Freelancers, contractors, gig workers — oh my! Thanks to the remote work opportunities created by the internet and the freedom provided by P2P apps, workers today have more options than ever when choosing their jobs and career paths. Yet, with so many different types of work and worker, many business leaders are beginning to wonder: Who is part of the contingent workforce?
A variety of employment and tax laws determine how employers must manage their workforce, but different types of workers can expect different levels of treatment. For example, a full-time, salaried employee must receive health insurance and at least 12 weeks of protected medical leave, but a part-time worker is not guaranteed either of these benefits. The contingent workforce is a sometimes-confusing class of workers, and many business leaders struggle to understand which workers qualify and what they are guaranteed.
This guide should help everyone, from business leaders to the contingent workforce themselves, understand and set appropriate expectations for this unique group of workers.
Contingent Worker Definition
A contingent worker is any type of worker that has been hired by a company to perform a task or complete a project on a seemingly temporary basis without functioning as a traditional employee. Sometimes, contingent workers are contracted through labor suppliers, staffing agencies, freelance marketplaces and other talent pools, and sometimes HR departments recruit or procure contingent workers directly. Contingent workers are not new, but they are increasing in number and diversity. Some other names for the contingent workforce that business leaders might recognize include:
- Flexible labor
- Non-payroll workers
- Outsourced workforces
- Staff augmentation
- Temporary staffing
- Independent contractors
As interest in the contingent workforce has grown, so have penalties for misclassification of contingent workers. It is important for HR and other related departments to pay close attention to use the right tools to manage contingent labor to avoid harsh fines and other sanctions that can damage business operations.
Contingent Worker Examples
The contingent workforce is a huge category of workers. Some of the most common types of contingent workers in 2022 include:
- Freelancers
- Gig workers
- Contractors
- Consultants
- Temporary workers
- Seasonal workers
The Digital Age has seen a steady increase in both supply and demand of contingent workers. Connected digital technology makes remote work more feasible, and more and more workers have come to appreciate the advantages of working outside the office. What’s more, the rise of P2P platforms has provided a wealth of gig work opportunities, from taxi services to food delivery to pet sitting, childcare, personal shopping, moving and various other tasks.
Contingent Worker Expectations
Though some workplaces have been slow to grant employees more flexible working hours and locations, the COVID pandemic demonstrated on a grand scale that working from home is not only possible but sometimes lucrative for companies, who no longer need to pay for premises, utilities or supplies for their workforce. As a result, many organizations have started phasing out certain employee roles and replacing them with contingent workers, who tend to be much more affordable in the short and long term.
Contingent workers are technically self-employed or else employed by another organization that is supplying companies with labor. Thus, businesses that hire contingent workers are not responsible for benefits, such as healthcare, paid time off, retirement contributions, disability insurance and more. Additionally, organizations that utilize contingent workers do not worry about various payroll taxes.
Every industry relies in some part on contingent workers for fast, affordable and efficient labor. Studies on the contingent workforce have found that organizations that utilize contingent labor can be more successful at achieving goals like cost management, organizational agility, risk reduction and business resiliency. Yet, hiring contingent workers is not without some risk. Organizations must treat contingent workers appropriately, respecting their employment rights.
Indeed, though contingent workers are not employees, they are entitled to certain federal and state employment standards. For example, contingent workers are guaranteed minimum wage, overtime pay and standard working hours; they cannot be forced to work more than 8 hours per day or 40 hours per week without additional compensation. Additionally, contingent workers must be provided with a safe work environment, even if they are working remotely.
It is not an issue of whether a company relies on the contingent workforce, but of when. The contingent workforce is growing in power and popularity, and the sooner business leaders understand what it is, why it works and how to treat it properly, the better.