What is a contingent worker?
A contingent worker is someone who works for an organization but is not officially hired as an employee is known as Workers that are considered contingent may offer their services on a permanent, temporary, or as-needed basis. In contrast to permanent employees, who take on a constant, unending job, they are frequently employed to finish a specific project.
An example of a contingent worker
It’s important to understand the various examples 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 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
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
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:
- Financial services
Who uses contingent workers?
1. Assembling, Upkeep, and Repair
These industries employ both skilled and unskilled labor in large quantities. Workers who fulfill activities linked to the creation of an item, whether a finished product or a component, are known as team assemblers. Work is done on buildings, machinery, and other equipment as part of maintenance and repair. Plumbing, HVAC, construction, and factory equipment maintenance are among the tasks carried out by these contingent laborers; electricians, however, belong to a different category.
2. Healthcare Careers
The healthcare industry needs contingent staff since Americans are living longer and getting older. Specialized patient care and support provided by registered nurses are particularly in demand, and many temporary employees are filling these positions. For patients in long-term or assisted living institutions, the area of nursing aides and assistants also includes contingent workers to provide basic care. Home health aides are also frequently independent contractors. An HHA visits patients at home to help with daily hygiene activities, medicine administration, and bandage changes.
3. IT & Computer Support
There are two broad groups into which these contingent workers might be divided:
- Computer support professionals help companies and their employees use IT technologies. They could work on installation, hosting, troubleshooting, modification, or other support-related tasks.
- Computer programmers typically work in the background, producing code and creating solutions that are used by customers, companies, and other organizations.
Manufacturing is another sector that offers a wide range of opportunities for contingent workers and is another one that makes extensive use of both skilled and unskilled labor. There is evidence that manufacturing is moving back to the United States, which implies there will be more openings for these occupations.
Furthermore, due to the flexibility and financial advantages the position offers, many businesses in this sector choose to engage contingent labor rather than permanent staff. Production supply and demand change, and the hiring of temporary help can be quickly modified. To quickly fill the positions they require, more manufacturers are going outside of the conventional employment arrangement.
Benefits of being a contingent worker
1. Closing the skills gap
Many businesses are finding it harder and harder in today’s market to locate employees with essential skill sets. Many employers are turning to contingent labor to find top talent as they struggle to fill skills shortages in their personnel.
Organizations may guarantee they have access to people with particular expertise to do work on a project-by-project basis by utilizing the gig economy and recruiting external workers. This is a fantastic approach to enhancing you are in-house skills.
2. Increased adaptability
Have you ever had the impression that your company is unable to scale up or down based on a particular project or respond quickly to changing market conditions? If so, your company’s flexibility would come from the contingent labor.
Your company can react to changing market conditions and customer needs with the help of non-permanent employees. Without the lengthy lag time frequently associated with full-time staff, your organization will be able to quickly respond to, adjust, and adapt to market conditions.
3. Quicker and more economical hiring procedures
Contract workers can be hired more swiftly and with less red tape than permanent employees, whether you need them to handle your company’s busy season or you need specialized skills for a specific project. Experienced contract workers can frequently be hired on short notice and will offer your business a quick fix.
The hiring procedure is not only far quicker than making a permanent hire, but it is also significantly less expensive. Working with non-permanent workers can help cut down on a lot of the expenditures related to hiring permanent personnel.
Even though contract employees sometimes earn a higher income than employees, your business is not obligated to provide them with insurance, paid time off, or sick pay. That doesn’t even take into account the significantly lower or nonexistent costs associated with onboarding, training, and professional development.
4. You can continuously evaluate the needs of your business.
Businesses frequently discover that their headcount fluctuates quickly based on the state of the market and the expansion of the organization. Instead of committing to permanent personnel, contract workers offer the ideal chance to continuously analyze organizational demands.
5. New viewpoints
New faces and fresh perspectives are just one advantage that non-permanent employees can provide your company. On the other hand, a staff that is static and consists of people who have worked for your company for a long time can frequently result in a dearth of originality and “outside the box” thinking.
Don’t get us wrong, your internal workforce is crucial to the success of your company, but occasionally, it only takes one outside employee to entirely transform how a particular component of your organization functions – for the better.
A highly qualified and skilled employee can advance your company’s operations and foster expansion while they are an employee of your organization.
6. Trial new hires or posts in number six.
Employing non-permanent workers with an eye toward full-time employment is possible because of the contingent workforce. This procedure enables your business to confirm that a certain position is included in your long-term objectives or to confirm that a particular person fits into your corporate culture.
Your business can assess a contractor’s fit before deciding whether to convert them to an employee in the future by engaging them initially temporarily.
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 in 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 more 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.
Difference between employee and contingent worker
Traditional workers are recruited permanently and are given contracts outlining their legal rights, such as:
- How much each month they will be paid
- their scheduled hours of employment
- Vacation pay
- Sick pay
- severance pay
- Their time of notice
You have more flexibility and agility with contingent personnel. When you hire individuals temporarily, you avoid having to commit long-term resources to things like annual salaries, benefits, and redundancy packages if you have to make layoffs.
Another significant area of distinction between regular and contingent labor is taxation. When you hire a permanent employee, you are responsible for adding them to your payroll, ensuring that they are paid accurately, and ensuring that the appropriate amount of tax is being withheld from their salary. Utilizing contingent labor greatly reduces these worries.
Administrative and paperwork
If you decide to source and manage your contingent workers through a staffing agency, the agency may handle a lot of the administrative and paperwork, including managing contracts and taxes. Consultants, contractors, and freelancers who work completely independently are in charge of handling their tax obligations and making sure they pay the correct amount.
Each part is valuable
Your full-time employees are something you value highly as a business asset, and your contingent workers can also work to your advantage. They can be kept on staff to cover production blips, saving you money on employing new workers when you have a temporary need. If they can handle some of the more basic duties that take up the time of your regular staff, these people could be a useful addition to your team.
Their motives vary
Your full-time employees work for a variety of reasons, including pay, perks, and job satisfaction. In terms of motivation, contingent worker is fairly similar, but they have additional objectives. Many people who seek contingent employment are wanting to expand their careers or are doing so for personal reasons.