Contingent Workforce 101: A Comprehensive Kit for Contingent Staffing

In today’s fiercely competitive business landscape, possessing a diverse skill set, cost efficiency, and consistently high productivity are paramount for achieving success. The ability to swiftly adjust to the fluctuating talent market while maintaining profitability is the driving force behind sustainable growth. Contingent staffing offers businesses the flexibility to adapt to changing product and service demands without the constant need to restructure their workforce. This flexibility is especially crucial for small and medium-sized enterprises, who don’t always have the resources to instantly expand their teams to accommodate sudden changes in workforce requirements.

However, effectively building and managing a contingent workforce demands precise skill recognition and the ability to quickly align talent with specific business needs. It can be a daunting task for companies to maintain a constant pool of skilled contingent workers to meet the constantly evolving demands of the business environment. This guide explores strategies for developing, managing, and retaining a contingent workforce for businesses of various sizes and sectors. But, before we go any further, let’s establish a clear understanding of what constitutes a contingent workforce and what industries they’re the most prevalent in.

What is a contingent workforce?

Freelancers, independent contractors, temporary workers – are all a part of a contingent workforce. Simply put, contingent workers provide skills and services but are not actual employees of an organization.

The monumental rise in the “gig” economy in the last decade has brought about significant changes to the structure of the U.S. workforce and contingent labor has become a popular choice for both workers and employers. According to an article in Forbes, 40% of full-time employees in the U.S. have a freelance side gig. Factor in that 90% of corporate leaders in a recent global survey say they currently use freelancers and intend to increase their reliance on them in the future – plus, a projected increase in freelancers of more than 90 million by 2028, and it’s safe to say, a freelance future is emminent.

Contingent workers vs. full-time employees

The dynamics of a contingent worker are quite different from those of full-time employees. Despite working together, the relationship they share with the organization is very different. It’s important to understand the core differences for an organization to manage both effectively to achieve maximum ROI.

Contingent workers

• Non-employees retained on a project or contract basis either independently or via a staffing agency.
• Employer is not responsible for HR burden including taxation, and/or ancillary benefits.
• Duration of services varies and is not subject to national employment guidelines and standards.
• Contingent workers typically manage themselves or are managed by the staffing agency representing them.

Full-time employees

• Directly hired with the assumption of long-term employment.
• Organization is liable for meeting national employment guidelines and standards.
• Employer is responsible for paying applicable payroll, state, local and federal employment taxes.
• Employees are managed by organization’s HR team or individual.
• Ancillary benefits such as health insurance, retirement, PTO and others are administered by the company.
• Training and employee development is managed by the organization.

What are the different types of contingent workers?

Every industry has its own unique workforce requirements and when it comes to contingent labor, there are a variety frameworks to choose from in terms of the type of contingent worker that is the most compatible with a particular business / industry.

Freelancers: Workers who are self-employed and seek work on a per-project basis are considered freelancers They often showcase a portfolio of work samples to grab opportunities. Graphic designers, copywriters, bookkeepers, and accounting professionals who simultaneously work with multiple clients would fall under this category.

Consultants: Consultants are typically independent contractors with specialized skills in a specific industry or niche. They may offer services like problem discovery, professional advice, and solutions, without any active involvement in the execution process. Examples include quality consultants for a food organization, or marketing consultants for a start-up. Businesses generally involve consultants with deep experience and a good reputation in the market.

Temporary workers: Usually hired via a staffing agency for a predefined duration on as-needed basis, temporary or temp workers are often hired for seasonal work, to fill in for employees on leave, or a labor-intensive project. People such as file clerks, warehouse helpers, construction workers, or harvest season farm employees fall into this category.

Leased employees: These employees are hired through another company or a private employer organization (PEO). The associated company or the PEO has them on their payroll. They have specialized experience and are brought in for ongoing roles. They have a longer association with the organization than temp workers. Industries with a need for verifiable qualifications and specialized experience such as the healthcare and construction industries often prefer leased employees due to the critical nature of some of the tasks.

On-call workers: On-call contingent workers leave their contact details with a POE or on hiring platforms for employers to reach out to them when the need arises. They are paid per project and their skill level varies based on their industry and experience. IT technicians, doctors, and repair technicians fall under this category of contingent workforce.

Contingent workers and Direct Sourcing

For many businesses, a talent pool comprised of contingent workers offers the flexibility to quickly scale their workforce up or down based on market conditions. We explore this in more detail in our white paper: Direct Sourcing: A Powerful Recruiting Solution. But the expansion of contingent workforce solutions into more mainstream talent acquisition strategies via a Direct Sourcing recruitment model illustrates the shifting dynamic in the structure of today’s workforce. The tangible benefits of contingent staffing make it easy to understand why.

Advantages of contingent staffing

• Decreases costs: Engaging contingent talent for short-term (or long-term) projects requiring specific skillsets is more cost-effective than hiring full-time employees. Because there are no costs associated with payroll tax, benefits and other human resource efforts, businesses can decrease costs associated with employee burden. In addition, there can be cost savings associated with office space, and other infrastructure costs if talent is working remotely.
• Enhanced flexibility: A contingent workforce can be hired in an on-demand basis. In a fragile economy, where business requirements and work volume is unpredictable, contingent staffing affords businesses the ability to scale their workforce according to their needs at any given point in time.
• Increased access to expertise: Businesses are able to access virtually any skill set required to complete a particular project without the need to increase overhead by hiring full-time employees with those skills.
• Build agility: Accessing and retaining contingent workers is a much faster process than hiring full-time employees. Faster still with the help of an AI sourcing tool such as the Arya platform. Using predictive analytics, 7 multidimensional data points and 300+ attributes to assess candidate relevancy, Arya facilitates rapid discovery of the talent most likely to succeed in the role you’re sourcing.
• New vision: Bringing on contingent staff can add fresh perspective to your team. After all, every individual brings with them new experience, knowledge, and strengths when it comes to solving complex business challenges.

Potential disadvantages of contingent staffing

While the benefits are clear, there are some potential disadvantages to contingent staffing that should be considered as well to ensure you launch your contingent staffing initiative successfully.

• Lack of reliability: Contingent workers sometimes prefer to work at their own pace. They manage their work according to their own timelines and often business managers are forced to relinquish control over the process. It can also be difficult to communicate with contingent staff anytime the need arises. They may require advance notice to arrange a meeting or a call.
• Risk of misclassification: The U.S. Department of Labor and IRS have enlisted specific guidelines to define if a worker is an employee or a non-employee contractor. Organizations often misclassify workers, which could result in legal penalties and fines. Businesses must clearly define their relationships maintain with contingent workers to avoid regulatory concerns.
• Limited access to contingent worker pool: Sourcing talent in general is challenging in today’s recruiting ecosystem. But finding and engaging contingent workers can be even more challenging, and businesses may find themselves saddled with additional third-party sourcing costs. This is also where an AI sourcing tool such as Arya can be a game-changer. With Arya, recruiters and hiring managers have immediate access to the largest talent database in North America (850+ million candidates sourced from 70+ channels across 150+ industries) making it easy to find the contingent staff you need to build a robust pool of on-demand talent.

Roadmap to building a contingent staffing workforce

A successful roadmap to developing your contingent pool of talent resources starts with doing your homework.

Identify tasks that can be delegated to contingent workers: This requires an analysis of business functions to identify jobs and activities that can be delegated to contingent employees. Managers may decide to balance some workload of their internal team during peak seasons, or fully outsource a piece of work to contingent workers. For instance, graphic designing for a specific project or salary calculation at the end of each month.

Understand what you need in terms of volume: Gauge the volume of work that needs to be allocated to the contingent workforce. This includes predicting potential fluctuations in work volume and planning accordingly to ensure smooth operations.

Conduct a skills gap analysis and identify the skills you need from a contingent workforce: Once you’ve identified what your contingent workforce will be doing, it’s time to map out the skills required for each task. Organizations can use these skill sets to create job descriptions for each role or task that needs to be offloaded to contingent staff. Defining worker personas can also help you quickly source the right contingent workers for the roles more quickly. Learn More about mastering candidate personas here.

Define budget and contract terms: Be fully transparent about budget, assignment duration, and contract terms to ensure all stakeholders are on the same page and to ensure there are no gaps in communication that can lead to confusion. Research compensation rates in the industry to attract and retain top contingent talent. Keep in mind that a well-compensated contingent workforce can significantly contribute to high-quality output and project success in the long run.

Define the scope of work: It’s essential that your contingent workforce understands the scope of work and of workflows. To eliminate confusion and maximize productivity, develop precise work instructions, guidelines, and requirements for deliverables and discuss in detail prior to work commencing.

Prepare for a seamless launch: By implementing a seamless onboarding process. Onboarding is a critical aspect of , not only contingent workforce management, but any type of workforce management. Introducing contingent staffing early on to core team members can speed up the collaboration process and better set expectations for both parties.

Get your work done: After onboarding, it’s time to assign to get your contingent staff to work! Based on the communication terms, you should check on the progress regularly or get daily/weekly updates of the task assigned. Establish a process for change orders or additional issues to reduce any extra work down the line.

Wrap things up properly: Create a two-way feedback channel to strengthen your relationship with your contingent workforce. Once a task is completed, issue payment promptly to retain your brand image and provide feedback. This can help improve you retain valuable contingent workers for future projects.

Legalities around contingent staffing

Misclassification is one of the most common hurdles businesses encounter as they try to build a contingent labor pool. To avoid misclassifying workers, it’s important to be aware of the legislation and regulations surrounding contingent staffing.

Fair Labor Standards Act (FLSA)

Fact Sheet 13 of the FLSA act provides clear guidelines on how to classify a worker as an employee or a contingent labor. These include whether the worker’s tasks are a part of the business’s core competencies, the profit opportunity for the worker, amount of control exercised by the employer, permanency of the relationship, and the amount of initiative that the worker takes to compete in the open market for other jobs.

Internal Revenue Service (IRS)

Organizations can refer to publication 15A by visiting irs.gov to determine the category in which their association with an employee falls. The publication covers the benefits an employee is entitled to, based on the different types of engagement.

State laws

Most U.S. state laws define minimum wages and criteria for determining employment types. Businesses need to familiarize themselves with the regulations in their state to ensure they are meeting the requirements on a state and local level as well as federal.

How can AI technology help with contingent workforce management?

The explosion of AI technologies into the recruiting and talent acquisition industry has taken the industry by storm by automating tedious, time-consuming manual sourcing and a myriad of other workflows. But in terms of helping with contingent workforce management, the right AI sourcing tool can be the difference between success and failure. However, the operative word here is – right. Because all AI technologies were not created equally.

Arya, the AI-powered sourcing platform that empowers recruiters and hiring teams to rapidly source and engage the talent most likely to succeed – is distinctly different from other AI sourcing platforms. Built on multiple machine learning models, predictive analytics, and natural language processing (NLP), the AI in Arya has been learning on the largest dataset in the industry for more than 10 years. What does that mean? Let’s break it down:

• Talent Intelligence around key data points such as location potential, skill set distribution, salary projection, company mapping, and education, etc., to establish more effective search parameters that not only lead you to the most compatible candidates faster, but also empower you with the right recruiting strategy up front for your contingent staffing needs.
• Arya sources, scores, and ranks talent for compatibility, 70+ channels for 90% of jobs across more than 150 industries – in under 5 minutes, reducing candidate review and shortlisting time by 50%.
• Adds flexibility and scalability to your contingent workforce staffing with on-demand sourcing capability. Arya’s Applicants on Demand service eliminated the burden of sourcing and delivers AI qualified, motivated applicants directly into your ATS at a predictable, per-per-applicant rate.

The future of work is changing every day. Keeping up with the competition for top talent isn’t getting any easier in the contingent workforce and everywhere else. Arm your team with the right tools to get the job done. Book your demo today and find out why industry-leading staffing agencies are choosing Arya.

FAQs

What is contingent staffing?

Contingent staffing refers to the practice of hiring temporary or contract workers on an as-needed basis to meet specific business demands.

Are there different types of contingent workers?

Yes! Freelancers, consultants, temp workers, leased employees and on-call workers are all considered contingent workers.

What are the advantages of contingent staffing?

Advantages of contingent staffing include flexibility, cost savings, access to specialized skills, and scalability to meet fluctuating workload demands.

How does AI technology help with contingent workforce management?

AI technology tools like Arya can streamline contingent workforce recruiting processes, provide access to the largest talent database in North America, enhance candidate engagement and much more.

What is the most common risk associated with contingent staffing?

Misclassification is one of the most common hurdles businesses encounter as they try to build a contingent labor pool. To avoid misclassifying workers, it’s important to be aware of the legislation and regulations surrounding contingent staffing.

Resources

[1] https://www.mckinsey.com/featured-insights/sustainable-inclusive-growth/future-of-america/freelance-side-hustles-and-gigs-many-more-americans-have-become-independent-workers

[2] https://www.businesswire.com/news/home/20211208005266/en/

[3] https://www.dol.gov/agencies/whd/fact-sheets/13-flsa-employment-relationship

[4] https://www.irs.gov/forms-pubs/about-publication-15-a