The concept of a contingent workforce has been a staple in most companies’ workforce strategies for decades. And while the number of U.S. contingent workers – and businesses’ reliance on them – has grown reliably over the last 15 years or so, the rising need for workforce flexibility fueled by the pandemic has accelerated this growth. More than ever, big and small businesses alike are leveraging the power of a contingent workforce to stay agile, innovative, and competitive.
So what exactly is a contingent workforce, and how can you successfully integrate contingent labor into your operations? Let’s dive in.
Understanding the Massive Contingent Workforce Labor Pool
The contingent workforce essentially represents non-permanent workers who perform services for a client. These can be freelancers, independent contractors, temps, gig workers, Statement of Work (SOW) consultants, and even larger consulting firms. The term “contingent workforce” can reflect an individual companies’ pool of non-employee labor, or the entire national or global contingent labor force.
And this labor force is huge. According to MBO Partners’ 2023 “State of Independence” report, there are over 72 million U.S. workers who work on a contingent basis at least part of the time – representing an astonishing 45% of the U.S. labor force. And as we alluded to above, the pandemic spurred significant growth in this population: the number of full-time independent workers jumped 91% since 2000, while the number of “occasional” independents skyrocketed by 132% over the same period.
Of course, you can’t have this sort of supply without significant demand. Businesses in every industry are increasing their use of contingent labor and changing how they operate to accommodate the nuances of independent work. According to a 2022 Deloitte study, more than 4 out of 5 businesses are making changes to improve how they integrate contingent labor into their workforces.(By the way, if you are new to this concept and want to better understand the basics of contingent work, Prosperix’s blog is a great place to start.
Why Go Contingent?
There are several compelling reasons why businesses use contingent workers. Most notably, they offer far more flexibility than full-time staff, enabling companies to scale up or down quickly in response to market demands. They also bring specialized skills for specific projects without the long-term commitment of a full-time hire. And this model can be cost-effective as well; while contingent workers’ rates may sometimes seem higher at first glance, they’re ineligible for their client’s benefit programs and don’t require much of the overhead associated with permanent employment.
Building a Successful Contingent Workforce: Strategies and Best Practices
The process of integrating a contingent workforce into an overall labor strategy can be as individual as the companies that leverage such workers. The steps below therefore reflect some very basic and general guidelines that will likely be common to most initiatives.
1. Define Your Goals
Start by identifying what you want to achieve with your contingent workforce. Are you looking to fill a skill gap, handle seasonal demand, or undertake a special project? Clearly defining your objectives will help you pinpoint the type of talent you need and the best means of finding it.
2. Focus on Quality Recruitment
Just because someone is a contingent worker doesn’t mean your selection criteria should be less rigorous than that of their full-time counterparts. Use a combination of job boards, social media, and professional networks to find the right talent. Platforms like LinkedIn, Indeed, and Upwork are great places to start, and there are dozens of others out there that may have just the specialized skill set you’re looking for.
3. Streamline Onboarding and Integration
A smooth onboarding process gets people to work faster and leaves a great first impression for your business (which is important if you want to re-engage a given worker down the road). Even though contingent workers are not permanent, they should still understand your company’s culture and work processes. Provide necessary training and resources to help them integrate quickly and efficiently.
4. Foster a Culture of Inclusion
Make your contingent workers feel like they’re part of the team. Inclusion can increase engagement and productivity. Regular communication, team-building activities, and involving them in decision-making processes can go a long way to fostering successful projects, a happier workforce, and long-term relationships.
5. Use Technology for Management
Managing a contingent workforce requires a different approach compared to traditional employees. Find the right workforce management software for your situation, and make sure it handles scheduling, tracking, and payment processes efficiently. This not only saves time but also minimizes errors.
6. Ensure Legal Compliance
Different laws apply to contingent workers compared to full-time employees, and navigating the legal landscape is crucial. If you engage someone as a contingent worker but treat them more like an employee, you run the risk of “reclassification”–that is, when a labor or tax authority reclassifies independent workers as your employees (and levies heavy fines and back tax payments along the way). And to make matters worse, different authorities and jurisdictions have different standards for independent contracting.
So you’ll need to make sure you’re compliant with all labor laws and tax regulations. For starters, have clear contracts outlining the scope of work, payment terms, and confidentiality agreements. But that’s not enough–the safest route is to bring in an expert or engage your contingent workers through an external engagement services provider.
7. Measure Performance and Provide Feedback
Just like with permanent employees, setting clear performance metrics and providing regular feedback is important. This helps maintain quality and identify areas for improvement.
8. Build Long-Term Relationships
Consider your contingent workforce as a talent pool for the future. Building long-term relationships can be beneficial. When an additional need arises, you’ll have a go-to list of proven talent.
9. Embrace Diversity
A diverse workforce brings a variety of perspectives and ideas. Embrace diversity in your contingent workforce strategy to foster innovation and creativity.
10. Stay Ahead of Trends
The gig economy is continuously evolving. Stay informed about trends and adapt your strategies accordingly. This proactive approach will keep you competitive and attractive to top talent.
Building a successful contingent workforce is not just about filling immediate gaps. It’s about strategically leveraging talent to drive innovation, flexibility, and growth. By following these best practices, you can create a dynamic, agile, and diverse workforce poised to meet the challenges of the modern business landscape.
Remember, the key to success lies in treating your contingent workers not as temporary fixes but as integral parts of your business journey toward success.