A contingent worker is an employee who is not part of the company’s core workforce – and is also therefore known as an external worker. This type of worker can be hired on a project-by-project basis, through a temporary placement agency, or as an independent contractor.
Contingent workers are often sought out by companies during times of high workloads or when they need to fill specific skill gaps within their team. They can be independent contractors, freelancers, consultants, and other temporary workers.
In this blog post, we lay out the differences between contingent workers and employees, the benefits and drawbacks of hiring contingent workers, when to hire them, and where you can find the contingent workers you need.
The differences between contingent workers and employees
There are several differences between hiring contingent workers and regular employees. Here are a few:
Shorter term – The main difference is that contingent labor is employed for a limited time for specific purposes. The purpose is either to provide additional help during peak periods, to fill in skill gaps in the workforce, or to provide project-specific capabilities.
Traditional employees are hired for the long term and present different benefits to businesses. They develop an intimate understanding of a business over time. They are familiar with how it functions, the essential daily and weekly tasks, and the industry in general. Businesses rely on this knowledge and experience to run smoothly.
Benefits – Contingent workers do not receive company benefits such as paid vacation time, health insurance, and pension plan contributions. Independent contractors and consultants will usually factor in the cost of these necessities when setting their rates.
Taxes – Permanent employees typically rely on employers to deduct payroll taxes from their salaries. A contingent employee is entirely responsible for their tax obligations.
Classification – Governments will have laws about the employment and classification of temporary workers. These laws and regulations exist to reduce the risks to workers’ employment conditions and determine the appropriate tax status of a worker.
The benefits of contingent workers
Companies benefit from hiring contingent workers in several ways:
Saves money – Companies don’t have to provide them with employee benefits like health insurance and paid time off. Contingent workers are paid an agreed amount for a defined scope of work before their contract starts.
Provides flexibility – Contingent workers are hired only when necessary, giving companies the flexibility to expand or shrink their team accordingly.
Shorter hiring process – While hiring full-time employees can take months to find, interview and screen, finding and hiring a contingent worker is a lot faster. Companies can easily find them through online marketplaces, staffing agencies, or consultant firms.
Allows quick starts – Contingent workers will need some onboarding and orientation, but only on matters that are directly related to their assignment, unlike permanent employees who have a longer orientation and onboarding process.
No training required – Contingent workers are also usually hired for their skills and knowledge, so they won’t need to spend time on training either. They’re able to hit the ground running and get things going right away.
Simpler HR processes – Employers aren’t responsible for a contingent worker’s payroll taxes, retirement contributions, and other human resources department tasks associated with full-time employees.
The drawbacks of contingent workers
Hiring contingent workers has its drawbacks, too. Among them are:
Availability – As with finding permanent employees, finding the right talent to add to your contingent workforce may be challenging. They may be engaged with another project, which means you will have to wait — to the detriment of your project –or continue your search.
Exposed data and security – Contingent workers will likely have access to company data, some of which may be confidential. This risk can be minimized by ensuring that company data is securely managed. These temporary employees should also have proper onboarding, offboarding, and management protocols to ensure data security.
Awkward team dynamics – Short-term workers won’t have had the time to bond with the team they are working with or learn their working styles. A contingent worker may feel like an outsider, and some misunderstandings and delays due to miscommunication can happen.
However, taking deliberate steps to integrate contingent employees into the working team can significantly improve productivity.
Fragmented management – Department managers are often tasked with managing their contingent workers without a cohesive strategy in place. This can create inefficient onboarding and offboarding processes, delayed payments, overspending, non-compliance, and poor performance.
Companies that do thrive on the services of a large number of contract workers use vendor management systems, or VMS, to manage their external workers efficiently.
Separate management strategy – Contingent workforce management requires a different management approach. Managers aren’t meant to supervise, direct or control contingent employees. They can only specify the expected result of the work, but not how the work is done. Performance should be measured based on KPIs defined specifically for contingent workers.
When to hire contingent workers
There are many benefits associated with hiring contingent workers, but they provide the most value in specific circumstances. We outline some examples below.
When you need niche expertise – Some businesses find their talent faster when opening up temporary positions for hard-to-find skills. As independent contractors tend to work on short-term projects, they become available for hire sooner.
To accommodate peak periods – If your business has regular rises and falls in worker demand, it makes sense to consider temporary staff.
To fill in for permanent staff – When crucial full-time employees are away for long periods of time, e.g. for medical or maternity leave, or an extended vacation, companies can consider temporary workers to cover for them.
To complete intermittent or one-off projects – Freelancers and skilled workers are good options, particularly for irregular business needs and short-term projects.
Where to find contingent workers
Online resources – There are numerous job boards, recruitment sites, online marketplaces, and freelance platforms that make it easy to find contingent workers. However, the right platform will depend on your market, your industry, and the specialized skills you need.
You can either search through profiles on marketplaces and platforms for the expert you need. As an alternative, you can post temporary positions with detailed descriptions of the project and the expertise needed.
Onsiter is an online marketplace that’s specifically for finding highly skilled independent contractors in IT and business in Scandinavia and other parts of Europe. It has a free-to-use cloud-based vendor management system called the Onsiter VMS, which allows its users to find and manage their contingent workforce. Users of the Onsiter VMS will be able to get detailed insight into performance and costs, automate workflows, and access tools that will help them reduce spending.
Staffing agencies – Staffing agencies provide contracted employees and direct-hire talent, but there are also agencies and consulting firms that focus on independent contractors.
Right People Group helps companies find independent IT consultants and contractors, saving them the time and effort it takes to find the right talent. They also provide Managed Service Programme (MSP) services for companies that need help in sourcing, engagement, and administration of independent contractors. Right People Group focuses on the countries where it operates, namely Denmark, Sweden, Norway, Finland, Germany, Italy, and Spain.
Online communities – Recruiting from online communities for skilled contingent workers may be unconventional, but can be highly effective. Businesses that need talent fast, like this one, successfully found the IT talent they needed quickly from online communities like Hacker News, Reddit, and GitHub.
