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A Guide to Contingent Staffing

Everything you need to know about hiring a temporary workforce

What is a contingent workforce?

Contingent staffing refers to the strategic practice of hiring and managing a flexible workforce to meet the fluctuating demands of an organization. This approach enables companies to augment their permanent workforce with temporary or contract employees, thereby addressing short-term projects, seasonal workloads, specialized skills requirements, or unforeseen spikes in workload efficiently and cost-effectively. 

To effectively implement contingent staffing, it is essential for organizations to establish clear policies and procedures, maintain compliance with labor regulations, and work closely with reputable staffing agencies or talent acquisition partners. This approach empowers businesses to access the right talent at the right time, optimizing their workforce for success in today’s dynamic business environment. 

contingent workforce

Criteria

Contingent worker

Employee

Compensation

Contingent labor does not appear on the organization’s official payroll. These individuals are engaged independently for specific projects and subsequently submit invoices to the organization for their services. When sourced through an agency, the agency bills the business, either on an hourly basis or for the completed project. Regardless of the arrangement, the burden of handling payroll and taxation does not fall upon the hiring entity.

An employee is engaged with the organization, regardless of the nature or amount of work. The organization is obligated to adhere to national employment standards and guarantee the timely disbursement of monthly salaries. Also, the company assumes responsibility for remitting employment taxes on behalf of the employee.

Duration

An organization engages contingent workers for a particular assignment with specified objectives and a set timeframe. If both the contingent labor and the company concur, the contract may be prolonged, or the worker may be reengaged. In such instances, the terms and conditions governing the work and compensation are renegotiated and reaffirmed.

An employee’s tenure with the company extends beyond the duration of a specific project. Any decisions regarding layoffs or employment discontinuation must be made in compliance with regulatory requirements and the employment agreement’s terms.

Management

Contingent talent may either be self-directed or overseen by the agencies that facilitate their hiring. The contingent workforce typically receives minimal supervision, training, and employment benefits from the organization.

The organization’s HR team oversees the management of full-time employees. The company dedicates resources to training and closely monitors their work to assess performance and strategize employee development paths.

Contingent worker categories

There are many different types of contingent workers. Understanding these categories will allow you to determine the best fit for your unique business needs.  

Freelancers

Freelancers are independent professionals who offer their services on a project-by-project or contract basis. They are not permanent employees of a company but are hired to complete specific tasks or projects. Freelancers often work remotely and may serve multiple clients simultaneously. They are responsible for their own taxes, insurance, and other business-related matters. 

Consultants

Consultants are experts in a particular field or industry who provide specialized advice, solutions, or services to organizations. They are typically hired for their knowledge and experience to address specific challenges, make improvements, or provide strategic guidance. Consultants can work independently or be part of consulting firms. 

Temporary workers

Temporary workers, often referred to as temps, are individuals employed by a staffing agency or organization for a limited duration. They are typically hired to cover short-term staffing needs, such as filling in for absent employees, assisting with seasonal workloads, or supporting specific projects. Temporary workers may or may not have a long-term commitment to the hiring organization. 

Leased employees

Leased employees are workers formally employed by a professional employer organization (PEO) or employee leasing company but work at a client organization’s facilities. The client organization retains control over the leased employees’ day-to-day tasks, while the PEO or leasing company handles HR-related responsibilities, such as payroll, benefits, and compliance. 

On-call workers

On-call workers are available to work as needed. They may not have a fixed work schedule but are called in when their services are required. On-call workers are often used in industries with variable or unpredictable workloads, such as healthcare, retail, or emergency services. 

How to determine if contingent staffing is the right solution for your business

Contingent staffing

You want to reduce your costs. Contingent workers on average have a lower wage rate by about 10% than full-time employees. This is because you do not have to pay benefits, except those provided by an agency. But because the provider fees are about the same as benefit costs, you will save money overall. Training costs will also be lower because your contingent worker is specialized in a specific area and can immediately contribute to your success.  

 

You want more flexibility to navigate ebbs and flows. Contingent workers can be brought in on an as-needed basis, allowing organizations to scale their workforce up or down in response to changing business conditions.

 

Niche experts for specific projects. With contingent workers, you can hire specialists for specific tasks or projects. That means if you are building an app or new feature, highly skilled workers can use their expertise to make a direct impact on that project’s success.  

 

You need to get projects done quickly. A contingent workforce is ready to start working on tasks immediately. This means you don’t need to spend nearly as much time training and onboarding. 

 

Contingent workers can add unique perspectives to the issues you are facing with fresh eyesThese workers are coming into the situation with years of experience and expertise in a specific technical niche. They are able to quickly assess the current situation and add valuable insights on how to improve the project.  

 

You have less managerial control over the day-to-day tasks of the worker. Although you can control the requirements of the project, you can’t always dictate the working hours of the contingent worker. Violations of this could result in a misclassification lawsuit.

Full-time employee

You are ready to invest in long-term salary. Hiring a full-time employee is a big commitment. You will need to invest in onboarding, training, upskilling, and management. These workers cost more because they are guaranteed a salary and benefits, regardless of the amount of work they need to accomplish. That means, when things slow down for the business, you are losing productivity with your workforce. 

You have a stable business and are not worried about market fluctuationsBusinesses that are not actively seeking to increase revenue may not need to worry about the risk associated with growth.  

Someone that has a general knowledge of things but might not have the technical skills for everything. Oftentimes, employees are expected to know everything. While a person may be able to develop a broad range of knowledge, they may only have in-depth expertise with one or two areas of the business.  

You have a stable working environment that usually does not require last-minute turnaround timesEmployees can provide consistency with their day-to-day tasks as long as there is a good management structure in place for them to work within.

You like the way your current processes and systems are functioning. Sometimes it’s good to have employees trained to follow the current structure of your company. This ensures a level of consistency and reliable results. But it does limit some of the creative problem solving if it is too rigid.  

You have full control over when and where an employee works. With full-time employees, you can require their time and attention for 40 hours a week. This is because they have access to benefits and salaries that contingent workers do not.    

contingent workers

Understanding the common challenges of contingent staffing

Employers who utilize contingent workers sometimes encounter difficulties if they plan to do the program management themselves. When dealing with contingent labor, organizations must navigate challenges such as regulatory compliance and securing top-tier candidates, among other factors. While regulations and talent access pose challenges in traditional talent acquisition, the rules and approaches differ when dealing with contingent labor.

 

Fragmented management of the process 

Bad working relationships between management and employees cost the economy $360 billion each year from lost productivity. In numerous organizations, individual hiring managers are responsible for overseeing the engagement of contingent labor, resulting in challenges regarding transparency. This fragmented approach often results in elevated expenditure on contingent workers, limited insight into the actual on-site workforce, and compliance issues. 

In contrast, when contingent workforce management is centralized under a single entity, such as a managed service provider, the engagement and supervision of contingent workers become more streamlined and cost-efficient. Conversely, when contingent workforce management remains disorganized, establishing a genuinely efficient and cost-effective program can be a daunting task. 

 

Difficulty finding qualified candidates 

According to Gartner research findings, IT executives reported that in 2021, a deficiency in technical skills hindered the adoption of 64% of emerging technologies, a stark contrast to the mere 4% reported in 2020. Additionally, a staggering 97% of IT departments within middle-market companies faced considerable challenges when it came to hiring over the past 12 months. In a separate report by Computer Weekly, Hays’s research revealed that 95% of employers seeking tech talent in 2022 encountered a shortage of technical skills, while Nash Squared’s research indicated that almost 70% of businesses experienced limitations due to a lack of technical expertise. 

The effectiveness of a contingent workforce program is mostly contingent on well-qualified candidates’ availability. Frequently, disorganized contingent workforce management results in limited supplier relationships and insufficient access to qualified candidates. Organizations may become overly dependent on a single supplier, raising concerns about their ability to fulfill the organization’s needs in the future. The question then arises: where can suitable candidates be sourced from? 

Such excessive reliance can lead to extended vacancies, inflated candidate costs, or even the termination of an organization’s contingent workforce program altogether.

 

Compliance with worker classification 

Misclassifying an employee carries the risk of substantial penalties imposed by the DOL, IRS, and state authorities, potentially amounting to millions of dollars. Additionally, you may be obligated to repay back taxes and interest on employee earnings, including FICA taxes that were initially omitted. Neglecting these payments could lead to further financial penalties. 

Revisions to classification guidelines have posed difficulties for numerous employers. Incorrectly categorizing non-employee labor can lead to financial penalties and even legal action. 

Organizations are most vulnerable to regulatory non-compliance when hiring managers handle contingent workforce management. These managers lack expertise in worker classification, nor should they be expected to possess such knowledge. In the absence of an expert to oversee worker classification determinations, contingent labor programs may become potential liabilities for employers. 

 

Lack of visibility in program spend 

Lack of transparency in contingent workforce management can create challenges for supply chain or procurement teams in accurately assessing the actual expenditure associated with the contingent labor program. This can potentially hinder an employer’s budgetary objectives and the overarching strategic vision for the contingent labor program. 

contingent workers

Our process for recruiting a technical contingent workforce

Start with collaboration

  • Client determines the tasks and projects they need help with 
  • We discuss the best talent that matches your skill criteria 
  • We work with the client to determine how long the project will last 
  • Establish clear workflows for timelines, quality checks, etc.  

Recruit top-tier talent

  • We leverage our expansive network of contingent workers to find the right fit for your needs 
  • We onboard the worker and introduce them to all the project criteria we have outlined during the coordination process 
  • The worker follows the instructions, timelines, quality checks and other parameters of the project 

Offboard and improve

  • It is important to have a process in place for when the project is complete
  • We collect feedback and maintain positive relations for future projects 
  • Leverage these relationships for future projects 

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