The term ‘contingent workforce’ refers to a labour pool that, alongside permanent employees, also has those that have been hired on temporary contracts for pre-decided amounts of time, often on a project basis.
Contingent workforces have seen major growth in recent decades and in 2015, research conducted by the US Government Accountability Office estimated that over 40% of American workforces were contingent, a figure that has no doubt grown since. The label of contingent worker can be broadly applied to any person who does not operate on the traditional permanent hire process, such as contractors, casual workers, freelancers and independent consultants.
How did contingent workforces grow popular?
The rise of the contingent workforce is the result of various developments.
Some of these include:
The rise of the contingent workforce is the result of various developments. Some of these include:
- Growing struggle with skill shortages and finding employees who are the right fit and have adequate experience
- More vacancies in companies due to a globally aging population, and as a consequence, an aging workforce
- Having the ability to create more flexible contracts with contingent workers and keeping up with a competitive global market
- Traditional views of work changing as more Millennials and Generation Z enter the workforce for the first time and bring with them a shift in perception of the ‘employee’ role.
Benefits of a contingent workforce
1. Greater access to talent
Having a contingent workforce allows employers to gain access to a far wider talent pool that they would not have access to otherwise. These workers can be hired for projects or other company ventures that only require a certain skillset or perhaps to help supplement the work of existing employees during busy periods.
Hiring them permanently may not be sustainable or even necessary due to the nature of the skillset and the company’s operations or in some cases, the individual may be a great fit for the organisation but does not wish to enter a traditional employee contract. In cases such as these, a contingent workforce allows organisations to hire talent that can participate in projects, contribute ideas and valuable skills and simultaneously maintain the best interests of both parties.
2. Flexible workforce
One of the greatest benefits of contingent workers is the flexibility with which organisations can work with them, which is not always possible when it comes to permanent employees. During times when the company is under duress and needs urgent help, contingent workers can be bought in for the time period and leave once they are no longer necessary to maintain efficiency – the workforce becomes adjustable for employers in terms of size.
It is also flexible in terms of skillsets as companies can have greater percentages of certain types of skillsets when differing projects require them. Flexibility is one of the main reasons that contingent workers choose such a lifestyle for themselves as it allows them to work according to their personal interests, schedule and other goals.
3. Bigger pool of potential candidates
During hiring periods, the contingent workers you have partnered with before are a great pool of individuals to look into. In the time they spent working with the company, one can determine if the individual is a good fit for the company in terms of their values, their ability to adapt to the employee culture and their general working style and skills.
Hiring these workers when seeking permanent employees provides a far more reliable option as you are already aware of how they operate, their performance, what role they would thrive best in and how to use their skills to the greatest advantage. In comparison, hiring new people can be a longer and more drawn procedure because of the time and effort that goes into assessing if they are a good fit.
4. Financial advantages
A contingent workforce can also be financially beneficial for companies and a great way to reduce unnecessary costs by limiting the hiring of talent that is somewhat niche in nature to a need-only basis. Hiring talent only when required for a short time period, saves not only the unnecessary cost of finding a permanent worker whose skills will soon no longer serve a purpose to the company, but also the time and resources spent on finding and onboarding a new employee.
Furthermore, because of the difference in the way permanent and contingent workers operate and form contracts, most organisations do not have to pay any benefits to the employee – this can be very effective in reducing costs, in fact, the Bureau of Labor Statistics found that in comparison to a permanent worker, companies save about 30% in benefit-related costs.
5. Highly trained and/or experienced workers
Due to the nature of how they operate, typically on the basis of particular skill sets, contingent workers are likely to be trained, experienced and very proficient at what they do. This is necessary in order for them to succeed as a contingent worker. They also acquire a wide range of experiences that make them able to adapt quickly to your company’s processes and procedures.
In conjunction, these factors minimise the amount of time the organisation has to actually spend onboarding the company. They are able to come in and contribute to the task, be autonomous and work efficiently. A contingent workforce is hence able to reach their aims faster and with fewer mishaps in comparison to a non-contingent workforce which may be required to spend time and money on upskilling current employees or investing in new ones and training them.
What is contingent workforce management?
Contingent workforce management refers to the policies, practices and culture of a company in regard to contingent workers and how the two parties work together. There are two common approaches to contingent workforce management, inclusive and exclusive. An inclusive management style does not attempt to separate contingent workers when it comes to HR practices and includes them in the same manner as permanent workers. The exclusive style makes a clear separation between the two and in this case, the workers often are not included in HR systems.
When it comes to best practices, adopting an inclusive style allows for consistency across the employee experience and allows the contingent workforce to benefit from HR processes and systems. Some practices that will help you work towards this include:
1. Inclusive HR processes
As stated earlier, an exclusive approach to managing a contingent workforce includes those workers from the HR processes and systems that help guide the work experience of permanent employees. HR processes exist to optimise a company’s functioning, improve employee performance, provide consistency in work life and provide expectations around which to shape their performance. Contingent workers are not only unable to take advantage of these processes when they are excluded, but the company itself also has to expend other resources, time and costs in order to cater to them
2. Employee experience
The employee experience is absolutely vital to the core of a good workforce and plays a significant role in employee satisfaction, irrespective of the type of employment contract they are under. Contingent employees, for as long as they are with the company, should be treated equally and feel included and valued.
A common issue is that due to the nature of their temporary status, they often are left out of important discussions and decisions which can not only be detrimental to the employee experience but also prevent valuable input from being considered. Furthermore, a positive employee experience encourages contingent workers to return for various other company ventures in the future and develop a lasting positive relationship with the organisation.
3. Analysing data
Because contingent workers are typically only present for a short term, many companies do not include them when examining data related to their employees such as performance management.
This prevents a considerable amount of valuable insight to be lost – the contingent workforce is growing every day, and having your own data to assess how your organisation has changed over time in relation to the contingent workforce, such as employee contributions and performance, allows you to reassess and optimise your current workforce.
It can further allow a company can find out what skillsets it benefits from most and should prioritise, understand how to upskill permanent workers better and enable a more insightful understanding of current trends in the workforce.
4. Risk management
A key aspect of managing a contingent workforce is also recognising the risks that can accompany it. The process of incoming and outgoing contingent workers can create a greater security threat to the company, particularly in terms of internal attacks, leaks, theft and negligence regarding confidential intellectual property.
All contingent workers should be treated with the same diligence as permanent employees to mitigate the risk of data security and attacks. It should also be ensured that all confidentiality agreements, onboarding processes, background checks etc. are conducted with the same assigned importance.
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As the contingent workforce grows further and alternative employee contracts become even more popular, employers should actively seek to understand how they can best respond and adapt to these changes.
Ultimately, a contingent workforce comes with many benefits for both employers and employees and understanding how to shape your practices around to maximise them, will allow you to strike the right balance in your organisation.