Understanding the Types of Contingent Workers

The term contingent worker is an umbrella term, meaning it can be used in different contexts across an array of professions. If you’re interested in how these workers step in when they’re needed most, we’ll look at different types of contingent workers, their roles, and how they’re different from a traditional employee.

What Is a Contingent Worker?

A contingent worker refers to a person employed on a per-project basis. Unlike full-time or even part-time employees, they do not receive benefits, such as pensions, paid-time off, or healthcare. Contingent workers are usually hired with specific parameters around their employment, including how long they’ll work, what their responsibilities are, and what qualifications they need to apply.

Contingent workers are extremely popular today, particularly when employee preferences have changed over time. Even before the pandemic, this employment category was picking up steam, and it’s only increased since then.

The need for contingent workers has increased for numerous reasons in the past few years. For some companies, it’s a matter of saving money on its labor force, especially if they’re dealing with uneven workloads. Other businesses have structured their entire model around contingent workers, providing flexibility for employees that can’t work a normal schedule. Despite the multiple definitions, there are some key points to understand about how they’re hired, assessed, and paid. No matter what industry you’re in, it’s worth learning the expectations and responsibilities on both sides of the aisle.

Benefits to Hiring Contingent Workers

 

Contingent workers can be drawn to their work for a variety of reasons depending on the individual’s needs and preferences. Some potential benefits include flexibility, variety, independence, skill development, increased diversity, and potentially increased compensation for specialization. As many benefits as there are for the workers, though, there are plenty of benefits for the employer as well.

Quality

 

A contingent worker can be someone who works in a skilled trade or requires no training, meaning you’re paying for quality. Instead of having to invest a certain number of hours on training someone — which often defeats the purpose of hiring an employee at a lower hourly rate — you get someone who can jump right into the role.

The focus is not on the process that the person is taking, it’s the results that they produce. So, instead of having to walk someone through the entire game plan and monitor them throughout, you get exactly what you’re looking for without the hassle.

Convenience

 

Most companies can find contingency workers who are available when they need them most. The catch is that intermediaries are usually the key to capitalizing on this particular. It’s worth noting that you can hire a contract worker directly, and it might be incredibly easy if the economy is in freefall. However, most need a connection to track down workers that fit the bill.

Speed

 

A contingent worker can typically start when you need them to. The right supplier can expedite the search, supply you with a list of candidates, and set up the contract as fast as possible. You can also hire a contingent worker directly. Should the contract go well, you can have a discussion with the worker and then either assign another contract or issue an extension.

This benefit can be a lifesaver when there are skill gaps or hiring shortages. Staffing snags are common in companies, but the ripple effects can be disastrous. One hole in the company can end up crippling multiple departments. A contingent worker can step in on an ad-hoc basis, streamline operations, and keep revenue stable for the company.

Costs

 

While contingent workers may look a little more expensive at first glance, consider how much you’ll save in benefits, retirement costs, and paid time off. Plus, all taxes are managed by the employee, which can save the accounting team and payroll operations some hassle. In addition, contingent workers are non-salary employees. Once the project is done, you no longer have to pay them anymore.

Improved Morale

 

Layoffs aren’t just difficult for those who are cut, they’re difficult for everyone in a company. It can erode the trust between employee and employer and lead people to start looking for another position. With contingency workers, the expectations are set early on, so everyone is comfortable with the arrangement.

 

What are the Different Types of Contingent Workers?

The term contingent worker can refer to anyone in the workforce. From healthcare to data entry, any organization in the world can make use of contingent workers for either one-off or recurring needs. We’ll look at the categories, and the general parameters that define them.

Temporary Workers

A temporary worker is an employee who works with a company for a purpose for a short period of time. While there is no hard-and-fast cut-off for this term (e.g., 3 months), it’s usually under a year and under 1,000 hours.

For instance, a retail employee might be brought in from November to January to help with the holiday rush. Or an accountant might be brought in to complete a complicated internal audit. Temporary workers can be hired directly by the company, or companies can go through temp agencies to recruit and sift through the candidates. It is possible for temporary workers to be hired on as full-time employees based on the tenure of the employee, but it is by no means an obligation.

Consultants

A consultant is a contingent worker hired to improve the direction and strategy of the company, rather than for a specific project. For instance, they might be hired if revenue is slumping or if a company has decided to branch into unknown territory.

So if a formal-dining restaurant wants to establish multiple casual spin-offs in nearby cities, they might hire a consultant to understand everything from the demographics to the zoning regulations in each location. Or if a business has fallen out of favor with their core demographic, they might hire a consultant to understand what’s driving away their customers and whether it’s worth regaining their trust or going after an entirely new market.

Independent Contractors

An independent contractor functions as a sole business entity rather than as an employee. For instance, Uber and Lyft famously hire independent contractors, and those independent contractors are free to work with multiple rideshare companies without repercussions.

An independent contractor can be hired on as a temporary worker or as a consultant, though they may have more requirements based on their designation. For instance, if they have their own LLC, they may need to be paid a certain way or they may require more formalized partnerships. With temporary employees, you’re required to file your payroll taxes, track time, and send out W2s. With independent contractors, you’ll need to send a 1099 if you pay them more than $600 in a year.

 

What to Consider Before Hiring Contingent Workers

 

Compliance & Risk Mitigation to Employment Laws

 

There are certain companies who will take advantage of contingent workers, which has led to a national debate about how to restructure employment laws. Certain states, like California, have already made changes to regulations. If you want to stay in compliance, you’ll need to know how to stay within the letter (and, ideally, spirit) of the law.

 

Flexibility for Workers

 

Contingent workers are ready to get straight to work, but that doesn’t mean there won’t be any unexpected events along the way. Whether it’s an economic change or family tragedy, you’ll want to build in some flexibility to the project. If you’re wholly dependent on one contingent worker, it can be just as debilitating to lose them as it would be a full-time employee.

Few Restrictions on Contingent Workers

 

While contingent workers can be highly skilled professionals (e.g., software engineers, etc.), they don’t have to be. You can hire people for simple tasks like data entry all the way up to your most complex endeavors. Plus, you can have them work either on-site or off, depending on the needs of the project.

Avoids the Need for Layoffs

 

It’s unfortunately easy for companies to overestimate the workforce they need, particularly if they’re in a sustained period of growth. Only when it’s in the rearview mirror do hiring managers realize that they overstepped in terms of full-time staff. When you hire contingent workers, your workforce is much more flexible allowing your headcount to change according to the ebbs and flows of your business. 

Visibility

 

Contingent workers are there to do their jobs, and they’re used to working under the radar. Ideally, you hire them, they finish the work, and then companies can reassess the next best steps. Of course, this doesn’t mean that you’re entirely hands-off.

You need to know who’s working on different projects, where they are, what their role is, and how many hours they’re putting in. This standardization is critical to getting the job done — whether you’re managing on your own or employing a Managed Service Provider.

 

How to Manage Contingent Workers

When there are multiple types of contingent workers, the challenge lies in management. From invoicing to taxes to scheduling to onboarding, even small companies can get lost in the details. If you’re looking for a consultant company with experience in the modern landscape, Monument Consulting is a Managed Service Provider that provides clients with the capacity, support, and advice they need to drastically cut back on risk. If you’re looking for a partner that can find solutions to even the trickiest problems, contact us today to learn more.