Businesses today are continuously striving to keep a competitive advantage in this highly competitive and turbulent global market. Because resources are the most expensive investment, businesses strive for optimum efficiency. However, difficulties such as skill shortages and unanticipated attrition are generating project delays and budget overruns, which are having a negative impact on corporate profitability and sustainability.
In the face of rapidly changing company circumstances, an on-demand workforce might be a lifeline in overcoming these staffing issues. They have no extra frills, such as lead time or overhead expenditures, and are appropriate for project-centric enterprises.
This article discusses the advantages of a contingent workforce and the best management practices. Let’s begin by defining a contingent workforce.
What is a Contingent Workforce?
The term “contingent workforce” refers to a labor pool made up of workers from various occupational categories who are hired by corporations for a specific time, type of work, or project. Modern organizations increasingly use both a contingent workforce and permanent personnel on indefinite contracts, and they benefit from both models.
The picture of the contingent workforce is not straightforward. Contingent workers may fall into a variety of overlapping categories, depending on the business sector, country of operation, and individual scenario. When offering an outsourced service, other companies might also be part of the contingent workforce. As an example:
#1. Consultants and independent contractors
In the United States, a contingent worker is frequently an independent contractor or freelancer, also known as a ‘1099 employee’. This type of worker is frequently employed when projects necessitate a high level of knowledge or experience that is not available in the permanent workforce. Graphic designers and video editors, social media and marketing professionals, computer programmers, app developers, and web developers are some examples.
#2. ‘Zero hours’ employees
Zero-hours employees are neither guaranteed nor compelled to work the hours offered, which is common in the UK but strictly regulated or prohibited in some nations. Zero-hours workers may be eligible for national minimum wage, paid holiday, work-related costs, and other benefits under the conditions of their contracts.
#3. ‘On-call’ personnel
Contingent workers may be zero-hours workers, casual employees, or permanent employees working overtime under their usual contracts. Many industries have a “bank” system in place where one or more types of workers, such as care workers, medical staff, or cleaners, can be called in to cover surges, sickness, or other emergencies.
#4. Temporary employees
Temporary employees are typically hired on fixed-term contracts through an employment agency or directly by a hiring company. Pay, sick leave, and vacation time will be determined by national legislation as well as any provisions agreed to in their particular contracts.
#5. Temporary personnel
This word is frequently used to characterize workers who provide flexible or irregular services, typically in industries with seasonal or otherwise varying demand, such as textile pieceworkers and warehouse packers. Depending on specific contracts and local legislation, these workers, contractors, self-employed individuals, or others may be classed.
#6. Third-party service providers and government agencies
Management consultants, accountancy firms, and recruitment agencies may all contribute a component of the contingent workforce, providing access to a pool of high-level talent and knowledge that other companies, large and small, lack in-house.
Changing Workforce Trends
The aforementioned contingent workforce dynamics (skills shortages, retiring boomers, and a need for flexibility on both the employer and employee sides) have an impact on firms’ so-called human capital architecture.
However, if we look at the contingent workforce patterns over the last few decades, we can see how this model is changing. Tasks that were once vital are now frequently performed by contingent workers or outsourced (for example, IT, accounting, and administrative services). As a result, an organization’s core workforce shrinks while its contingent workforce expands.
What are the Benefits of Using a Contingent Workforce?
The primary benefit of a contingent workforce for firms is overall flexibility, which subsequently flows into a variety of more particular benefits.
#1. Responsiveness in business
A contingent workforce enables businesses to respond effectively to changes in demand in various areas or marketplaces. When the volume of work increases, you can call in your contingent workforce. There is no need to formally lay off or reward long-term employees when business slows. Access to a contingent workforce in priority countries enables international corporations to quickly shift their focus across regions as business demands dictate.
Permanent and fixed-term personnel, on the other hand, must constantly be paid and deployed regardless of the economic or business situation. Terminating employment when there is little business or when individuals lack the necessary skills and experience can be costly for the employer and upsetting for employees with long-term aspirations.
#2. Reduced overall expenses
While overall employment expenses will always be determined by local regulations and the conditions of individual contracts, using a contingent workforce is often less expensive in the long run than retaining a permanent workforce of comparable size and shape.
Contractors and consultants frequently command greater hourly rates than equivalent permanent employees, although hiring a contractor usually does not necessitate providing the same broader benefits (e.g., healthcare, pensions, redundancy). It also does not bind a corporation to long-term financial commitments.
Certain services (e.g., completely new websites, customer databases, or personnel management systems) may only be required every few years, and it makes more sense to hire a highly skilled individual for a few months to produce these outputs than to keep web designers and IT architecture gurus on the payroll indefinitely.
#3. Access to specialized knowledge and otherwise inaccessible talent
Businesses may be able to acquire more competent and experienced personnel for specialized tasks as part of a contingent workforce than they could as permanent employees.
#4. There is no need for additional training or growth.
Permanent employees may require extensive training or development at the outset of their careers or when embarking on a new project. When you hire a contingent workforce, you are frequently hiring people who already have the necessary skills and expertise to begin work right away.
What are the Drawbacks of Using a Contingent Workforce?
When considering a contingent workforce, it is critical to carefully weigh the benefits against the drawbacks and dangers.
#1. Less control over recruiting and screening
When contingent workers are hired through an expert intermediary (such as a recruiting agency), the hiring firm often does not have direct management of the screening process and must rely on the agency’s expertise.
Even when employing contingent workers directly, HR and managers may undertake less due diligence than they would for permanent staff. This increases the risk of exposing the company to employees who have not been as careful security examined or screened as long-term employees.
#2. Accountability is hazy.
When dealing with a contingent workforce, responsibility and accountability for delivery and success can quickly become muddled as to what remains with the hiring organization and what passes to third-party service providers, recruitment agencies, or independent contractors/consultants themselves.
Companies may need to think about lines of accountability in more depth and reduce risks in areas such as customer data, commercial confidentiality, and other areas. Failures could result in severe harm to business and reputation, as well as legal issues in the future.
Consider the value of non-disclosure agreements for your independent contractors and other contingent personnel to limit this risk.
#3. Misclassification of employees
As the contingent workforce expands, so does the possibility of employment misclassification, with all of its legal and tax implications. Businesses that operate in many countries with distinct legal systems face increased risks. Expert guidance should be sought early on, especially when entering new markets.
#4. Lower employee engagement
Contingent workers may be less likely to feel like part of a corporate team and hence less personally devoted to the fulfillment of company goals than their peers on long-term or permanent contracts. This is a problem for managers who are responsible for directing and motivating all employees.
#5. Management is fragmented.
Managers may struggle with the successful deployment and supervision of a contingent workforce in comparison to permanent personnel, especially if business plans, HR policies, and operational strategies do not offer specific direction on how to integrate contingent labor.
#6. Reduced institutional memory and continuity
Turnover among contingent employees is likely to be higher than among the permanent workforce, and an organization’s institutional memory will be diminished. If contingent workers interact with customers, turnover may have an impact on stakeholder engagement and business reputation.
What is the Definition of Contingent Workforce Management?
Simply put, contingent workforce management is concerned with how a company treats its contingent labor. We can roughly differentiate two basic techniques here, which we’ll refer to as inclusive and exclusive approaches.
Companies in the former include their contingent workforce in their standard HR operations. Companies in the latter treat contingent workers as a different category of employees, frequently bypassing current HR procedures and processes.
Between these two approaches, a wide range of contingent workforce management solutions that combine features of both are feasible.
Best Practices for Contingent Workforce Management
We’ll go through effective practices for managing your contingent workforce in this part.
#1. The Human Resources Life Cycle
Contingent workers frequently skip the standard HR life cycle in businesses that take a ‘exclusive’ approach. This implies that they – and the organization for which they work – do not benefit from all of the streamlined HR processes that are in place. Consider a procedure for quickly onboarding new employees, managing and enhancing their performance, offboarding, and so forth.
When your contingent workforce is not included in the HR cycle, your firm misses out on opportunities to bring them up to speed faster and improve their performance.
Companies that take an ‘inclusive’ approach to contingent workforce management, by definition, include their contingent workers in the organization’s HR cycle.
#2. Employee knowledge
Should we talk about contingent worker experience? Inclusive firms recognize the value of providing a positive experience for all customers, regardless of contract type. As a result, they ensure that the three enablers of an exceptional employee experience (technology, workspace, and culture) are maximized for both regular employees and their contingent workforce.
A basic, typical example of this is ensuring that traditional employees do not make decisions without consulting with their contingent colleagues and that information is shared with everyone. Birthdays are an example of a tiny gesture that can make a big difference; celebrate your contingent employees’ birthdays as you would any full-time employee.
Another reason for HR to consider the company’s contingent worker experience is recruitment and employer branding. If the organization treats its contingent workers properly and like everyone else, the temporary workers may be inclined to return for a different project in the future, and you can add them to your talent pool. Perhaps they’d like to join as a full-time employee.
If, on the other hand, they had a bad experience and felt like they weren’t a part of the team, they’re unlikely to return. They will also not recommend you as a potential employer to other (contingent) candidates.
#3. Performance management
Many firms do not track the performance of their contingent workers, and those that do so frequently collect the information outside of their regular HR system and personnel database. This means they are losing data on a growing number of their employees. And, while temporary workers aren’t necessarily as important as full-time employees with a permanent contract, this isn’t always the case.
Consider the following hypothetical case. Your company has recently gained a significant new client. You’ll need a project team – and a project manager – with unique abilities and knowledge for their first assignment. You choose a contingent project manager because recruiting one or more full-time staff would take too long. Sophie is her name. She not only completes the job successfully, but she also transfers some of the abilities your workforce lacked to your current personnel.
You would have data indicating Sophie’s contribution to the organization if her performance had been assessed and managed as part of your company’s performance management process. This would have allowed you to do stuff like:
- compare her performance to that of full-time employees in comparable roles and other contingent employees
- learn how to increase the performance of full-time employees in similar roles as well as other contingent workers
Another incentive to collect performance data on contingent workers in your typical HR system and personnel database is for succession planning. You already have their performance data if you wind up hiring high-performing temporary personnel on a permanent basis. This greatly facilitates the development of these skills.
Wrap-up
Over the next few years, the contingent workforce is expected to become an even more essential component of your organization’s human capital. Naturally, this has ramifications for human resources and their methods. However, while much remains uncertain regarding the role of contingent employees, the ideal approach appears to be an ‘inclusive’ one that adheres to the best practices stated in this article. What are your ideas on contingent workforce management, and how have you used it? Please leave them in the comments section
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