What Are Contingent Workers?

Have you heard the term “contingent worker”? What does that mean? Who does it include?

In practical terms, a “contingent worker” would be any worker who is hired just for a specific job or task (a “contingent” piece of work) or time period, and who is paid just for this but does not get any benefits and is not considered to be a regular employee of the organization. Contingent work is any work that is handled in this manner, including contractual work, short projects, etc. Typically contingent workers are either part-time or temporary or both.

Contingent workers include groups like freelancers, consultants, temps, and other independent contractors.

Contingent work has been a part of the labor force for decades, but it’s becoming much more commonplace now. The recent recession prompted many individuals who were previously full-time employees to explore the idea of becoming independent contractors instead of relying solely on one employer for their income. This situation has continued in the years since the recession, and the contingent workforce continues to grow.

Why Have Contingent Workers?

There are many benefits for employers in utilizing contingent workers as part of their workforce. Here are a few:

• It improves agility and enhances the ability to respond quickly to fluctuating demand. Having a proportion of the workforce that is effectively available at a moment’s notice means having the ability to quickly meet changes in demand. Temporary workers are often used in seasonal industries, for example.
• Labor costs and administration can be simplified. This is because a contingent workforce usually is paid on either a contractual or similar basis. This means they’re not typically subject to many employee benefits. It also generally means there is no need for the employer to handle tax withholdings, thus requiring less administration for the employer.
• It can allow employers to access talent they do not have in-house. For example, if an organization needs a technical project to be completed, but does not have enough of this type of work to require a full-time employee,  a freelancer with technical expertise could be contracted to complete the project.
• Time to productivity can be decreased. When hiring contingent workers, employers typically look for someone who already has all of the skills to do the task—no time is spent on training, meaning that the project can go forward quickly.

What Are the Risks?

There are also downsides to having contingent workers. Here are some of the concerns:

• Employee morale may be affected. Depending on the implementation of a contingent workforce, some regular employees may see them as a way to reduce overall compensation and benefit levels. If this is true—or if it appears to be true to a sufficient number of employees—morale could suffer.
• There are legal questions to contend with. Employers need to be sure they’re not illegally labeling workers as independent contractors, for example. Due to the propensity of some organizations to attempt to skirt the law by improperly labeling employees, using a contingent workforce may also bring heightened scrutiny in the future.
• Less control. For most contingent workers, employers do not want to consider this person as an employee. This means the employer cannot exert too much control over how and when the work gets completed. This risk can be viewed both positively and negatively; the positive aspect is that the company can get work done with limited interaction required.
• Workers’ compensation laws will not protect you. Contingent workers who are independent are not typically covered by your workers’ compensation insurance. If you have these workers on-site and an injury occurs, this could be problematic for everyone.

Contingent Workers: Looking to the Future

As contingent work becomes more and more commonplace, it’s likely that laws will need to catch up with a changing labor force. Currently, there are only very limited protections for contingent workers, and these protections vary, depending on the situation. In many cases, there’s no overtime pay protection, no workers’ compensation, no unemployment insurance, and so on. (There will be exceptions of course; some protections will apply in some scenarios.)

If more and more workers opt to work on a freelance basis—even if only in addition to their regular work—then there will be more pressure for the law to catch up. It’s worth keeping an eye on this topic going forward.

*This article does not constitute legal advice. Always consult legal counsel with specific questions.

About Bridget Miller:

Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.