Who Are Contingent Workers?
Contingent workers work with companies/individuals either remotely or on-site on a per-project basis. They are highly-skilled people hired to complete described tasks under the statement of work (SOW) provision. Once they complete the project, they leave. They may be called back if another project arises.
These workers are not permanent employees of the organization. Hence the company and business owner have no responsibility for providing them with continuous work.
Contingent workers are also referred to with other names such as:
- Gig Workers
- Non-payroll Workers
- Flexible Labors
- Temporary Staff
- Individual Resources
- Agency Workers
- Outsourced Workforces
How Are They Different From Regular Employees?
Contingent workers work with a company on specific projects, while regular employees complete tasks daily and continue to work with the company every day. Contingent workers do not complete company tasks every day but rather complete the duties based on the project requirements and follow a contract schedule.
Unlike employees, contingent workers are not trained on the job but are hired for their specific skills. They know what to do for the project and require minimal guidance. They are not paid like salaried or hourly employees. They are paid for the project they are hired to do. The project’s pricing is set before they start working on the project.
Contingent workers are not provided with employee benefits such as retirement plans or healthcare. They have to file their income tax instead of getting it deducted by the company’s payroll.
What Are the Benefits of Hiring Contingent Workers?
There are several strategic benefits to hiring contingent workers. They are:
The biggest advantage of hiring contingent workers tends to rely on the financial side heavily. When you hire contingent workers, you can have some cost cuttings in terms of:
- You don’t have to offer them health benefits or any employee benefits package
- You won’t have to provide them with paid sick leaves and vacation
- You don’t have to pay them for overtime.
With all these benefits, you save costs on employing a worker and keep administrative costs with the payroll and HR.
No Tax Responsibilities
Contingent workers are responsible for filing their taxes. The company they do projects with is not liable to withhold and deposit payroll taxes. Moreover, you do not have to pay employer contributions for Social Security and Medicare Taxes.
Companies have to adapt quickly, respond, and change to new market situations. You can engage resources and meet the demand through temporary workers depending on the market conditions.
Hassle-free Onboarding Time
Operating with a contingent workforce helps managers in making informed hiring decisions. Moreover, the onboarding time of contingent workers is short and speedy. The entire process of inviting applicants, conducting interviews, recruiting candidates, holding orientation, and conducting training sessions is eliminated with contingent workers. You can simple search online, contact good staffing agencies, negotiate rates, and hire contingent workers according to your requirements.
Larger Talent Pool
Whether contingent workers are sourced and engaged from a staffing agency or through the company’s sourcing team, the employers will have access to a wide range of talent pools to choose from. This is highly beneficial for short project-based work or projects that require specific skills your employees might not possess.
Filling the Skills Gap
Employers will have great access to varied expertise and can find the specific skills and talent they need for a particular project which they cannot find internally. Contingent workers can bridge the skills gap by providing specific skills required for a project.
Shift of Duties
Organizations that hire staffing agencies for contingent workers shift the burden of hiring on these agencies. This puts the responsibility of mitigating the risks associated with a contingent workforce on the agencies.
In every day-to-to operation, often it gets difficult for management to find new paths for business development. In this matter, an expert from outside the organization can bring a fresh perspective, bringing change to the organization’s strategic direction.
What Are the Disadvantages of Hiring Contingent Workers?
While there are several great benefits of hiring contingent workers, employers face a few disadvantages. These include:
Contingent workers are going to be working at their own pace and time. They will put their own hours into the projects. If you have any time restraints or specific availability demands, mention them beforehand. Otherwise, contingent workers will have the freedom to fulfil their obligation in a way that suits them.
Some employers see this lack of control as a problem.
Chances of Worker Misclassification
Worker misclassification happens when a company misidentifies its relationship with the contingent worker. This leads to hefty penalties to the company and back payment to contingent workers.
The loyalty and commitment of contingent workers lie to their work and not your company. They are more dedicated to the project rather than the organization. Since they will work with other companies while working with yours, they would not go above and beyond what the contract specifies.
There are several tax risks in hiring contingent workers. Overseeing tax documentation is complex, and if you accidentally show an employee as a contingent worker, you may end up paying hefty fines and penalties in addition to paying missed employee taxes.
Also, remember that you will need to update your tax information if you plan to hire the contingent worker as a full-time employee.
Contingent workers are temporary. This makes your organization vulnerable to potential unethical behavior. Unethical behavior includes frauds that will tarnish your company’s reputation and financial frauds that will target the company’s invoice payroll process.
Ineligibility for Government Programs
Corporations get several benefits from the government by employing people full-time, especially in times of duress. For example, companies were able to apply for PPP loans and employee tax credits to help keep people employed and stay afloat but a company that relied mostly on contingent workers did not meet the eligibility requirements.
Technology Being an Aid
Today hiring has become a challenging task. If you plan to hire a talented contingent worker, you will probably find them in abundance. However, this extensive availability clogs the hiring process, making it difficult for hiring managers to sort resumes and pick the right talent for the organization. But technology has provided a solution for this problem.
With the availability of an applicant tracking system like Jobsoid, the hiring process becomes manageable. It is designed to automate the entire recruitment process of HR managers and recruiters, making it easier for everyone.