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The Pros and Cons of Contingent Workers

by YOSS Community Writer, on October 21, 2019 at 3:00 PM

Contingent workers make up a growing share of the workforce. According to the Brandon Hall Group's 2017 Contingent Workforce Study, "90% of organizations use contingent labor." Below, we'll look at the pros and cons of this important part of the workforce.

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Contingent Worker Definition

As the name implies, contingent workers are used under special circumstances. They are typically hired on a temporary basis, and usually as freelancers. But the contingent workforce also includes temporary workers employed through agencies or contract firms, as well as gig workers, although they will normally fit into another category.

In the United States, contingent workers make up a significant part of the workforce. At the high end is an estimate of 25 to 30 percent, per Intuit. At the low end is the Bureau of Labor Statistics (BLS) that finds they represent 10.1 percent of the total labor force. Note that the BLS data is from 2017 and it does not include people who are regularly employed but also work contingently.

The BLS helpfully subdivides the kind of workers who make up the contingent workforce:

Type of Worker % Labor Force
Independent Contractors/Freelancers 6.9%
On-Call Workers 1.7%
Temporary Help Agency Workers  0.9%
Workers Provided by Contract Firms  0.6%

 

What's striking here is that contractors make up a majority of the contingent workforce. This goes along with the finding that 41 percent of contingent workers were in "management, professional, and related occupations."

The image of contingent workers as day laborers is wrong. Contingent workers certainly do provide needed help with simple tasks, but they also provide highly specialized and technical skills.

Let’s now explore the contingent workers pros and cons to get a better understanding of how to utilize them at your company.

Pros for Using Contingent Workers

Contingent workers provide many advantages to businesses. We'll go over the primary reasons why the vast majority of firms employ at least some contingent workers.

Reduced Costs

The direct payment to a contingent worker may seem expensive, but many factors make up for this. The most important one is that you only pay for the work that is done. There is no time wasted in between projects. The worker is brought on when the project starts and leaves when it is finished.

You also need to consider costs that apply to regular employees like benefits and the management of payroll and related matters. Freelancers take care of this for themselves, and so do the agencies that provide workers.

Increased Flexibility

As we already mentioned, the flexibility of contingent workers makes them cost-effective, but there is more to this.

Starting projects is easier with contingent workers. If your company has a good talent pool, you can scale up projects quickly. There's no need to wait until regular employees with the right skills are available.

In a more general sense, contingent workers allow businesses to more easily deal with workflow fluctuations. If your business has a busy season, it isn't necessary to get your permanent workforce to put in overtime; you can bring on contingent workers to fill in the gap.

More Talent

The improvements to the skills your workforce possesses may be the biggest advantage of contingent workers.

Imagine that you have a customer relationship management (CRM) system that you need to update for a new direction your company is taking. You could train one of your existing employees to be a CRM specialist, but it makes more sense to simply hire a freelancer with the necessary skills.

This way you have all the advantages of a CRM specialist without all of the disadvantages of hiring one full-time or investing in training.

Cons for Using Contingent Workers

Even with the significant increase in the use of contingent workers over the last few decades, most businesses use traditional employees. It isn't the case that one kind of worker is better than another. In fact, a lot of regular employees go on to do contingent work after they retire. Plus, contingent workers often become regular employees.

Worker Availability

Freelancers and other contingent workers need to be hired for any given project. If you don't have a good system for finding new workers, you could find yourself stuck. You may not want to pull an employee off their current work for a new project, but if it’s important enough, you could.

Management Control

On-call and agency workers can generally be closely managed, but freelancers generally manage themselves for when, where, and how they work. So if you need great control over what a contingent worker does, you may be better off with a regular employee.

For example, let’s say you need a back-end developer to connect an Android app to your company's database. If it's clear what you need, you can hire a freelancer, set the scope of work, and have them report back when they are ready for testing.

If the project will require a lot of back-and-forth between you and the developer, it may be better for a traditional employee to do it. For many freelancers, independence is the primary appeal of the job.

Legal Issues

There are many special legal issues related to using contingent workers. They aren't worse than those for regular employees—just different. So if you are starting to utilize contingent workers, you should set up procedures to protect your business using your HR and legal teams.

Team Building

It is more challenging to build a strong sense of team with contingent workers, even on a long or open-ended project. It can also be difficult to maintain morale. Regular employees may feel like they are being eliminated and contingent workers may feel like they are nothing more than hired guns.

Limiting the Cons for Using Contingent Workers

Many of these disadvantages can be mitigated through good management. For example, worker availability is an advantage of using contingent workers, as long as your company has an excellent talent pool and the system to support it.

Summary

Contingent workers can help your business grow and become more efficient, but they must be used appropriately. And while they aren't right for all businesses, they are a great addition to the vast majority of them.

At YOSS, we represent the very best pre-vetted freelancers in the world. We only engage with the top 1 percent of talent. So whether you are looking to fill a particular position or to shore up your talent pool, we can help.

Our mission is to make agile staffing easy for companies like yours so see how YOSS can help you manage or add to your workforce below with YOSS Talent Pools. 

Learn More About YOSS Talent Pools

Topics:Business InsightBusiness StrategyTalent ManagementWorker ClassificationIndependent Contractors

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