What is a Contingent Workforce?
For most individuals, the goal use to be finding a steady, 9 to 5, Monday – Friday job. Holding a career position was considered the gold standard, and by many it still is. There is security and predictability associated with this type of job. However, in recent years there has been a growing shift in what the workforce looks and behaves like.
Now many individuals are cashing checks from multiple companies and working a part-time role or scheduled end-date employment contract. These positions offer little job security but deliver a variety of popular benefits to workers. Simply defined, the contingent workforce is a sector of the overall workforce where a collection of individuals hold an employment relationship that is non-permanent and paid on a piece-by-piece basis.
Today, the contingent workforce is gaining traction from both the employer and employee sides. According to the 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 its workforce made up of contract or freelance workers. By 2050, it is estimated that half of the workforce will be freelancers and contract workers.
Sometimes referred to as the “gig economy,” contingent work has become a lynchpin in today’s economy as 62 percent of enterprises view contingent workers as a critical component to their overall workforce. This number is only expected to grow in the coming years, as the current economy continues to evolve and move away from traditional models.
The Benefits of a Contingent Workforce
There is considerable excitement surrounding the prospect of a growing contingent workforce among business owners, C-suite members, and other operational stakeholders. The move to increased use of contract workers solves several key logistical, HR, and financial headaches that enterprises are dealing with today.
While it may make sense to employ full-time professionals who can handle the necessary job duties and responsibilities that surround your business model, when it plays out in the day-to-day, problems arise.
Issues that persist with full-time employees and a traditional workforce include:
- Inability to retain top talent
- Employee burnout/complacency
- Lack of cost-effectiveness & expenses (healthcare, retirement, etc.)
- Missing specialized professionals or skill sets
When employers invest in a contingent workforce and create the supporting infrastructure within their business, they can begin to address some of the pains associated with a traditional employee model. By offering and depending upon contract work, employers never have to worry about losing internal talent to outside opportunities. The revolving door of personnel for a full-time position can create a lack of stability for a company’s operations, as well as, cause onboarding and offboarding nightmares for HR.
Employee burnout is something that all businesses have to remain conscious of. When employees are overworked and stressed, the risk of lowered productivity, potential errors, and absenteeism rises. Another concern is when employees have become complacent in their role and drop their desire for innovation, growth, and excellence. This attitude can negatively impact company workflows, in addition to being a morale killer for fellow employees within the organization. A freelancer or contract-based employee is only working for a specific amount of time or on a certain project. This significantly reduces the chance of employee burnout or complacency.
Hiring and retaining full-time employees is a major financial commitment and expense for employers. The general rule of thumb is that the true cost of an employee is 1.25x to 1.4x the employee’s annual salary. Through a combination of insurance, healthcare benefits, taxes, and other financial obligations, the price of a full-time employee can often not make financial sense. Payroll is almost always the biggest expense an employer faces. Therefore, if these expenses can be minimized, excess funds can be allocated to other areas of the organization — potentially benefiting full-time and freelance employees along the way.
A contingent worker also gives businesses the flexibility and responsiveness to adapt and fill needs as they appear. The likelihood of having every necessary specialist or personnel member in place when an issue comes up or a major project is started is slim. By using contract-based work, employers can quickly find professionals to fill the gaps when unique or rare skill sets may be needed. Additionally, a contingent workforce also employers to scale their personnel needs at will based upon their workflow. Only need employees during your busy season? Contract work might be your best solution.
Types of Contingent Workers
Not all contingent workers are created the same. As with full-time employees, there is a level of designation that comes within the contingent workforce. The three main types of contract workers include:
Temporary Workers: Temporary workers are employed by a staffing agency, they typically work onsite at their part-time work assignments. These jobs may last anywhere from a few hours to a few months, which means hiring these employees is a good option for companies that only need additional help for a short period of time.
Consultants: Consultants often work in highly specialized fields. Like all contingent workers, consultants are non-employees who aren’t on the payroll. However, unlike temporary workers, consultants typically work without much oversight and offer guidance on strategy. Consultants usually don’t execute the work required to carry out their recommendations.
Independent Contractors: Independent contractors can be freelancers, consultants, and gig workers who are not represented or employed by any type of staffing agency or consulting firm. These are individuals who are self-employed and provide their services to the general public. Hiring an independent contractor is best when specialized services are needed for a short period of time or regularly, but not at a full-time level.
How to Find Contingent Workers
Tapping into this unique labor pool can be difficult if a business doesn’t know what they are doing. While you are opening yourself up to countless hiring options, you want to be in contact with top-level talent. For your business, you will want a thoroughly vetted and skilled contract worker who you can depend upon.
There are several ways to go about this, yet not all are equally successful. There is always word of mouth, and networking with your current industry contacts who may know a potential fit or fits for your business needs. Additionally, you may choose to go the job board or LinkedIn route. Posting about openings on these sites will definitely generate buzz about your contingent work openings. The only downfall is wading through applications and trying to identify the good candidates from the bad. This is both a time suck and big investment for an individual who may only work for you for a day.
The best way to find high-quality contingent workers is to enlist the help of a top-tier search firm like Merito Group. As experts in the workforce market, we have built a reliable network and can depend on our expansive search capabilities to present your business with the best candidates available.
Knowing the ins and outs of the emerging contingent workforce has led us to help staff thousands of businesses with skill-tested and approved contract-based workers. If you are in the market for freelance or contingent workers, connect with us about your hiring needs.