What is a Contingent Workforce and Why an Organization Needs It

August 12, 2021

Today, businesses constantly strive to maintain a competitive edge in this highly competitive and volatile global market. Resources being the most expensive investment, companies try to achieve maximum efficiency. However, challenges like skill shortages and unplanned attrition are causing project delays and budget overruns, adversely impacting business profitability and sustainability.

An on-demand workforce can be a saving grace to overcome these resourcing challenges amid the rapidly evolving business dynamics. They come with no extra frills, like lead time or overhead costs, and are viable for project-centric organizations.

To understand how indispensable a contingent workforce in the modern is, let’s look at the findings of the Oxford Economy’s Workforce 2020’s survey.

83% of executives worldwide use contingent and seasonal workers. 

This article walks you through the benefits of a contingent workforce and the best practices to manage it. Let’s start by defining a contingent workforce first.

Future-Proof your Workforce against Market Uncertainties

1. What is a Contingent Workforce?

A contingent workforce is a pool of workers that an organization hires temporarily to work on a project. For example, if you require a voiceover artist for your videos, you can hire them on a video-to-video basis rather than keeping them as permanent employees.

Various companies around the world today maintain a blend of contingent and permanent resources for their projects. However, before exploring the benefits of contingent workers, it’s essential to understand the key differences between a contingent worker and a permanent employee.

  • Unlike permanent employees, a contingent worker is not on the company’s payroll. Instead, depending on the contractual agreement with the employer, they are either paid on an hourly basis or by deliverables completed. Larger organizations use their empaneled vendors who provide contractual workers as and when needed.
  • A contingent worker is generally not eligible for perks, leaves, yearly appraisal, etc., and other traditional employee benefits.
  • Unlike regular employees, there is no contractual obligation to continue with a contingent worker after completing the work. Contingent workers are typically there for a limited time or purpose beyond which you can discontinue their services.
  • A contingent worker can work independently, or the staffing company that leases them to companies manages the on-demand workforce. So, there is a minimal requirement of supervision or training, and they are primarily prepared to do the tasks you assign them.

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2. Types of a Contingent Worker

A contingent worker falls under one of the primary categories as follows.

I. Freelancers

A freelancer is a self-employed individual to whom you can outsource your tasks and pay by the hour or deliverable quantity based on the nature of the job. An independent blogger is an excellent example of a freelancer. A company can pay them a fixed amount per word or article as they agreed upon mutually. Moreover, a freelancer typically has no fixed start date or end date, unlike other types of contingent resources. A very closely related type of contingent worker to this is a gig worker. The difference, however, is that a freelancer is more autonomous in terms of terms and conditions, more specialized, and open to more specific skill-intensive tasks.

II. Contractor

A contractor is an individual or a group of individuals hired for a fixed time, often for a multi-faceted project. There is a predetermined start date and end date laid down in the contract between you and the contractor. Independent contractors provide the niche skill sets essential for a high-value project that requires heavy investment and specific expertise. For instance, constructing a new airport requires architects, designers, financiers, and more such experts. A contractor is the one who can provide you with all this expertise under one roof.

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III. Casual Earners

A casual earner is a contingent worker, similar to a freelancer. However, there is no guaranteed availability of work in the future or guaranteed hours of employment. A company hires casual earners only when they need contingent workers to cater to peak season demands. They work irregular hours and mostly in shifts, unlike a contingent worker who can work anytime throughout the day. Some good examples are daily-wage laborers and workers hired to handle the holiday rush in retail outlets.

IV. Temporary Workers

A temporary worker lies somewhere between a contingent worker and a permanent employee. They keep getting “on-demand” work from different companies and rely on staffing agencies or their current client to get a more permanent role. The staffing companies also offer them more protection as compared to any other type of contingent worker. Additionally, they stand higher chances of getting a permanent job as compared to other contingent workers.

3. What Are Some Advantages for Firms Hiring a Contingent Workforce?

Statista forecasts the gross volume of the gig economy to touch $455.2 in 2023.

This figure highlights the growing importance of tapping into a contingent workforce or gig economy in the present-age business scenario.

Let’s delve into the benefits of contingent workers in detail.

I. Cost-Effective for Short Assignments

When you hire a contingent workforce for short-term assignments, it helps you reduce expenses. Unlike regular employees, you don’t need to manage and bear their overhead costs. Moreover, companies need not provide them with other employee benefits like health insurance, perks, paid time-off, etc. Therefore, a contingent workforce helps you complete short-term assignments or projects faster and in a cost-efficient manner.

5 ways to Reduce Project management cost

II. Greater Flexibility

Business agility makes an organization ready to adapt to market changes swiftly and economically. It strengthens its ability to deal with uncertainties and market volatility by evolving values, work culture, and technology. A contingent workforce helps drive business agility by providing a company more flexibility. You can continually expand or shrink a contingent workforce as per ever-changing requirements, unlike a permanent workforce. Furthermore, flexible working schedules and better work-life balance help boost the efficiency and productivity of contingent workers.

III. Fresh and Diverse Perspectives

Sometimes, a company requires a fresh and “neutral” way of looking at things. Contingent employees gives you that new perspective. Every contingent worker brings their specialized skill sets and niche expertise to the table. Besides, contingent resources have no close ties with the company and look at everything unbiasedly. As a result, it opens the door to fresh and diverse viewpoints that benefit a firm.

IV. Better Access of Niche Expertise to Fill Skill Gaps

Enterprises find it practically challenging to maintain a permanent workforce with expertise in all areas all the time. They are supposed to cater to the constant need for specialized skills varying from project to project. Besides, skill sets are scarce and expensive, making it economically non-feasible to hire them full-time sometimes. Now, this is where a contingent workforce with niche expertise comes in handy for plugging those skill gaps effectively.

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V. Reduced Onboarding Time and Easy Scaling of Projects

The onboarding process for a contingent worker is often shorter and speedier. It doesn’t involve inviting applications, conducting interviews, recruiting candidates, holding orientation and training sessions, and other formalities as in a regular employee’s recruitment. Instead, you can simply search online, contact good staffing companies, negotiate the prices, and hire the right contingent workers. Further, you can scale projects anytime by increasing your contingent pool size without compromising the quality.

VI. More Freedom to Try New Approaches

Diversifying products and services is the key to keeping up with changing market demands and enhancing customers’ experience. Diversification, however, is not an easy feat – especially when there are limited resources having niche skills. Hiring a permanent workforce for a new service without testing the waters can lead to a huge capital loss, heavy debts, liabilities, and other consequences. On the other hand, a contingent workforce gives you the room to experiment with new and “out-of-the-box” ideas and innovations. It’s because you can easily walk away from non-feasible approaches without any long-lasting repercussions.

innovation management and why is it important

4. Best Practices for Contingent Workforce Management

I. Run a Background Check Before Onboarding

A thorough screening is essential before onboarding a contingent worker. One can go through their testimonials and contact the firms with whom the candidates have worked beforehand. All this information at your disposal helps expedite the process of making the right choice for your contingent workforce. In addition, it helps avoid issues like deterioration in project quality, skill mismatch, or delays in tasks at a later stage.

II. Develop a Project Specific Onboarding Process

A contingent workforce is for projects that need specialized and niche skills on an urgent basis. Having the same recruitment process for both an on-demand workforce and a full-time workforce isn’t feasible. It delays the onboarding of the workforce for critical project requirements and fails to serve the very purpose of just-in-time scheduling. Therefore, develop a proper and separate project-specific onboarding process to facilitate easier and faster hiring of contingent resources.

What is Workforce Planning & How to Master it?

III. Foster Good Relations with Your Contingent Workforce

Even if a contingent worker is not long-term, developing good relations with them is a wise choice. Ensure that your contingent worker(s) get the right technology, conducive environment, and inclusive work culture. Strengthening your connections with your contingent workers sets the stage for working with them again for future projects. Happy contingent workers will also spread the good word about your firm among their peers. In addition, it will pave the way for the recruitment of contingent workers for more staffing agencies due to your good reputation.

IV. Manage Your Workforce’s Performance for Future Records

Maintain the record of every contingent worker that you’ve hired so far. Compiling this data helps you keep a better track of them. For example, you can sort your previous contingent workers by their expertise and skillsets. Also, maintain a repository of their past achievements, contributions, and USPs that helped you in your earlier projects. It will help you better visualize the contingent workers you can hire again for your pipeline projects.

V. Onboard Contingent Resources from Empaneled Vendors Only

Hiring contingent resources on a random basis every time may not be a good idea for two reasons. First, it increases the probability of hiring non-competent contingent resources with no proven track record or matching skill sets. Second, chances of unfairness in onboarding may increase without a list of empaneled contingent vendors to provide contingent workers. For example, people in influential positions may pull strings to get the contract passed to their acquaintances, eroding the transparency. Therefore, create a list of empaneled vendors to hire contingent resources for enhanced quality and clarity.

Guide to resource capacity planning

5. How Can Resource Management Make Contingent Workforce Management Effective?

Working at a large-scale enterprise makes it practically unfeasible to stay abreast of the vast expanse of the resource pool, such as their availability, skills, etc. At the same time, with insufficient visibility, resource managers cannot precisely gauge the need for a contingent or permanent talent pool. Thus, companies should invest in good resource management software to stay ahead of the curve and forecast future skills’ demands. Its advanced features will enable you to predict demands for specialized skillsets for your upcoming projects. Additionally, managers can look at the existing capacity and identify the skills they may need to hire on an ad-hoc basis.

Moreover, the tool provides real-time updates that enable stakeholders to assess the available permanent workforce’s workload. They can also check their future allocations to determine their utilization levels. For instance, you require a specific resource for one or two projects, but your existing workforce functions on stretched timelines. In this case, real-time updates and foresight will indicate the need to hire contingent workers well ahead of time. Further, you can track your contingent workforce’s real-time utilization with forecast-vs-actual reports to ensure that they meet set deadlines.

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6. Contingent Workforce – A Way Ahead for Workforce Dynamics

A contingent workforce has undeniably emerged as a highly flexible and cost-effective alternative to traditional resources. Contingent workers supplement your permanent employees, help meet your skill demands at possible costs, and expand the scope for new approaches.

To sum it up, a contingent workforce is one of the critical ways to future-proof your workforce against market volatility. If you also want to align your enterprise with the changing dynamics of the workforce in today’s tech-driven world, it’s time you tapped into contingent workers.

7. The Glossary

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8. SAVIOM Solution

SAVIOM has over 20 years of experience helping multinational clients manage their resources efficiently and effectively. With over 20 years of experience, this Australian-based MNC has a global presence across 50 countries and has helped 100+ clients meet their specific business goals. Saviom also provides tools for project portfolio management, professional service automation, and workforce planning software. So, SAVIOM can help your business to establish an efficient system geared towards your specific business challenges.

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