Contingent Workforce: The How-Tos, Risks & Benefits

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Contingent workforce is an umbrella term that refers to freelancers, independent contractors, and all similar forms of employment indicating such temporary, flexible, and alternative work arrangements. Organizations use them to supplement the existing labor force or complete short-term tasks. They also help reduce costs for the company.

As the pandemic gave what seems to be an irreversible makeover to work cultures all around the world, it also accelerated innovations in remote work and HR technology. Employers and employees were forced towards tech-savviness in a short period.

These changes sounded the death knell for the work culture and the modes of employment that emerged and remained since the industrial revolution. 

The flexible nature of remote work was so practical with technological advancements that employees became convinced of contracting projects as a viable way to work.

In the eyes of an employee, contingent labor allows them to be flexible with the kind of work they do. They also feel that such flexible forms of work help them fulfill their interests along with their professional goals.

Contingent Worker Versus Employee

So where does one draw the line between a contingent worker and an employee?

Contingent workers are also called non-employee workers. Meaning, they are workers who aren’t part of the company’s payroll.

An employee is someone who works full-time for the organization and is registered on the company’s payroll. 

However, a contingent labor is someone who works on short-term projects or a part-time basis and is usually not part of the company’s payroll. Thus, these workers manage taxes on their own and are imparted no benefits by the company; they have no social security and manage medical benefits like insurance on their own.

Contingent workers cannot avail stock options too.

Different Types of Contingent Workers

There are different types of contingent workers as mentioned above. They are categorized based on their contract, nature of work, number of hours they work, etc.

Long gone are the days when companies hire contingent workers for just temporary projects. Now, organizations maintain a talent pool or a database of temporary workers to suit their business needs. 

  1. Temporary contingent workers

As the name suggests these laborers are hired temporarily to support existing teams to complete projects or to work on projects that can last from a few hours to a few months. 

The temporary contingent workforce aids companies that require help for a short stint. They are used to meet seasonal demand or fill in for a  specialized skill set.

These days a temporary worker is hired from overseas for global expansion plans. For instance, sales staff are hired to cold call or nurture leads spread across different time zones. Such a setup would pragmatically enable your company to work 24x7.

Such teams are easy to set up and disband. As these workers are technically self-employed, they manage taxes and benefits on their own, thus helping companies save time and costs.

  1. A Contingent Specialist or Consultant

Consultants also form a substantial part of the contingent workforce. 

Consultants are usually experts in their respective fields. They offer counsel, audits, frameworks, and strategic direction to companies. They are more experienced than their temporary counterparts.

However, one similarity is that these specialists are not part of the company’s payroll either. 

  1. Independent contractors

Independent contractors can be anyone encompassing freelancers, consultants, and gig workers who work independently; unbound to any company’s payroll and legal obligations. 

They aren’t represented by any agencies or a staffing firm. They are self-employed. They manage their own business; their taxes aren’t withheld by any form or agency and have to secure benefits on their own. 

Independent contractors are hired to manage tasks that require specialized skill sets for a short period. Sometimes they are hired regularly across a particular season. 

However, keeping up with their quality as a contingent worker, they are not employees of any company.

Thus, they work on timings convenient to their cause and the organization has no control over how they get their work done. Any intervention over their work timings is seen as a non-compliance issue. However, a company must still set deadlines for the project. 

What are the Advantages of Hiring Contingent Workers

The advantages of tapping into the contingent workforce pool are often realized in the forms of cost and compliance. However, there are several other benefits of hiring contingent workers for your organisation.

  • You can hire unconventional Talent: It would be hard to believe, but the best talent isn’t always looking for full-time roles anymore. More and more employees are joining the contingent workforce. Perks such as flexible work timings and the freedom to work on projects that are congruent to their interests entice the millenials more than the perks of full-time roles. 

This shift in work preference implies that you cast a wider net to reach these talents. When reaching contingent workers, you can hire across interesting demographics such as:

  1. College goers who have a thrust for learning and career building.
  2. Single parents who would like to work remotely so that they can spend more time with their toddlers and children.
  3. Budding entrepreneurs who are willing to cater their skills part-time to make some extra money to fund their projects. 
  • Flexibility: The pandemic has allowed us to work remotely for 2 years now. Earlier, working from home was not something one could easily avail from their managers. 

What began as a contingent plan during the advent of the pandemic, has become a norm. 

Once people realize the comfort of remote work, there arises this friction which has people holding onto remote work. This has accelerated the trend of turning to work as independent contractors.

As a part of the contingent workforce, workers can carry out tasks based on their convenience.

  • Fewer costs: Cost is one of the biggest advantages to gain by hiring contingent workers. 

This is how companies can save by hiring a contingent worker. 

Firstly, companies need not manage the taxes of an independent contractor or a freelancer. Part-time workers such as students are not susceptible to taxes in most countries. Furthermore, when independent workers are paid on an hourly basis, the amount of salary you pay is usually less than what falls under a tax bracket.  

  • No need to train/highly specialized: Temporary workers are hired to offer specialist skills for extremely niche projects. They come with super hot skills which they can deploy right away without much training. 

Of course, good onboarding should be part of your plans. You still need to shed light on your business, goals, and the impact the contingent labor would make by assisting you in your projects. 

It is just that you need to spend less time and money on training initiatives as opposed to full-time employees.
For instance, contingent workers such as consultants are hired mainly due to their profound experience. 

Hence one of the advantages of being a contingent worker is that apart from helping build an agile task force, they can work autonomously 

What are the Risks Involved in Engaging Contingent Workers?

Non-Compliance is a common risk in of hiring a contingent worker. Compliance issues rise when employers misclassify as contractors and full-time employees. 

Companies violate compliance when they engage with freelancers and contractors for more than a few months, offer benefits, fix their work timings, etc. 

By being non-compliant, companies run into problems with the revenue department of the country. 

Companies usually engage with EORs to tackle compliance needs. An EOR or Employer of Record engages with companies to hire workers on the former’s payroll, thus offloading the latter from legal ownership of the employee. 

By doing so, companies avoid non-compliance. They can also avoid the risk of violating local labor laws and can safely manage employees like their own.

By having them on an EOR’s payroll, you transfer all your legal responsibilities and obligations to the EOR, thus effectively eliminating all the compliance-based disadvantages of managing a contractor or any contingent worker.

How to Find a Contingent Worker

With the burgeoning rise in the contingent workforce, an-employee isn’t hard to find. 

Once again, you first need to find out what type of contingent worker you need for your project. 

For instance, freelancers can be found on Upwork, Fiver, and similar freelancing platforms. Specialists and consultants can be found on LinkedIn. 

There are numerous ways to find and hire a contingent worker and build a menacing pack of contingent labor. However, the tricky part is to employ them compliantly. 

Particularly, when hiring independent contractors across international borders you would need to heed local compliance and labor laws. You need to know what kind of benefits they must be endowed with if the local government entitles them to benefits.

Here is where an EOR like Multiplier can help. Our SaaS-based EOR solution is a modern-day solution to effectively manage your overseas contractors. By using Multiplier you can :

  1. Set up a global team with 100% compliance
  2. Employ an unlimited number of contractors and contingent workers
  3. Increase employee engagement and satisfaction by offering emphatic benefits

Book a demo today to learn more about Multiplier.

Hiring and onboarding using Multiplier ensures you hire remote talent with locally compliant, fool-proof job contracts, offer emphatic benefits and disburse salaries accurately with absolutely nil errors in payrolls.

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