Contingent Workforce 101: A Comprehensive Kit for Contingent Staffing
In today’s competitive business landscape, skill diversity, cost efficacy, and productivity are key for a business to succeed. Agility to scale up and down with fluctuating talent marketplace while ensuring profitability drives growth. Contingent staffing enables a business to address varying product and service requirements without having to continuously change the employee base. This is even more important for small and medium businesses, as they do not have the capability to immediately expand their team to cater to requirements that come up every now and then.
Acquiring and managing a contingent workforce requires intense skill recognition and talent alignment with the appropriate product. It can be challenging for companies to ensure they always have ready contingent workers with adequate skills to meet dynamic business needs. This Contingent Workforce guide focuses on acquiring, managing, and maintaining reliable and ready workers for businesses of different sizes and segments. But before diving into the details, let’s define contingent workforce in the first place.
What is a contingent workforce?
A contingent workforce is the harbinger of the on-demand economy. It enables organizations to meet their skill requirements amid unpredictable market conditions. It provides a business with greater flexibility for scaling up and down, without impacting its permanent workforce. A business can hire global talent and foster adaptability with 24-hour availability to meet the requirements of its global clientele.
From the perspective of contingent talent, they enjoy being their own boss and having the freedom to manage their work pressure and time. This is the reason about 36% of the American workforce comprises of independent workers.
What is the meaning of contingent staffing?
Contingency staffing is a recruitment strategy that enables a business to optimally leverage independent workers to fill skill gaps during times of high labor demand. It is a strategic process of diversifying the skillset and prioritizing talent according to business requirements.
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. This is why it is important to acknowledge their core differences for an organization, to manage both effectively.
|Contingent labor is not on the organization’s payrolls. These individuals are independently hired for a project and invoice the organization for their work. If they are recruited through an agency, the agency invoices the business either hourly or on a per-project basis. In any case, managing their payroll or taxation is not the responsibility of the recruiter.||
An employee works with the organization, irrespective of the work type and volume. The organization is liable to meet the national employment standards and ensure monthly salary payout. The company is also responsible for paying employment taxes on behalf of the employee.
|An organization hires contingent workers for a specific task and duration with defined deliverables. The contract can be extended, or the worker rehired if both the contingent labor and the company agree. In such a case, the terms and conditions for the work and payment are re-established.||
An employee stays with the company beyond the life of a project. Laying off or discontinuing employment need to be executed as per regulations and the terms of employment.
|Contingent talent either manage themselves, or are managed by the agencies that help them to be hired. The contingent workforce receives only limited supervision, training, and employment benefits from the organization.||
Full-time employees are managed by the organization’s HR team. The company invests in training and monitors their work closely to determine their performance and plan employee journeys.
Types of contingent workers
Since businesses have varying needs, it is essential to recognize the different types of contingent workers. This helps to effectively evaluate and engage the most suitable ones.
They are self-employed individuals who seek work and associate with organizations on a per-project basis. They often show their work samples to grab opportunities. Graphic designers, bookkeepers, and account managers who simultaneously work with multiple clients fall under this category. They are typically hired through freelance platforms or by word of mouth.
They are independent experts in an industry with specialized skills. They offer services like problem discovery, professional advice, and solutions, without any active involvement in the execution process. Examples are 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.
They are usually hired via a staffing agency for a predefined duration on a need basis. The need may arise from seasonal demand, an employee on leave, or a labor-intensive project. People such as file clerks, warehouse workers, or harvest season farm employees fall into this category.
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 such as healthcare and construction often prefer leased employees for the credibility and criticality of the tasks.
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.
Pros of contingent staffing
Improve cost efficacy
Engaging contingent talent for projects centered on specific skillsets is more cost-effective than hiring employees. The business does not have to manage their leaves, overtime, or sick days. They are solely responsible for their work quality and delivery timelines. This saves human resource and payroll management costs and effort. Additionally, since they are mostly remote, the organization also saves infrastructure costs.
A contingent workforce can be hired and relieved on a need basis. Thus, the organization can scale up or down in terms of available labor, skillset, and effort with ease. This is of great help in a fragile economy, where business requirements and work volumes are unstable. Overseas contingent employees even extend the working hours of a business, giving them access to wider markets without having to pay overtime to their employees.
Contingent talent has specialized skills. More than 50% of post-grads prefer freelancing over day jobs. Hiring and maintaining skills requires funds and effort, which can be saved by relying on contingency recruitment. Additionally, smaller businesses get access to specialized skills at a lower cost and can deliver superior-quality output. They can even use the opportunity to train internal teams.
Organizations can access contingent workers faster than hiring full-time employees. These workers are also focused on completing the work sooner, as their payment is based on delivery. Organizations can hire them quickly with ready terms of association, compensation, and dissociation. These advantages allow businesses to immediately reap the ROI.
Bringing in a new member adds a fresh perspective to the team. Contingent workers bring new experience, knowledge, and expertise to give a fresh outlook to solve a business problem or deliver a project.
Cons of contingent staffing
Just as every coin has two sides, so does having a contingent workforce. Here are some cons on relying too heavily on these workers:
Lack of reliability
Contingent workers prefer to work at their own pace. They manage their work according to their timelines and business managers are forced to relinquish control. It can also be difficult to communicate with a contingent employee anytime the need arises. They may require a day’s notice to arrange a meeting or a call.
Risk of misclassification
The US 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 (on purpose to save taxes or due to lack of knowledge), which could result in legal penalties and fines. Businesses must remain cautious of the relationship they maintain with contingent workers.
Contingency recruitment process
Contingency staffing gives businesses the opportunity to grow or shrink their workforce. The added flexibility requires management and team leaders to also be dynamic in adapting to divergent working and collaboration styles. This often requires them to redefine ‘professionalism.’ Additionally, the recruitment process must be modified as per the type of workforce recruited:
Step 1: Enlist tasks to be delegated
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 rush hours 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.
Step 2: Outline the skills of the contingent workforce
Using the list created in the first step, a set of skills required for each task is mapped out. Organizations use these skillsets to create job descriptions for each role or task that needs to be offloaded to the contingent staff. Defining worker personas helps in quickly allocating the jobs.
Step 3: Quantify the workload to be delegated
Once the job descriptions and tasks to be delegated are defined, it is necessary to gauge the volume of work to be given to the contingent workforce. It may be wise to slightly overestimate the requirement to compensate for the missing reliability and prepare for a contingency worker’s quality of work not meeting the organization’s standards.
Step 4: Define association methodologies
The business should be clear about its budget, association duration, and terms to allow collaborators and contingency staffing partners to understand the requirements. Additionally, businesses need to prepare the terms of the association to ensure a smooth journey from onboarding to dissociation.
Step 5: Develop clear workflows
To gain immediate productivity, it is crucial for contingent workers to receive precise work instructions, guidelines, and deliverables. This includes timelines, quality checks, and work templates, if any.
Step 6: Recruit contingent talent
With everything planned and documented, the next step is to communicate these with the PEOs and ask for referrals. Businesses often post requirements on online platforms to advertise one or more contingent vacancies.
Step 7: Plan for a smart landing
Onboarding is a critical aspect of contingent workforce management, which inexperienced organizations often miss. It is essential to make the workers aware of your workflows. Introducing them to team members can aid the collaboration process. Communication terms also need to be established, to set expectations for both parties.
Step 8: Get your work done
Once the contingent worker has been onboarded, it is time to assign them the work. Based on the communication terms, an organization can check the progress regularly or decide to get daily/weekly updates of the task assigned. Further, any required changes or quality issues need to be reported immediately, to ensure smooth functioning and reduce rework at a later stage.
Step 9: Say your goodbyes
It is a good idea to develop a two-way feedback channel to improve contingency workforce management. Once the task is completed, clear the payments to retain your brand image. Finally, give and receive feedback. This can help improve associations and avoid roadblocks in the future. This also helps in enhancing future associations with the same worker.
Legalities around contingent staffing
To avoid misclassifying workers, a business must understand the following legislations around contingency recruitment:
Fair Labor Standards Act (FLSA)
The Fact Sheet 13 of the FLSA act gives clear guidelines based on employment factors 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 the publication 15A of the IRS to determine the category in which their association with an employee falls. It covers the benefits an employee is entitled to, based on the different types of engagement.
Most US state laws define minimum wages and criteria for determining employment types. Businesses must understand and adhere to them to avoid any allegations or legal penalties in the event a relationship turns sour.
Tips for efficient contingent workforce management
With the dramatically shifting workforce and workplace dynamics, more businesses are keen on contingency staffing. An increasing number of individuals are also inclined to work on a freelance basis and quit their day jobs. It is crucial for organizations to adopt contingency workforce management best practices:
Provide better onboarding and working conditions
Ensuring that contingency workers receive a warm welcome and smooth onboarding can set the tone for the complete period of association. Giving out company merchandise and introducing a point of contact can help them feel included in the organization. Finally, ensuring that they are provided with all necessary resources and proper work guidelines can enhance their performance and the quality of their deliverables.
Facilitate building connections
It is essential to make contingency employees feel that they belong to the team, especially for onsite work formats. This helps in keeping them motivated and ensures high productivity in the team. Further inviting them to team building activities and offering an inclusive environment can help them keep engaged and focus on work. This can also encourage them to find new ideas and insights to improve the organization’s functions or the projects they are working on.
Present contingency workers with challenges
Temporary or permanent, workers dislike monotonous tasks. Establishing work goals and benchmarks can help improve the efficiency of contingency talent. Additionally, offering them new types of work to give them an opportunity to widen their skillset can be beneficial for both parties.
Provide competitive compensation
The business landscape is competitive, and freelancers claim to earn better than permanent employees within a year of joining the contingent workforce. A business must ensure that good talent is paid what they deserve. Offering competitive compensation plays a key role in keeping future association opportunities open.
Ready access to contingent workers
As contingency hiring becomes more prominent across the employment space, businesses must practice effective contingent workforce management. Since skill matching is critical for contingency recruitment, a business can leverage cutting-edge technologies like AI and NLP to discover the most suitable talent for the role. Arya by Leoforce enables businesses to check candidate compatibility and build a candidate pipeline to have ready contingent labor when required. Schedule a demo now to make contingent hiring future ready.
What is the meaning of contingent staffing?
Contingent staffing refers to the practice of hiring temporary or contract workers on an as-needed basis to meet specific business demands.
What is a contingent worker example?
An example of a contingent worker is a freelance graphic designer hired to work on a short-term project.
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.
What is contingency hiring?
Contingency hiring refers to the process of recruiting and hiring contingent workers to fulfill specific job roles or projects.
What is contingent workforce management?
Contingent workforce management involves effectively managing and overseeing the recruitment, onboarding, scheduling, and performance of contingent workers within an organization.