimal or even non-existent. 

It can be quite alienating and create a sense of isolation, especially when they do not have an opportunity to learn from peers on the job. Thus, a briefing document, followed by a live orientation is a great way to introduce an employee to the team, communicate the company values and standards, and set them on the right path. Involving your project-based employees in regular team meetings, calls, and brainstorming sessions is paramount to building engagement and having a defined overview of workflows.

Also, by investing time and resources in learning and development provisions for your contingent workforce—particularly the basics around compliance and onboarding—you aren’t just aiding the personal and professional development of these workers. You’re boosting internal skills and helping yourself attract and retain this kind of talent for the future.

Performance measurement and feedback

When it comes to managing contingent staff, performance measurement plays a key role in ensuring everyone pulls their weight and contributes effectively to the project. By consistently evaluating their performance against predefined benchmarks, managers can spot areas where support or adjustments are needed and offer constructive feedback. This ongoing dialogue helps contingent workers fine-tune their skills and approach, ensuring they deliver their best work.

Technology and tools for management 

There is currently a void for technology innovations in contingent work as current employment and social tools are largely geared towards traditional employment arrangements.

Just like the processes for employees, systems designed to hire and track contingent workers should be automated. Determine if contingent workers will be added to the company's human resources information system and if so, what information will have to be collected and transferred to certain departments within the company. The finance and IT departments, for example, must be notified when contingent workers join the company.

Workstaff’s on-demand shift scheduling software, for example, allows you to create schedules based on location, positions, and compensation. You can also conveniently edit your shifts and save time by repeating your schedules. Additionally, the mobile app allows employees to clock in and out from their mobile phones, while pre-filled timesheets and accurate time tracking ensure that payroll is always spot-on.

With the right contingent workforce solutions in place, companies can more easily manage the details of contingent worker contracts, such as onboarding, work frequency, billing, pay, and performance management. By centralizing all of this information, a business can more effectively manage its contingent workforce and plan for the future needs of this group of workers.

Conclusion

Talent needs can escalate in the snap of a finger.

New innovations or new competitors can make your talent gaps glaring. Deploying a contingent talent strategy enables you to access the right talent to meet specific skills or competitive challenges promptly, without bearing longer-term costs or disrupting the existing teams. 

Managers have no choice but to ensure they are ready to accommodate the new ways of working with the contracted employees to achieve business goals. By adopting a few approaches aimed at creating a sense of belonging and maintaining engagement within the entire team, managers will reap the benefits of the decentralized structure and ensure a healthier working environment for all team members.

To fully harness the potential of this rising group of workers, employers must undergo a paradigm shift in how they perceive contingent workers. They need to dispel the notion that contingent workers are somehow inferior, less proficient, or less dedicated than their "permanent" counterparts, and discard the belief that contingent workers are merely a financial maneuver. Contingent workers don't just offer economic benefits; they bring a wealth of diverse experiences, innovative perspectives, and novel problem-solving methods to the table. In today's landscape, the expanding contingent workforce presents fertile ground for ambitious enterprises to explore and capitalize on.

If you want a simple way to search, book, schedule, and manage your temp staff, look no further than Workstaff’s platform. Demand ebbs and flows rapidly, so you can leverage this powerful scheduling and booking engine to fill your shifts with just a few clicks. Quickly see who’s available to work, gather the right candidates, and create schedules. With instant visibility into all your projects, schedules, and staffing progress, managing staff requirements is a breeze.

Plus, with the mobile app, your team is always reachable through instant messaging and broadcast messages. They can even create and submit invoices for shifts worked directly from the app. And all you have to do is export your staff's timesheets and earnings to your payroll system - simple. 

One thing is clear: the nature of work and the workplace has radically changed over the last 15 years, and some of these changes will inevitably persevere well into the indefinite future. Leveraging technology empowers you to embrace this change and take control of it. 

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