Contingent Workers: Here’s Everything You Need to Know
Ten years back, contingent workers weren’t a regular part of the organization. In fact, they were rarely constituted in the organizational workforce. But fast forward to today, contingent workers have become an active part of every organizational workforce.
Organizations are now actively strategizing their workforce to form a perfect mix of permanent and temporary workers. It is projected that in 2027, 86.5 million people will be freelancing in the United States and will make up 50.9 percent of the total U.S. workforce.
If you are also thinking to make contingent workers a part of your everyday workforce strategy, then here’s a complete guide to help you understand more about this emerging workforce and how you can build one for your organization.
1. Who are Contingent Workers?
Contingent workers are temporary workers who work on temporary contracts to fill short-term roles. These workers are generally categorized as freelancers, independent consultants, or part-timers. Their work, time, payment, and expected results are defined at the time of signing the contracts. Once signed, these workers have to adhere to the agreed timelines.
Besides, no company/client can dictate these freelancers when it comes to defining the process of their work. The autonomy to determine how to work remains with the workers. Companies can only question these workers if the output doesn’t match with the agreed results.
Contingent worker’s employment with the company is largely dependent on the assignment at hand. As soon as the assignment or contract is over, the association between both the parties ends. However, the company always has the option to extend the assignment or retain the worker, if required. Also, these workers do not work on the company’s payroll and therefore are not eligible for company benefits or tax policy.
2. Stats Supporting Contingent Workforce Rise
According to a U.S. Government Accountability report, 40 percent of the U.S. workforce is made up of contingent workers, with the average organization having 18 percent of their workforce employed on a contingent basis.
It is estimated that by 2050, 50 percent of the U.S. workforce will be made up of freelance or contingent workers.
The rising trend of contingent labor is a global phenomenon. According to an Oxford Economics survey, 83 percent of executives reported an increase in usage of contingent labor to meet business objectives.
McKinsey estimated 30% of the American workforce — 49 million people — are freelancer by choice.
Nearly three-quarters (74% ) are interested in freelancing, according to USA Today, and 40% plan to abandon their job to freelance in the next five years.
57.3 million people freelance in the U.S. It’s estimated that by 2027 there will be 86.5 million freelancers. (Upwork)
36% of U.S. workers participate in the gig economy through either their primary or secondary jobs. (Gallup)
3. How Contingent Workers Benefit Organizations
1. Flexibility
A lot of times, companies take on short-term projects that last 6 months to a year. Hiring permanent employees for such short-term projects is not only an expensive affair but also a waste of resources.
Therefore, hiring independent workers on-the-need basis gives you the flexibility to respond to changing demands of the industry without worrying about layoffs or resource utilization. Contingent workers allow you to take new projects without worrying about the permanent placement of these resources into the organization.
2. Cost
Hiring a full-time employee costs $4,425 to an organization whereas choosing a contingent worker instead of a full-time employee saves almost 30% in benefit costs alone.
Hiring permanent employees is expensive especially if it’s a short-lived requirement. This is where hiring employees on a need per basis optimizes the hiring cost to a great extent.
Moreover, companies are not liable to provide regular benefits such as sick leave, vacation, health insurance, or any other employee benefit to contingent workers. Cumulatively, all these factors save a lot of company costs.
Also, contingent workers are hired for a short period when the actual work is going on. This assures that companies do not end up paying for the non-productive time of the workers.
3. Skill Gap
In today’s market, candidates with niche skills are hard to get. At times, it takes months to find the right candidate who could fit the required role. Moreover, the higher the demand for the skill, the higher is the remuneration. This also adds an extra burden to the company budget.
You can handle these hurdles by hiring niche candidates on a requirement basis. In place of paying those hefty salaries, you can contact these experts for a short while and let them go once the project is done. This helps you expand your skills without permanently hiring the resources.
4. Trial for New Positions
Contingent workers also allow businesses to experiment with new positions by hiring temporary workers on the new proposed positions. Deploying resources for a short-term project helps you understand the feasibility and requirement of these resources in the longer run.
If the cost of the resource doesn’t match the requirement generated, you can decide to fill these positions on a contractual basis. And if does match, then you can look for a permanent hiring plan for these resources. Either way, it’s a win-win for you.
Read More: Things to Keep in Mind While Planning a Direct Sourcing Strategy
4. Building a Contingent Workforce
Organizations can build their contingent workforce by migrating to the traditional MSP model and its staffing vendor pools. These staffing vendors have their own diverse contingent talent pools that are curated from many sources like referrals and talent platforms such as Upwork, Toptal, Freelancer.com, and TalentDome.
To start with, you must align your staffing strategies with your talent goals. Strategize what kind of roles you want to outsource to a contingent workforce and what you want to keep with yourself. Create a mix of talent strategies to support your overall workforce including permanent employees, gig workers, temporary staff, SOW engagements, and contractors.
Looking for experienced vendors who can build your entire contingent workforce plan? We’re just a call away