What Is Contingent Work & How Do I Know if It’s Right for My Business?

According to a past Ardent Partners report, 62% of businesses consider contingent labor vital to their workforce. The rise of contingent labor can be attributed to various factors, including the Great Resignation post-pandemic, the thriving gig economy, and the shifting attitudes toward more work-life balance. Let’s understand what contingent work is and whether you should consider it for your business. 

What Is Contingent Work? This arrangement hires individuals temporarily, often through contracts that define the employment duration and specific project needs. Contingent workers differ from permanent employees in the following ways: 

• Taxes: While contingent workers make their own contributions, companies are responsible for submitting their permanent employees’ payroll and income taxes. 
• Control: Contingent workers enjoy more autonomy in their assignment selections  work schedules, location, and work techniques. 

Compensation and Benefits: While employees earn predictable salaries, contingent staff are compensated per hour or per project until their contract expires. Access to benefits is dependent upon the type of contingent engagement.  Of course, independent contractors are not eligible for benefits.    

Contingent Labor Categories 

Contingent workers offer unique talents and fulfill different roles. Here are your options as an employer. 

• Agency Contractors – Staffing agencies will source and administer workers on your behalf.  The staffing agency serves as employer to the contractor, providing screening, onboarding, payroll management, tax reporting, and offboarding at assignment end. 
• Internally Sourced Workers Payrolled by a Third-Party  – You may want to engage known professionals for a specific assignment.  Through an Employer of Record (EOR) relationship with a third party, the worker will be temporarily employed by the EOR who will take full responsibility for screening, onboarding, paying, addressing performance issues should they occur, complying with tax and employment regulations, and offboarding at assignment end. 
• Independent Contractors – Independent Contractors are self-employed professionals contracted by a client to perform work.  Work details are specified in a Statement of Work. Payment may be hourly, fixed price, or by retainer.  The independent contractor is a designation established by the Internal Revenue Service (which is why they are referred to as “1099s”), and there are different types of independent contractors, including gig workers, freelancers and consultants. 

Resources with virtually any skill can be attained through a contingent relationship. 

Determining Your Need for Contingent Labor 

After answering “What is contingent work”, let’s determine whether this model is right for your business. 

Project Scope 

You can choose permanent employees if you have ongoing work. But if the project requires specialized skills for a limited duration, contingent workers are your best bet. That way, you can terminate the contract with minimal obligations once the work is done and paid for.   

Labor Costs 

Contingent arrangements allow you to pay for labor only when it’s needed. Rather than project-based compensation, full-time employees receive regular salaries, benefits, and severance payments. This is in addition to recruitment expenses such as advertising, background checks, training, onboarding, and even relocation. Not forgetting the cost of a bad hire is estimated at nearly 30% by the U.S. Department of Labor. 

Skills Gap 

Besides reducing productivity and employee morale, skills shortages affect the quality of output and result in delayed goals. Contingent employees supply skills that aren’t readily available in-house to fulfill immediate needs and beat tight deadlines. They also boost your team efforts without the commitment of permanent expansion.    

Legal Considerations 

Understand how contingent staff differ from employees to avoid the tax liabilities, fines, and back pay associated with misclassification. You can draft a contract specifying the terms of engagement, employee status, and how to resolve arising disputes. The contract can also include intellectual property clauses to safeguard your trade secrets, patents, copyrights, and trademarks. 

Scalability 

Your workforce has to be agile enough to keep up with unforeseen disruptions, seasonal fluctuations, and changing customer preferences. Contingent labor allows you to hire more workers during peak seasons and downsize when the demand is low.  

Streamlining Contingent Labor 

It’s not enough to onboard contingent workers, you need to manage them in the right way to derive maximum value. Here’s how to optimize your contingent workforce. 

• Don’t Skimp on Onboarding – You might be on a tight schedule but taking your time to successfully complete all onboarding steps ensures a smooth transition to increase productivity and align workers with your company goals. 
• Orientation – Besides availing equipment, documents, and other necessary resources, introduce the contingent worker to the rest of your team to enhance collaboration. You can assign a mentor to offer support during orientation and the entire project duration. 
• Define Your Expectations – Clear expectations prevent misunderstanding and instill a sense of responsibility in the contingent worker. Additionally, you can use the expectations as a basis for performance evaluation and resource allocation. 
  Set realistic and measurable goals for the contingent worker, making sure to clarify deliverables and deadlines. Additionally, provide channels to communicate with management and collaborate with the rest of the team. Although you should clarify availability and working hours, leave room for emergencies. Don’t forget to discuss the payment terms including rates, approval process, and payment methods.  

Improve the Contingent Worker Experience 

Contingent workers make the greatest contribution when in a conducive work environment. You can protect the interests of your contingent workers through: 

• Fair Pay – Even when saving money with contingent labor, ensure the compensation matches industry standards.
  Review the region’s cost of living regularly and adjust the pay to reflect standard rates paid by others in those locations for similar skills. 
• Safe Work Conditions – It’s your responsibility to protect your workers’ well-being. Additionally, safe work conditions prevent injuries and fatalities that could ruin your reputation and invite legal liabilities.   
  During orientation train workers on emergency procedures, equipment handling, and task-specific safety protocols. Inspect  work areas for potential dangers and establish open channels to report hazards and accidents. 
• Fair Treatment – Ensure your contingent staff and permanent employees understand their roles to avoid misunderstandings. Provide needed access to work resources, including technology, support services, and documents.  Ensure  non-discriminatory dispute avoidance and resolution—treat the entire labor force’s concerns with privacy, fairness, and urgency regardless of the work tenure.  

Upgrade Your Contingent Workforce With nextSource 

The next step after defining what is contingent work is finding a reliable staffing partner. At nextSource, we’re more concerned about the quality rather than the quantity of placements. That’s why we strive to align candidate priorities with your employer brand for a mutually beneficial relationship. Ready for year-round staffing support? Get in touch with us to experience contingent recruitment in a different way.