What is a contingent worker?
A contingent worker is someone you hire for a specific period or project. Businesses typically pay contingent workers to complete work outlined in a contract or agreement. Once the contingent worker completes the agreed-upon work, the business relationship usually ends, or you may choose to renew or extend the contract.
Contingent workers are responsible for their taxes, so you don’t withhold income and Social Security taxes for them when processing payroll.
What are the types of contingent workers?
The following independent roles may be well-suited for contingent work:
1. Freelancers
Freelancers are self-employed individuals who typically work on small projects for multiple clients at a time. Their work often focuses on a single task, such as writing content, designing graphics for a new product release or launching a social media campaign.
2. Independent contractors
Like freelancers, independent contractors are self-employed and often work for multiple clients. The primary difference between these contingent employees is that independent contractors usually handle larger projects, such as managing a company’s finances, developing a website or leading a specific project.
3. Consultants
Consultants serve as advisors for businesses. Companies often hire them to solve problems using their expertise and experience. For example, a consulting engineer may help a company develop a new manufacturing process to improve efficiency. An IT consultant might identify potential security vulnerabilities in a network and offer recommendations for reducing them.
4. Temporary workers
Temporary workers fill existing positions at organizations for a short period. They might join a company during its busiest time of year or take on the responsibilities of a full-time employee on leave. Temporary workers usually work for staffing firms that provide contingent labor for numerous organizations.
5. Gig workers
Gig workers typically complete short-term projects for companies and obtain new clients through gig hiring websites and apps.
When to hire a contingent worker
Anytime you need short-term, specialized support, you may need a contingent worker. Contingent labor often fills roles in creative industries and skilled trades. Some common roles contingent workers fill are:
- Repair and maintenance
- Writing
- Graphic design
- Videography
- Web design
- Tutoring
- Software development
- Construction
- Business consulting
- Taxes and accounting
Benefits of hiring contingent workers
Contingent workers give business owners the freedom to curate their workforce depending on their specific needs. Businesses often rely on contingent workers to bridge skill and experience gaps, especially during the growth stage.
Contingent hiring can offer several benefits for your business, such as:
1. Increased flexibility
The temporary nature of contingent work allows businesses to be more flexible with how they structure their staff for different projects. Short-term contracts with contingent workers help business owners adjust to prepare for seasonal increases in demand. It’s also easier for employers to end professional relationships with contingent workers. If a contingent worker makes a great addition to your team, you may offer them a full-time position.
2. Simplified administration
Because you generally don’t have to handle benefits and tax withholding for contingent workers, you can reduce the time spent on human resources administration tasks. You may also spend less time processing employee onboarding, payroll and ongoing benefits distribution. Some temp agencies handle payroll in-house, making it even easier to hire a contingent worker.
3. Reduced labor costs
Hiring contingent workers can save you money by allowing you to only pay for essential tasks needed to run your business. Even contractors with a higher hourly rate could potentially be less expensive over time than a regular exempt or non-exempt employee with a lower yearly salary or hourly rate. The money you save on health insurance coverage, paid time off, overtime and other company resources can add up over time and significantly impact your bottom line.
4. Access to experts
Contingent workers can give your business access to highly skilled professionals you may not have the resources to hire full time. If you need high-level skills for a project, you might consider hiring a contingent worker instead of spending company resources trying to train current staff or tackle the problem yourself.
5. Potential to move beyond contingent hiring
Contingent hiring can provide the opportunity to build relationships with professionals who have desirable skills and qualifications. As your business changes over time, you may discover that you need to fill a previously contingent position permanently. That former contingent worker may be a quality candidate who you can convert to a full-time employee.
Risks associated with contingent labor
Contingent hiring offers many benefits, but some risks are associated with this type of arrangement.
1. Inconsistency
Full-time employees who have been with your company for a long time may have an advantage over contingent workers regarding consistency between projects. Additionally, contingent workers may not fully understand your organizational values and goals like a permanent employee.
2. Knowledge retention
Key knowledge or skills might leave with the contingent workers, potentially impacting continuity and long-term projects.
3. Management complexity
Managing a mixed workforce of full-time and contingent staff can be more complex, requiring additional oversight and coordination.
Contingent hiring tips
If contingent hiring seems like a good option for your organization, the following tips can help guide you through the hiring process:
1. Identify your needs before you hire
Before looking for a contingent worker, fully analyze your needs and carefully consider your goals. Do you need expertise for a project? Do you need professional services such as accounting or web design for a limited period? Are you short-staffed due to vacations or extended leave?
Also, consider your timeline. When does the contingent worker need to start? How long do you need their services? Use this information to guide your search for contingent workers.
2. Set a hiring budget and be aware of costs
After exploring your needs, determine how much you can spend on contingent labor. Some contingent workers charge an hourly rate, while others charge a flat fee. If you have a set hiring budget, you may be in a better position to compare bids and proposals.
If you’re hiring a contingent worker through a staffing agency or gig website, plan for costs beyond the hourly or per-project rate. Some services and websites charge employers additional fees.
3. Assess training needs
Before your contingent worker starts, ensure they understand their job duties. In some cases, having temporary workers complete a short training program can be beneficial. Even if you’re hiring a freelancer or independent contractor, you might provide them with your branding package, mission statement and other documents so they can learn about your organization.
FAQs about contingent workers
What is the difference between a contingent worker vs. a contractor?
The difference between a contingent worker vs. a contractor comes down to the specificity of the terms. Contingent worker is a broad title that applies to any worker who performs tasks for a company on a limited-time or per-project basis. A contractor is a type of contingent worker who carries out a specific project for a client.
What is the difference between a contingent worker and a seasonal employee?
Both contingent workers and seasonal employees fill temporary positions at companies. However, seasonal employees are typically actual employees of a business, while contingent workers are not. Organizations usually hire seasonal employees to meet business demands during busy times. Although they’re not permanent hires, they’re often subject to payroll taxes and may be eligible for additional benefits.
Is there such a thing as a contingent employee?
Technically, there’s no such thing as a contingent “employee” because an organization doesn’t actually employ a contingent worker. They perform work for a limited time or until a specific project ends. Despite this, some people use contingent employee as a synonym for contingent worker.
