What is a contingent workforce?

Contingent workers are a vital part of the workforce. They offer their skills and services on a provisional basis. This workforce segment includes contractors, consultants, freelancers, and temporary workers who are typically under a contract to complete a project or fill a role for a defined amount of time.

Due to the rise in demand for greater work-life balance, more people are joining the contingent workforce—also known as the gig economy—because it offers flexibility and the ability to personalize their work experience. And as the way we work continues to change, more organizations are leveraging contingent and gig workers to fill gaps in their own workforces.

The benefits of a contingent workforce

The concept of a contingent workforce isn’t new. For many years, companies have hired workers to perform specific tasks that require skills the organization won’t need after the project is finished. For example, if you’re a small company looking to rebrand, you probably don’t have an art department that can create a new logo for your organization. Hiring a freelance designer makes sense because their skills will no longer be needed once the project is over. The same goes for remodeling your office space. Your organization doesn’t need construction workers year-round, just for the length of your project.

Contingent workers can help fill other temporary needs as well. Suppose an employee goes on parental leave or can’t work for a certain amount of time. In their absence, organizations may turn to temp agencies for help finding a temporary worker with the right skills to assume some responsibilities. The contingent workforce is ideal for filling immediate gaps and accommodating brief increases in workload. The flexibility of contingent workers allows you to retain their services for a week or several months, depending on your needs. In many cases, a contingent worker’s services can be extended if your needs suddenly change. Many contingent workers are also specialized. For this reason, organizations that leverage the contingent workforce may be able to access high-quality talent they otherwise couldn’t.

Not being on the company’s payroll is another reason why a contingent workforce is an attractive option for organizations. There can be significant cost savings when companies don’t need to pay for benefits such as health insurance, paid time off, and leaves of absence. Also, many contingent workers require minimal or no training, and they often have their own tools and equipment, which can result in additional cost savings.

Why a contingent workforce is crucial to a company

Along with the benefits already described, some organizations turn to contingent workers because they need flexibility. As our world of work continues to transform faster and is often disrupted, a contingent workforce gives companies the ability to scale staff up or down in various business areas as needed. This allows organizations to account for the volatility in their industry and the job market.

Additionally, sometimes companies don’t know what they need. As more baby boomers retire, organizations must rethink roles and job descriptions to adjust for technological innovation, especially if the company hasn’t been upskilling its workforce to remain competitive. Digital skills evolve quickly, so organizations in this situation may not be sure what combination of skills and experience would be ideal. Since there’s less pressure and investment involved in hiring a contingent worker, it gives the organization time to consider what they need, evaluate the role in practice, and decide how requirements for the position should change. And because finding a contingent worker is much quicker than hiring a traditional employee, this approach also benefits the company as they can quickly put someone with the right skills in the right place to keep business moving.

HR and a department head may also find themselves in a situation where they believe creating a new, permanent role would benefit that team, but they’re uncertain or need to convince leadership that adding an employee is necessary. Leveraging the contingent workforce allows them to test their theory, ensure the workload exists to justify the role, and prove that the addition benefits the organization. Sometimes contingent workers grow into their roles so well that they become indispensable. It’s not uncommon for organizations to hire temporary workers into permanent positions later or offer contract-to-hire opportunities. This allows both the company and the person to see if they and the role are a fit without a more serious commitment.

What generations comprise the contingent workforce?

Joining the contingent workforce often appeals to younger generations who have a different approach to work. Whereas their parents may have a live-to-work mindset, Generation Z and some millennials work to live. This shift in attitude has spurred the workforce to demand more-flexible work options and has led to an increase in people choosing freelance or contract-based careers, giving them more freedom and control over their work lives.

Managing a contingent workforce

The employee experience is important—and so is the experience of your contingent workforce. Their interactions with your organization impact your business’ reputation and influence whether they’d work for you again or consider a permanent position within your company if offered one. Their experience also determines whether they would recommend employment with your organization to family and friends. When managing your contingent workforce, you must ensure that each person has the support they need, which will vary based on the type of contingent worker.

As a rule, the more a contingent worker interacts with employees, the more support HR will need to provide. Seasonal and other temporary workers who are in a retail or office environment, for example, will require more extensive onboarding than a contractor remodeling your conference room, who may not require any. While seasonal workers will have a different onboarding journey than your average employee, they will still need to learn the basics such as where to go with questions, when they get paid, how to view their schedule, what the expectations are in their role, and so on. Depending on your organization and industry, various types of contingent workers—including contractors—may need to complete compliance tasks or forms. A self-guided journey makes it easy for any worker to get up to speed quickly.

While some contingent workers may not require training, for those who do, providing the proper training is crucial, as is having the tools necessary to manage them effectively. Supervisors need access to flexible scheduling options to accommodate contingent workers who need to split shifts or have more dynamic availability. Temporary, hourly workers need robust support to track their schedules, breaks, and holiday pay. On-demand pay options allow organizations to meet a new workplace demand—being paid for time worked in advance of the pay cycle. Safety is another critical factor to consider. Every type of worker needs access to health and safety reporting to maintain a safe working environment.

Managing the contingent workforce by integrating technology into the HR system

The technology and tools you use to manage your contingent workforce must integrate with your primary HR system so, as a team, you can provide a pleasant, consistent experience for your contingent workers. As this segment of the labor force continues to grow, organizations will need to find inventive ways to engage and attract contingent workers, which may include perks in addition to bonuses—but providing ample support will always be vital. As the talent shortage continues, organizations must consider how to improve the contingent worker experience and the employee experience to be genuinely competitive in the market.

Learn how an industry-leading HCM solution can help manage a contingent workforce.