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The Business Advantages of a Contingent Workforce Today

Businesses today are continuously vying for a competitive advantage in an extremely competitive and dynamic global market. Due to the high cost of resources, businesses strive for optimum efficiency. However, difficulties such as talent shortages and unanticipated attrition result in project delays and budget overruns, which has a detrimental effect on the profitability and sustainability of businesses.An on-demand workforce may be a lifesaver in overcoming these resource constraints in the face of quickly changing company conditions. They are cost-effective and come without additional frills like lead time or administrative fees, making them ideal for project-centric enterprises.

Some interesting stats on the contingent workforce:

According to Workforce 2020, 83 percent of CEOs said they’re increasingly hiring contingent labor at any time and regularly. According to another study, contingent employees make up between 20% and 33% of the workforce in the United States alone.This article discusses the advantages of a contingent workforce and how to manage it effectively. To begin, let us define a contingent workforce.

What is a Contingent Workforce?

A contingent workforce is a group of employees hired temporarily by an organization to work on a particular project. For instance, if you need a voiceover artist for your films, you may hire them on a video-by-video basis rather than hiring them full-time.Numerous businesses worldwide now use a mix of contingent and permanent personnel to complete their tasks. However, before delving into the advantages of contingent labor, it’s critical to grasp the major distinctions between them and permanent employees.

  • Unlike full-time employees, contingent workers are not paid by the firm. Instead, they are compensated hourly or per-deliverable, depending on the employment contract terms. Larger enterprises rely on their empaneled contractors to deliver contract labor as and when they are required.
  • Generally, a contingent worker is ineligible for bonuses, leave, annual appraisals, and other standard employee benefits.
  • Unlike permanent employees, contingent workers are not contractually obligated to continue working once the job is completed. Contingent employees are often hired for a certain period or purpose, after which they may be terminated.
  • Contingent workers may operate autonomously or under the supervision of the staffing organization that rents them to businesses. As a result, supervision and training are not required, and they are generally equipped to do the responsibilities assigned to them.

Types of Contingent Workers

A contingent worker fits into one of the following major groups.

A. Freelancers

A freelancer is a self-employed person to whom you may outsource duties and pay by the hour or by the amount of work delivered, depending on the nature of the assignment. A freelancer is an outstanding example of an independent blogger, and a business may pay them a set fee per word or piece, as mutually agreed.

Additionally, unlike other contingent resources, a freelancer often does not have a definite start or finish date. A freelance worker is a very similar form of contingent worker. The distinction is that a freelancer has more autonomy over terms and conditions, is more specialized, and is available to more specialized skill-intensive activities.

B. Contractor

A contractor is a person or a group of people hired for a certain period, often to work on a complex project. The contract between you and the contractor specifies a start and end date. Independent contractors supply the specialized skill sets required for a high-value project requiring significant investment and experience.

For example, establishing a new airport requires the involvement of architects, designers, financiers, and other professionals. A contractor is the only person who can bring all of this experience together under one roof.

C. Casual Earners

Similar to a freelancer, a casual earner is a contingent worker. However, there is no assurance of future job availability or hours of employment. A business will recruit casual earners only when it needs contingent labor to meet peak season demand. They work irregular hours and typically in shifts, in contrast to a contingent worker, who may work at any time of day. Two notable examples are daily wage laborers and seasonal employees employed to assist retailers during the Christmas rush.

D. Temporary Employees

A temporary employee is in the middle between a contingent employee and a permanent employee. They continue to work on an “as-needed” basis for several organizations and depend on staffing agencies or their present customer to get a more permanent position.

Additionally, staffing firms provide them with greater protection than any other contingent worker. Additionally, they have a greater likelihood of obtaining a permanent position than other contingent employees.

Are There Benefits to Employing a Contingent Workforce for Businesses?

Statista says the gig economy’s global revenue will reach $455.2 billion in 2023.

This number demonstrates the rising relevance of using a contingent workforce or gig economy in today’s corporate environment.

Advantages of Contingent Work

A. Economical for Short-term Assignments

Employing a contingent workforce for short-term jobs enables you to save costs. Unlike conventional workers, you are not responsible for managing or bearing their overhead expenditures. Additionally, employers are not required to give them additional employment benefits such as health insurance, bonuses, or paid time off. As a result, a contingent workforce enables you to perform short-term tasks or projects more quickly and cost-effectively.

B. Increased Adaptability

Agility in business enables a firm to respond quickly and efficiently to market developments. Adapting its values, work culture, and technology increases its capacity to cope with uncertainty and market turbulence. A contingent workforce enables businesses to be more agile by increasing their flexibility. You may constantly grow or contract a contingent workforce to meet changing needs, unlike a permanent workforce. Additionally, flexible work hours and a more balanced work-life balance contribute to contingent employees’ efficiency and production.

C. Diverse and New Perspectives

At times, a business demands a new and “neutral” perspective. Employing contingent workers provides you with that fresh viewpoint. Each contingent worker brings their own unique set of specialized skills and knowledge to the table. Additionally, contingent resources are unaffiliated with the firm and see things objectively. Consequently, it facilitates the introduction of new and different perspectives that help a business.

D. Improved Availability of Niche Expertise to Address Skill Gaps

It is nearly impossible for businesses to have a permanent workforce with knowledge in all areas at all times. They are intended to meet the ongoing need for specific talents that change the project. Additionally, skill sets are rare and costly, making hiring them full-time economically unfeasible at times. A contingent workforce with particular skills may help successfully address such skill gaps.

E. Reduced Onboarding Time and Ease of Project Scaling

Often, the onboarding procedure for a contingent worker is quicker and more practical. It does not include soliciting applications, conducting interviews, hiring people, providing orientation and training sessions, or performing other formalities associated with traditional employee recruitment. Rather than that, you may do an internet search, contact reputable staffing firms, negotiate rates, and recruit the appropriate contingent workers.

Additionally, you may expand projects at any moment by increasing the size of your contingent pool without sacrificing quality.

F. Increased Latitude for Experimenting With Novel Approaches

Diversifying goods and services enables businesses to adapt to changing market needs and improve the customer experience. On the other hand, diversification is not a simple task, especially when there are few resources with particular expertise. Hiring permanent personnel for a new service without first undertaking a feasibility study could result in a major capital loss, huge debts and liabilities, and other negative repercussions.

By contrast, a contingent workforce enables you to test novel and “out-of-the-box” ideas and technologies. It is because you can abandon infeasible techniques without suffering long-term consequences.

Best Practices for Contingent Workforce Management

A. Conduct a Background Investigation Before Onboarding

Before onboarding a contingent worker, it is critical to do a comprehensive screening, and one may peruse their testimonies and contact the businesses with whom the applicants have previously worked. With all of these facts at your fingertips, you can accelerate the selection of the greatest contingent workforce. Additionally, it assists in avoiding challenges such as project quality degradation, expertise mismatch, or work delays at a later stage.

B. Create a Customized Onboarding Process for Each Project

A contingent workforce is used for urgently needed specialized and special talents. Using the same recruiting approach for on-demand and full-time employees is not practical. It stymies workforce onboarding for mission-critical project needs and defeats the aim of just-in-time scheduling. As a result, design an appropriate and distinct project-specific onboarding procedure to streamline and expedite contingent resource hire.

C. Establish Positive Relationships with Your Contingent Workforce

Even though a contingent worker is not a long-term hire, it is prudent to cultivate positive relationships with them. Ensure that your contingent worker(s) access appropriate technology, a favorable work environment, and inclusive work culture. Strengthening your ties with contingent employees paves the way for future project collaboration.

Additionally, satisfied contingent employees will spread the news about your company among their colleagues. Additionally, your positive reputation will open the path for recruiting contingent employees by other staffing firms.

D. Ensure the Performance of Your Workforce for Future Records

Keep track of every contingent worker you’ve employed so far. Compiling this information enables you to keep a closer eye on them. For instance, you may organize your past contingent employees according to their areas of specialization and skillsets. Always keep track of their previous accomplishments, contributions, and USPs that aided you in previous projects. It will assist you in visualizing contingent labor that you may rehire for pipeline projects.

E. Onboard Only Empaneled Vendors’ Contingent Resources

For two reasons, hiring contingent resources on a random basis may not be a smart idea. First, it raises the likelihood of employing incompetent contingent resources that lack a track record or complementary skill sets. Second, the likelihood of unfair onboarding may grow without a list of empaneled contingent suppliers to offer contingent labor.

For instance, individuals in positions of influence may pull strings to get the contract passed on to their contacts, degrading the contract’s transparency. As a result, compile a list of empaneled suppliers from whom you may employ contingent resources to improve the quality of your work.

F. Utilize Technology to Manage a More Effective Hiring Process

You integrate a centralized, cloud-based procurement solution with your Human Resources Management System (HRMS) to create a Contingent Workforce Management System (CWMS). You can easily extend the benefits and cost savings associated with real-time, automated vendor management to all types of onboarding staff. This integration significantly simplifies the process of evaluating service providers in your vendor management system (VMS) for dependability and compliance.

Additionally, it simplifies creating and automating blanket purchase orders (POs) for contractor hours and integrating contract management with independent freelancers and service providers such as staffing agencies. To guarantee internal compliance with policies and processes while complying with employment laws and other requirements.

Integrating your VMS and CWMS also helps eliminate rogue expenditure by ensuring that only chosen, approved service providers are utilized to onboard new employees. Not only does increased visibility make it simpler to develop accurate and helpful financial planning papers, but it also helps shield the business from unnecessary risk exposure due to dubious “off the books” employment.

Finally, suppose a contingent worker demonstrates exceptional competence or value. In that case, integration between procurement and human resources makes it simple to convert them to permanent employee status without wasting time or effort by changing their contact and payment details or work history.

G. Manage Financial Burdens

Employers in the United States are legally compelled to withhold federal, state, and local income taxes and Medicare and Social Security taxes from their full-time workers. Additionally, companies must match their workers’ Social Security and Medicare tax payments.

Except for contract employees, contingent workers are not employed by the firm. They are personally liable for their taxes (or may have them withheld by their referring agency). Independent contractors will be required to pay self-employment taxes; contract employees may be required to have their taxes withheld, depending on the legislation in the jurisdiction in which your firm is located.

In addition to tax savings, contingent employees save money by eliminating perks. Contingent employees are not entitled to paid vacation, health insurance, or participation in employer-sponsored retirement plans. They are compensated for their job solely at an agreed-upon fee.

H. Organize a More Agile and Flexible Workforce

Adding a full-time employee may be expensive, not just in terms of tax requirements, benefits, and remuneration, but also in training, educational enrichment, and other steps necessary to close skill gaps on your team. Consider taking on a contingent worker with the required skills for the project duration if you have work that involves a certain skill set but don’t want to pay for or risk employing a full-time employee.

This strategy enables you to cast a broader net in your employment search, allowing you to quickly recruit temporary workers for menial labor to assist production and highly experienced designers and engineers as contract personnel for the length of the project without adding permanent employees.

How Can Resource Management Aid in the Effectiveness of Contingent Workforce Management?

Working at a large-scale business makes it almost impossible to keep up with the huge extent of the resource pool, including its availability, talents, and so on. Simultaneously, resource managers cannot accurately assess the demand for a contingent or permanent employee pool without enough visibility. As a result, businesses should invest in effective resource management software to remain ahead of the curve and estimate future talent requirements.

With its sophisticated capabilities, you can forecast demand for specific skill sets for prospective projects. Additionally, managers may assess current capacity and identify skills gaps that may need ad hoc hiring.

Additionally, the platform gives real-time information that allows stakeholders to gauge the workload of the available permanent workforce. Additionally, they may examine their future allocations to ascertain their use levels.

For example, you want a specialized resource for one or two projects, but your current workforce is stretched thin. In this instance, real-time updates and foresight will alert you far in advance of the need to engage contingent personnel. Additionally, you may monitor the real-time use of your contingent workforce using forecast-vs-actual statistics to verify that they achieve defined deadlines.

The Future of Workforce Dynamics Lies in Contingent Workforces

Without a doubt, contingent labor has established itself as a highly adaptable and cost-effective alternative to conventional resources. Contingent workers augment permanent personnel, assist in meeting skill requirements at the lowest possible cost, and broaden the opportunity for innovative ideas.To summarize, a contingent workforce is a vital component of future-proofing your workforce in the face of market instability. If you want to align your organization with the shifting workforce dynamics in today’s technology-driven world, it’s time to use contingent employees.

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