When it comes to the contingent workforce, the question is no longer whether hiring contingent workers will be valuable for your business, but rather which type of contingent workers you should hire for your needs and your situation.
Hiring contingent labor gives your business flexibility and agility, allowing it to adapt quickly to change in a continually evolving environment. Hiring contingent workers can help plug talent shortages, allow businesses to meet seasonal demands, or even gain specialist expertise only when they need it. The current global work situation related to COVID-19 offers ample proof.
Last year, we saw well-positioned online retailers like Walmart and Amazon hiring thousands of temporary workers to meet increased demand, while hundreds of other businesses in healthcare, entertainment, media, and even the government have increasingly turned to freelance specialists and consultants to get cost-effective and agile expert help.
To fully harness the power of the contingent workforce, you must first understand the different types of contingent workers available to you, including how to make the best use of their talent while mitigating compliance risks. We’re here to shed light on this complicated topic, so you can hire with confidence.
The Difference Between Contingent Workers and Employees
By design, contingent workers are not employees. But what exactly does that mean, especially when you have different types of these nontraditional workers, like temps, contractors, freelancers, and consultants, working alongside your employees?
Great question. First, let’s cover the difference between employees and contingent workers especially as it relates to compliance with IRS regulations. Contingent workers differ from employees in three important ways.
1. Contingent workers are not on your payroll.
By design, contingent workers are not employees. But what exactly does that mean, especially when you have different types of these nontraditional workers, like temps, contractors, freelancers, and consultants, working alongside your employees?
Great question. First, let’s cover the difference between employees and contingent workers especially as it relates to compliance with IRS regulations. Contingent workers differ from employees in three important ways.
2. Contingent workers are hired on-demand for a defined period of time.
Unlike your permanent full-time or part-time employees, you hire contingent workers on-demand and often for a limited duration or project. There’s no commitment to retain your contingent hires beyond the scope of the project or contract.
3. Contingent workers aren't eligible for benefits.
Since they’re not employees, contingent workers don’t qualify for company benefits or other perks like retirement plans and stock options. This doesn’t mean that contingent workers have to do without these benefits entirely, however. In some contingent work relationships, such as when workers are hired through third-party staffing vendors, the staffing company takes care of benefits and perks for contingent workers.
The downside of this is that, depending on the variety of staffing vendors businesses use, their contingent workers may receive uneven benefits. One way to mitigate this is to hire all contingent workers through solutions like Prosperix that act as Employer-of-Record for all worker types and provide consistent benefits for all contingent workers. Not only is this a great option for contingent workers, it also eases the burden of contingent workforce management on your business.
What Are the Types of Contingent Workers?
There are different types of contingent workers best suited to help your business. Depending on the variety of your business needs, you may even find that you could use multiple types in various areas. When it comes to contingent workers, there are three main types:
1. Temporary contingent workers.
Though these contingent workers are employed by a staffing agency, they typically work onsite at their temporary work assignments. These assignments may last anywhere from a few hours to a few months, which means hiring them is a good option for companies that only need additional hands on-deck for a short period of time. For instance, companies that need to scale up for seasonal demand, need a specialized skill for a short-term project, or that have key employees on short-term leave. Hiring temporary workers fills those gaps without needing to provide benefits, pay employment taxes, or even plan for layoffs when extra workers are no longer needed.
2. Consultants.
Experts in their fields, consultants professionally advise businesses within their area of expertise. They often work in highly specialized, complex, and/or technical fields, such as business strategy, marketing, and even patents and intellectual property. Like all contingent workers, consultants are non-employees who aren’t on your payroll. Unlike temporary workers, however, consultants typically work with a high level of independence and, while they offer guidance on strategy, they usually don’t execute the work required to carry it out. Companies most often hire consultants either through consulting firms or as independent contractors.
3. Independent contractors.
This category includes freelancers, consultants, and gig workers who are not represented or employed by any type of staffing agency or consulting firm. They are self-employed individuals who offer their services independently to the general public. This means that they hold responsibility for all employment-related taxes and are not eligible for company-provided benefits. It may make sense to hire an independent contractor when your company needs specialized services or expertise for either a short-period of time or regularly, but not at a full-time level. Other than defining deliverables and deadlines, companies cannot control when or how an independent contractor gets their work done or they risk noncompliance.
Getting Help with Contingent Workforce Management
Each type of contingent worker comes with its own benefits, of course, but also legal requirements to avoid compliance pitfalls. Misclassification of employees, even when unintentional, can invite hefty penalties from various government agencies, while also opening up your business to the risk of class-action lawsuits. The bottom line: Ensure that your human resources and legal teams work closely with your staffing vendors to ensure compliance.
Managing a contingent workforce program is a complex task, but you don’t have to sweat the complicated and ever-changing legal maze around hiring contingent workers. Instead of keeping track of multiple worker types, suppliers, contracts, and related compliance requirements, consider engaging with a solution that offers a single Employer of Record for your contingent workforce program.
Prosperix does just that while also providing a VMS solution that not only simplifies contingent workforce management, but also connects our customers to The Crowdstaffing Hiring Marketplace, where thousands of staffing vendors can work on your open positions. We manage all vendors as well as everything from onboarding to payroll and compliance for all types of contingent workers. With that covered, you can focus on finding the talent you need when you need it, while making use of best-in-class hiring technology.
