Does Your Company Use Contingent Labor?

If you answered “no,” you’re in the minority.

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According to a study conducted earlier this year, 90 percent of companies use contingent labor, and many are expected to increase their use over the next year.

Research Findings

The research, conducted by HCM research and advisory services firm Brandon Hall Group, finds more details are emerging on the way organizations find, retain, and make the most effective use of this growing labor pool.
The firm’s research also shows that almost three quarters of organizations say their contingent workforce is effective or very effective, and more than 70 percent believe the use of contingent labor is strategic to specific business functions or to the business as a whole.
Overall, about half of organizations plan to increase spending on contingent labor over the next year, including 60 percent of small organizations (less than 1,000 employees), 38 percent of mid-size companies (1,000-9,999 employees), and 44 percent of large employers (10,000+ employees).

Market Forces Driving Growth

Planned increases in spending show that organizations expect the contingent workforce to continue to grow.
There are several market forces driving the growth:

  • a more mobile workforce;
  • a younger workforce;
  • fast changing needs that call for expertise but not necessarily on a long-term basis; and
  • a greater number of jobs that can be performed from any location.

“Duration of assignment is the single largest factor driving use of contingent labor, with 57 percent of organizations overall deciding that, if other things are equal, a (presumably) shorter length assignment should go to a temporary employee over a permanent one,” said Cliff Stevenson, principal workforce management analyst at Brandon Hall Group.

Roles Vary

The type of contingent labor utilized consistently or frequently is heavily dependent on the size of organization and its performance level, and the responsibility for hiring. Procurement tends to play a larger role than HR at larger organizations.
Overall, organizations are most likely to use independent contractors consistently or frequently (51 percent), followed by paid interns (47 percent), part-timers (36 percent), and labor from an agency or staffing firm (34 percent).
But the division of labor depends quite a bit on the demographic. At large organizations, paid interns and staffing firm referrals are utilized most often, while independent contractors are most prevalent at mid-size and small organizations.
Interestingly, high-performing organizations use retirees almost three times more often than other organizations.