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The Advantages And Disadvantages Of Hiring Contingent Workers

The employment market has evolved much. Non-traditional job roles especially, contingent workers, have gained more importance than ever due to the onset of the pandemic.

 A Statista report depicting the growth of contingent workers reveals a growth curve in the upcoming years. Contingent workers in the U.S.A are growing at a rate of 64.8% and is predicted to reach a whopping 90.1% by 2028. 

 As more workers prefer contingent job roles, it becomes a dire need for you, the employer, to understand the contingent workforce and the benefits and challenges you might face.

 So who are contingent workers?

Who are Contingent Workers

 Contingent workers are a non-permanent, flexible category of workers whom you can hire on a need basis. 

 They aren’t obliged to be your employee and do not come under your payroll. They work on your projects in exchange for monetary compensation.

 The contingent workforce category includes freelancers, gig workers, on-call workers, part-timers, etc. Independent contractors also come under this category as opposed to contracted employees.

 With knowing who they are, let us dive into the pros and cons of hiring contingent workers.

Advantages of Contingent Workers

Owing to their flexibility, contingent workers come along bearing several benefits. Without further adieu, let us jump into the benefits of contingent workers.

Fill skill gaps quickly

With your company and tech growing, it becomes a necessity to increase your hiring. The hiring process, however, is easier said than done. 

According to SHRM’s report, it takes more than a month, precisely 36-42 days, to complete the process and fill in the position. 

Thus, it takes a long time to hire the right talent. 

On the other hand, hiring contingent workers is quick. They already have the required talent making the selection easier. Also, you don’t have to think about it on a long-term basis.

Hire diverse and expert professionals 

According to HCMWorks, 40% of companies find the best talent through the on-demand workforce. 

The prevailing stigma that contingent workers are less talented is flaking off as professionals prefer the non-traditional work model to have the much-wanted work-life balance. The above stat only adds more proof to this.

Hiring such a diverse array of individuals across borders brings in unique thought-provoking perspectives to grow your business. More often than not, innovation is what a business needs more than talent. 

With consultants who weed out ineffective strategies through analysis and plan working business models in place, the contingent workers help grow your business faster.

Endure a flexible employment model

With the market constantly changing and becoming more competitive, your company must be agile and fluid to stay adept. 

Non-permanent workers fulfilling your short-term goals resonate well with agility and are a perfect fit for your evolving business.

Reduce costs

A recent SHRM survey states that an average cost-per-hire for your core employees would be $4,129!

Hiring, an essential aspect of a growing business, is inevitable. Choosing contingent workers for short terms and on a project-bases gets you off the hook financially. You just pay for what you get done without accommodating the unproductive hours and only as long as you need them.

It doesn't stop there. Contingent workers do not come under your employees’ cader and thus, do not seek the additional benefits you offer your direct hires. You can avoid expenses on:

  • ~Hikes
  • ~Insurance plans
  • ~Profit-sharing plans
  • ~Paid leaves
  • ~Pension contributions, etc.

Thus, you pay only for what you get and avoid added expenses.

Avoid complexities during tax filings

As an employer, you must take care of your employees’ taxes and abide by the local laws and compliance. A complex task in hand, more so if you are a global employer.

Contingent workers, unlike your core employees, do not come under your payroll. By law, they are self-employed individuals who can take care of their taxes. You need not include their taxes under your hood. 

 This arrangement thus lets you save time and prevent penalties for non-compliance with government taxes. 

Freedom to experiment 

Bringing in innovations is a precarious task for companies. It involves money and several other risks.

Hiring contingent workers lets you experiment with new approaches. With only temporary arrangements, you can try, and if it doesn’t work, it still won’t affect you much. It is easier to withdraw the idea with them on board and is the cherry on top amidst other benefits. 

Disadvantages of Contingent Workers

It is unrealistic for any business model to have only leg-ups. As much as the benefits are soaring high, hiring contingent workers also has some challenges that you must be aware of. 

Control of the employer

Despite working for you, contingent workers aren’t your employees. This restricts your control over their work. 

While you can demand work, what you expect from them, and track their progress, you cannot control the time they spend on your project, the methods they use to accomplish the task and monitor the stepwise flow as they work.

Simply put, you can define what they must do, but not how they do it. You can only focus on the end result but not the approaches.

Trust and reliability

The time taken to onboard a contingent worker is significantly less than a core employee. As time-saving as that can be, it also brings in the challenge of trust.

A faster approach might make you overlook the screening process. This can open a can of worms as letting in one wrong person can cause severe damages.

Security risks

Despite being temporary workers, they work with your data, the intricate details of your business. Sometimes it also involves confidential data. 

This involves a risk factor as opposed to hiring a core employee for the same work. Even minor negligence can cause damages as serious as soiling your business and its reputation. 

Legality and non-compliance

By law, the employer has minimal legal responsibilities to contingent workers than direct hires. However, it gets tricky to classify them apart, based on the legislation. Companies struggle to define whether an individual is an employee or a contingent worker.

The most prevalent example comes in the case of contractors. While some consider them as a part of the contingent workforce, some consider them as temporary employees. Further, different countries have different legal terminologies and classify them differently. 

Misclassification might lead to penalties and legal complexities. Thus, being a global employer can have your work cut out for you.

Team culture and cohesion

The team dynamics can isolate a contingent worker. The bonding will not be intact as they work with your team for only a short term. This lack of cohesion can affect their productivity which would eventually cause a dent in the business. 

Besides, if a majority of your staff are contingent workers, the teams will be detached, leading to poor company culture. This can again affect your reputation.

Unavailability of consistent talent

Contingent workers work on their own terms. You cannot define their working hours or demand they be available during crises. Thus, their contribution to your project will not be consistent or streamlined.

Further, in case of sudden requirements, you cannot depend on a contingent worker. In such cases, it is easier to find a suitable existing employee than amidst contingent workers. 

Managing the Contingent Workers

The challenges, though colossal, aren’t manageable. Now that we have seen what possible challenges you might face let us look at the steps you can take to handle them. 

Meticulous screening

The foremost step in managing the cons of contingent workers is to choose the right workers. A diligent screening process must be in place to identify reliable individuals. 

Conduct a complete background check and hear about the individuals from the companies they’ve previously worked with. This helps you comb through the long list of workers to choose the right ones. Choosing the best fit helps solve most of the challenges posed by hiring contingent workers.

Ensuring data security

It is hard to trust an individual not associated with your business for the long term. However, this can be avoided by taking conscious steps while providing your company data.

You can avoid letting them handle sensitive data. In case of necessity, take measures to ensure that they cannot share or publish the data. Using technical barriers will go a long way in preventing data mishandling and theft.

Compliance

The best way to manage legal compliance is by outsourcing it to dedicated providers. They have experts well versed in handling complexities in staying compliant with the changing laws. 

Partner with PEOs (Professional Employer Organizations) to assist you in adhering to the changing laws across countries.

Humblebrag warning!

Multiplier, a SaaS-based HR service provider, constitutes PEO services as one of its wings. 

We have dedicated professionals working closely with the changing laws, analyzing the difference across countries to understand them in close scrutiny. Our experts can assist you in:

  • ~Abiding by the complex laws present
  • ~Staying compliant with the changes 
  • ~Managing the different laws in place for the different types of workers

They are well-versed in differentiating employees from contingent workers and ensure you follow the governments' norms and adhere to the laws and compliance. 

Team building and engagement

It is natural and unavoidable that your non-permanent staff feel like outsiders. It might also be difficult for them to connect regularly with your employees owing to the difference in the working hours and sometimes, across time zones.

Take explicit measures to involve and engage the contingent workers to create a comfortable workspace for them.

You can encourage team-building activities and include them in the team meetings to connect them with your direct hires. Not only does this improve your work culture, but also improves their efficiency in completing the given projects.

Conclusion

Contingent workers are a modern take on the traditional employment model. They offer flexibility and are a perfect fit for the changing business markets.

Despite having a few challenges, when managed right, they can reap a whole lot of benefits. 

Multiplier is here to help you manage your contingent workers. We are beside you in each step to effectively hire and manage them.

Our EOR services let you hire across borders without you having to set up local legal entities. We serve as your local platform to ensure a smooth hiring process.

We know how hectic it can be to manage the global payroll and offer suitable benefits based on the employment type and cader. We offer a single platform to manage your global payroll and benefits effectively through just a few clicks. 

In a nutshell, Multiplier offers holistic HR assistance in effectively managing your different employees within your budget. Check out our flexible pricing range.

Contact us to know more about our offerings.

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