Key Points:
- Hiring a contingent worker could benefit your organization, especially during an influx of work or when a complex project is presented.
- The most common compliance issue that employers face with contingent workers is misclassifying them.
- Contingent labor offers a flexible, on-demand hiring basis that can greatly benefit your organization.
Contingent labor is a rising trend as work-from-home and hybrid schedules become the new normal. This new generation of workers looks for flexibility in their work schedule rather than stability (and sometimes even more than salary). It is estimated that at least half of the workforce will consist of contingent workers by 2050, and 32% of organizations in the U.S. prefer to hire contingent workers rather than regular employees.
What is a Contingent Worker?
A contingent worker is a person that is hired on an “on-demand” basis. Contingent workers are not found on company payroll because they are not considered a traditional full-time employee. Instead, they are only hired for certain projects. Common examples of contingent workers are:
- Freelancers
- Independent Contractors
- On-call Workers
- Workers Hired Per-Project
There are advantages to hiring contingent workers rather than regular, full-time employees. In this blog post, we’ll highlight some common benefits as well as disadvantages to consider before making an offer.
Advantages of a Contingent Worker
The following are three of the most common advantages to hiring contingent workers:
1. Cost Efficiency
The amount of money saved on hiring contingent workers is a major benefit for every organization. When hiring a contingent worker, you negotiate and agree on a wage, and pay that wage until the work is done, rather than paying an annual salary. Besides wages, there are other costs that are required for regular employees that you don’t have to worry about when you hire a contingent employee. Unemployment contributions, payroll taxes, health insurance, and paid time off are all costs that don’t apply to contingent workers, saving your organization money.
2. Flexibility
Organizations can hire contingent workers on a per-project basis, then terminate their employment once the work requirement is met. If an organization runs into an employee loss or an influx of work, they can hire a contingent worker for a specific period of time. This can be a great opportunity for smaller businesses, as employee turnover effects them a lot more than larger businesses. Hiring a contingent worker is cheaper, and a much faster solution.
3. Fill the Skills Gap
Contingent workers offer businesses a large pool of talent and experience. These workers are typically already equipped with the skills required to execute a project, requiring little to no training. You can find contingent workers with specific, niche skills to help complete projects your full-time employees don’t have time or bandwidth for. Contingent workers can also give your current employees some insight into what skills they may want or need to learn as well.
Disadvantages of a Contingent Worker
The following are three of the most common disadvantages of hiring contingent workers:
1. Compliance Concerns
When hiring contingent workers, there must be a large focus on compliance. Before considering hiring a contingent worker, these are some factors to think about:
- Data privacy
- Health and safety
- Employment status
- Background checks
- Training
As an HR manager, there is a lot to consider before hiring contingent workers. One of the most common compliance issue that employers face with contingent workers is misclassifying them. It is extremely important to understand who is a contingent worker and who is not, and classify them as such. Another common issue to keep in mind is the responsibility, depending on how workers are hired. With a direct hire, the employer is responsible for providing benefits, but if a contingent worker is hired through a staffing agency, the responsibilities fall on that agency.
It is important to research the laws behind hiring contingent workers in order to avoid the consequences of non-compliance, including:
- Heavy fines and penalties
- Loss of reputation
- Organizational probation
- Employee turnover
2. Management
There are a lot of factors that play into the management and control of contingent workers. First, they often don’t go through an onboarding or training program like regular employees, so they are going to need more management at first. Ultimately, employers must trust that contingent workers are going to do the job that they were hired for and avoid micromanaging, which can take up time and resources.
3. Security Risks
When you hire a temporary employee, you must be aware of the information they have access to. There are often times when offboarding protocols are lacking when it comes to contingent workers, allowing them access to your information for months after their position has ended. It is important to terminate their access to your information immediately when they leave the company. This is a way to keep your company secure and avoid any social engineering attacks. There are a few other steps that you can take to limit security risks when hiring contingent workers, like:
- Using only time-based access
- Be proactive with reporting
- Automate your offboarding process
Conclusion
Hiring contingent workers could benefit your organization, especially during an influx of work or when a complex project is presented. But before hiring contingent workers, be sure that you do the correct amount of research, understand the advantages and disadvantages that come with this type of worker, as well as the laws that must be followed. Learn more about how SentricHR can help you manage your contingent workforce and reduce compliance risks.
