“$1.3 trillion in revenue was generated from U.S. contingent work alone. With so much money at stake, many leading organizations have embraced a more strategic approach to these workers: contingent workforce management.” – Ryan McNally , Magnit Global.
The contingent workforce represents a growing HR trend in the modern job market, where businesses increasingly rely on temporary, freelance, and contracted workers. The flexible nature of contingent workforce structures not only helps companies respond swiftly to changing market demands but also offers workers diverse work opportunities. This article discusses the growing significance of the contingent workforce, its value to businesses, pros & cons, and how prudent management of contingent labor can help optimize its many benefits.
What is the Contingent Workforce?
The contingent workforce consists of non-permanent, non-salaried workers, including independent contractors, freelancers, temps, and service laborers, who work either on-site or remotely.
A contingent workforce allows companies to scale their staff up or down based on business needs without the long-term commitment of hiring full-time employees.
What is a Contingent Worker?
A contingent worker works for an organization without being hired as an employee. Contingent workers provide their services under contract, temporarily, or on an as-needed basis.
Contingent labor is often hired to complete specific projects rather than accepting an ongoing, open-ended workload as permanent employees.
What is the purpose of Contingent Workforce Management?
Contingent Workforce Management (CWM) includes the recruiting, onboarding and managing of non-permanent employees, including freelancers, consultants, and temporary workers.
The field of CWM has become an integral component of total talent management due to the significant advantages contingent workers provide companies. When businesses hire freelancers and temporary workers, they are able to access specialized skills for specific projects without the long-term costs and commitment to full-time employees.
What is the Significance of the Contingent Workforce?
Contingent work redefines how we think of jobs by focusing on flexibility and personal responsibility.Contingent workers allow companies to quickly adjust to new market demands and specific project needs without the permanent ties associated with traditional employment. For workers, these jobs can mean working on a variety of projects and better balancing personal and work life.
These benefits provided by contingent workers afford organizations important strategic advantages. However, contingent work also shifts the responsibility for healthcare, retirement and other benefits from employers to workers. This can put workers at risk as they lose the benefits that normally come with full-time jobs.
As work continues to evolve with advances in technology and global changes, we face important questions about workers’ stability and rights. Contingent jobs don’t offer the same protections as full-time jobs, which leaves workers facing more uncertainty and financial instability. Society needs to find a way to keep work flexible while also giving workers the security and benefits they need.
What have Contingent Workforce Studies found?
The following studies help to paint a picture of the growing importance of the contingent workforce:
- 41% of companies expect to increase their use of Contingent Workers (Source: Deloitte’s Global Human Capital Trends Report)
- 60% of Contingent Workers choose flexible work arrangements voluntarily (Source: Gartner’s Future of Workforce Analytics Report)
- The Contingent Workforce makes up 20-30% of the labor force in developed economies (Source: OECD Employment Outlook)
- Contingent workers contribute 15% to total workforce productivity (Source: McKinsey Global Institute Analysis)
- 35% of Contingent Workers Are Employed in Professional Services (Source: S. Bureau of Labor Statistics)
- 40% of Millennials Prefer Contingent Work Arrangements (Source: Pew Research Center Study on Millennial Employment Preferences )
- The Average Tenure of a Contingent Worker Is 13 Months (Source: ADP Workforce Vitality Report )
Pros & Cons of the Contingent Workforce
Pros:
Flexibility
Employers can adjust the type and amount of labor resources based on current needs, allowing for agility in managing workforce size and expertise.
Cost Savings
Hiring contingent workers can result in savings on benefits, taxes, and long-term compensation costs. This can be especially valuable in industries where financial flexibility is crucial.
Immediate Expertise
Organizations can have on-demand access to specialized skills and knowledge that aren’t available internally. This is particularly beneficial for projects requiring unique or high-level expertise.
Economic Responsiveness
The use of contingent labor can grow with the economy, helping organizations scale quickly without the commitments associated with permanent hires.
Cons:
Job Insecurity
Contingent workers face significant job insecurity and lack the benefits and stability provided by permanent employment. This can lead to high turnover and a lack of loyalty to the employer.
Impact on Business Culture
The frequent change in contingent staff can disrupt the core morale and culture of a business, potentially affecting long-term employee engagement and cohesion.
Training Costs
While contingent workers provide immediate access to skills, there can still be substantial costs associated with training them to fit specific job requirements or to align with company operations.
Risk and Responsibility
There is a heightened risk of occupational injuries and fatalities among contingent workers. They often perform hazardous jobs without sufficient safety training or the ability to advocate for better working conditions due to fear of job loss.
“I have more flexibility and can better collaborate with others in different cities and countries. However, the burdens of healthcare and retirement fall on me.” — IIean H., participant in AARP focus group.
Final Comments
The contingent workforce is changing how people and businesses think about work, offering flexibility for businesses and diverse experiences for employees. Companies can scale quickly to meet market demands while accessing specific skills that drive innovation. At the same time, it’s important to ensure that contingent workers are protected and have access to key health and other benefits. Cultivating a balanced approach that values both flexibility and worker security will enable the contingent workforce to thrive in the evolving job market.
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