Why Contingent Workers Could Be the Competitive Edge You Need

Data from our recent Workforce Insights report reveals a surprising trend: while job openings from November 2023 to November 2024 increased by 8% globally and 9% in the US, hiring decreased by 22% over that same period.

This widening gap is forcing companies to rethink their workforce strategies.

Contingent workers are one solution to bridge these talent shortages. This flexible workforce can help businesses gain a competitive edge, stay nimble, and move fast in a competitive market. And they’re growing, too. According to an Upwork survey, more than half (53%) of Gen Z professionals spend full-time hours on freelance work.

Below, we’ll explore some key advantages of using contingent workers, what you need to know, and who they are in today’s economy.

Who Are Contingent Workers?

Contingent workers are people who provide work for a company without being hired as employees. The phrase sometimes gets used as an alternative to either “freelancer” or “contractor.” That’s not entirely accurate.

Both freelancers and contractors are contingent workers. They’re not the only type of professionals who fall within the category, however. The following are all people who can come under the umbrella of being contingent workers:

• Independent freelancers
• Contractors (both individuals and those provided by companies)
• Agency workers
• Interns (not always)

What all the above have in common is that they only work for a particular company on a temporary basis. They’re called upon by a business under certain circumstances or for certain projects. That’s where the “contingent” part comes in.

Contingent workers aren’t employees. Their relationship with the companies they work with is different from the traditional employer-employee relationship. This flexibility can further help explain why the contingent workforce is growing—in fact, it’s projected to make up more than half of the workforce in the next decade.

Why is the Contingent Workforce Growing?

Today’s workforce and workplace look very different from what they did a few years ago. For one thing, today’s work environment is largely hybrid—as of 2023, 40% of remote-capable workers had shifted to fully remote or hybrid working modes, compared to just 8% of fully remote workers in 2019.

The new generation of workers value flexibility and freedom over stability and high wages. They are more open to less traditional ways of working, such as telecommuting. These types of work fit better with modern lifestyles.

There’s more to it, though—contingent workers bring real value to businesses. They deliver a broad range of benefits to the organizations that use them.

Benefits of Using Contingent Workers

We’ve touched on the reasons workers may choose a less traditional relationship with companies. As a contingent worker, they have more freedom and control over their own working life. But what are the advantages they bring to the table?

Access to Expertise & Filling Skills Gaps

Contingent workers are often highly talented individuals with a specific skill set. Contracting these kinds of pros is the ideal way to fill a skills gap within an organization. You may not have an expert in every area on staff. This is where hiring an independent contractor can help.

Contractors can give the company specialized expertise that you may only need on a project-by-project basis. It’s less likely you’d be able to hire a worker at a similar skill level on a full-time basis.

Flexibility

Contingent workers offer flexibility that’s tough to match. In a modern business environment where things evolve fast, small companies need to be agile and able to respond to change quickly.

If there’s a sudden influx of work, companies can use contingent workers to pick up the slack. If a specialized project arises, they can find a contractor with the right expertise. Then, when a period of cooperation ends, so do the business’s responsibilities to the freelancer.

Cost-Efficiency

Using contingent workers makes a lot of financial sense for project-based work or other time-limited seasons when you need extra help (say, the holiday season).

Contracting a non-permanent worker for a project means you only pay them for as long as you need them, and you only pay them the agreed-upon amount for their work. You don’t need to worry about overtime, pensions, health insurance, paid time off, or other employee perks.

Fresh Outlooks

A fast and cost-effective way to get a fresh outlook is by bringing someone in from outside. A consultant, administrator, or advisor brought on board temporarily is still a contingent worker.

Sometimes in business, a company’s key decision-makers can struggle to see the forest for the trees. A pro with industry experience but no close ties to the company may see things more clearly. That kind of fresh perspective could make all the difference to a company’s strategic direction.

Easier, Swifter Hiring

Hiring for your business is often a complicated process to solve a simple problem—bring in new talent and skills to your organization so you can succeed.

There’s far less red tape if you choose to contract a contingent worker compared to hiring employees. Depending on the work needed, and the platform through which you find contingent workers, you may not need to spend the time and money you would on traditional hiring steps, like background checks or IT security clearances.

Experienced contractors or freelancers are also often available at short notice. You can find them, negotiate a project, and then set them to work. That all takes a fraction of the time to find and hire the right permanent employee.

Freedom to Try New Approaches

A final key benefit of contingent workers is that their use allows companies to be more adventurous. For any company, diversification is a thorny issue. Finding new ways to improve or make money can be transformative. Making the wrong moves, though, might have catastrophic effects.

If a company takes on temporary staff, they can more easily trial new approaches. That company can have all the staffing needed for a new venture, without getting tied to them for the long-term. If things work out, the business can then make things more permanent. If they don’t, it’s easier to walk away.

Trialing these new approaches can help companies face challenges, including meeting new market demands and improving customer experience.

Challenges of a Contingent Workforce

It’s rare for any business decision to be all upsides. Choosing to use contingent workers is no exception. Using non-permanent staff can create some challenges. Here are some hiccups you might face with contingent workers and how to address them.

Control & Oversight

Contingent workers aren’t your employees. Always keep that in mind. You can—and should—be clear about what you expect from them. You should also keep track of their progress and check in regularly. Keep in mind, though, you don’t have as much control or oversight as you would have over a permanent employee.

There’s a simple way to visualize the difference. With a contingent worker, you can dictate what they do but not how they do it. You don’t have full control over the hours they work or when you can speak to them. You also don’t have the power to define the processes they use to complete a project. This won’t necessarily impact the quality of work provided. Lacking that control, though, can prove a challenge for some managers and business leaders.

Screening & Trust

One of the advantages of contingent workers is the speed at which you can get them on board. Starting a project with a contractor often takes far less time than hiring a full-time worker. That can, however, distract a company from correctly screening the people with whom they work.

Overlooking the screening process can cause significant problems.

Even though they’re not permanent employees, you put a lot of trust in contingent workers. You’ll often give them access to your premises or systems. You may also allow them to see and use sensitive information. If you don’t vet contractors as you would other workers, they could cause real financial and reputational damage.

Legality

In general, a company has fewer responsibilities to a contingent worker than to an employee. You’re not typically expected to offer employee benefits. That means you’re likely not liable for providing insurance, paid leave, or similar legal responsibilities.

It can be tricky to define whether an individual is an employee or not, but it can cause legal problems if you treat an employee as if they’re a contingent worker. You may get hit with fines and penalties if you improperly declare an employee as an independent contractor (known as employee misclassification).

You’re still responsible for staying compliant with fair labor laws and other relevant legislation.

Inconsistent Access to Talent

Taking on contingent workers is a way to cover skills gaps. It’s one of the primary advantages of project-by-project hiring. There’s a related drawback, however. On occasion, you may find yourself unable to harness the right skills at the right time.

For example, if your company faces a particular challenge at short notice. If you rely on contingent workers, you’re not guaranteed to be able to find and contract the right pro in time. You wouldn’t face that issue if you’d hired a full-time employee who has the relevant skills.

Team Building & Culture

Relying heavily on non-permanent staff makes it tough to build company culture or cohesive teams.

Weak company culture and no real team morale can hurt any company. Engaged employees who bond with their colleagues are more productive. Weigh this drawback of contingent workers against the benefits of using them.

Tips for Managing Contingent Workers

Knowing the potential drawbacks can help your company avoid them and enjoy the many benefits of non-permanent staff. We’ve put together a few very brief tips for managing a contingent workforce.

Due Diligence

Before contracting an external worker, you ought to do everything you can to know who you’re working with. Due diligence in researching potential contractors is common sense. An excellent place to start is by reading testimonials to get an understanding of the kind of work this person delivers.

You can also try to speak to companies who’ve worked with the individual before. If you’re going to place a worker in a position of trust, too, you may want to consider a background check or social media background screening.

Systemized Talent Sourcing

If you’re going to lean on contingent workers, you need to find the best people for each project. Having a systemized approach to sourcing talent is a sensible first step. Try to set up a defined process for finding and contracting contingent workers. You could assign that responsibility to a team member. It may also mean implementing specialized software to facilitate talent searches.

Engagement & Integration

Employee engagement is vital to a thriving organization. But it can be tough to generate camaraderie and engagement among a non-permanent workforce, especially if your contingent staff also work remotely.

You’ll see a benefit, though, if you do try to better integrate your non-permanent staff. Try to foster bonds between contingent and permanent staff. Encourage positive perceptions of contractors and celebrate their contributions to your teams. No matter the balance of permanent and contingent workers on your teams, it’s well worth increasing employee engagement.

Compliance

One of an HR pro’s top responsibilities is maintaining compliance. You must always adhere to laws and legislation in your area. Regulation can get a little complex when it comes to contingent workers. If you haven’t used them before, get up to speed with the relevant legislation as a first step. Then, ensure that you or someone in your company keeps up with all changes as they occur.

Contingent Workers—A Vital Element of the Modern Workforce

Work isn’t what it used to be, and the concept of a typical workforce has changed. With advances in tech and shifting values, more people are embracing the flexibility of contingent work, and businesses are reaping the benefits too. By understanding the nuances of having a contingent workforce, you can better harness their talents and meet any potential challenges with confidence.