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What is a Contingent Worker?

Leveraging Versatile Professionals to Scale Your Business

Blog Author - Keertana Anandraj
Keertana Anandraj
May 23, 20245 minutes
Blog Author - Keertana Anandraj
Keertana Anandraj

Keertana Anandraj is a part-time freelance writer and full-time sustainability analyst. Before Justworks, she began her freelance career writing for The Financial Diet and Career Contessa. She currently resides in New York City.

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1920x1080 IRS Form 941 The Basics

We’re diving into a topic that could revolutionize the way you run your ship: contingent workers. These versatile professionals might just be the secret sauce your business needs to thrive in today's dynamic marketplace. Let’s explore the nature of contingent workers, discover what sets them apart from regular employees, examine the benefits they offer to businesses, and discuss their burgeoning role in today’s dynamic workforce.

Defining Contingent Workers

Picture this: you've got a project that needs tackling, but you don't have the resources or expertise in-house. That's where contingent workers come in. A contingent worker, also known as a temporary employee, is someone who is hired on a non-permanent basis to fulfill a specific role or complete a specific project. Unlike traditional employees, contingent workers do not have a long-term contract with the company and are not considered to be a part of the permanent workforce. They may come on board to tackle projects with a clear endpoint, work seasonal positions, or fill in for absent staff. 

Contingent workers can be sourced through staffing agencies or directly by the company, and their employment can range from a few days to several months or even years, depending on the nature of the work and the needs of the employer.

The contingent workforce is diverse, encompassing a variety of employment arrangements that cater to different business requirements. Employers may opt for contingent workers to manage unpredictable workloads, access niche expertise, or test out potential full-time hires in a real-world setting before offering a permanent position.

Types of Contingent Workers

Contingent workers come in various forms, each with distinct working arrangements:

  • Temporary employees: When you're short-staffed or facing a sudden surge in workload, temporary staff can provide the extra support you need to keep things running smoothly. These are workers hired for a specific period of time, such as during peak seasons or to cover for a regular employee who is on leave. They may work full-time hours but have a clear end date to their employment.

  • Contractors: Need a specialist to tackle a specific task or project? Contractors are independent workers who are hired to complete a specific project or provide a particular service. Contractors usually have a high level of expertise in their field and work autonomously, often managing their own business entities.

  • Freelancers: These are the go-getters who thrive on independence. Similar to contractors, freelancers are self-employed individuals who offer their services to different companies on a project basis. They enjoy greater control over their workload and clientele but bear the responsibility of managing their own schedules and business operations.

  • On-call workers: These workers are not guaranteed consistent work but are available to work when needed, such as event staff or substitute teachers. They offer employers a pool of readily available labor that can be tapped into at short notice.

  • Gig workers: This type of contingent worker is becoming increasingly popular, especially in the gig economy. They are self-employed workers who provide on-demand services, such as ride-sharing or food delivery, typically facilitated through digital platforms.

Advantages of Hiring Contingent Workers

The emergence of the gig economy, along with significant technological advancements, has simplified the process for companies to engage with contingent workers. These non-permanent employees bring a host of advantages to the table:

1. Cost Savings

One of the main benefits of hiring contingent workers is cost savings. Since these workers are not on the company payroll, employers can avoid the expenses associated with benefits and protections typically extended to permanent employees, such as health insurance, paid time off, or retirement plans. This financial advantage is particularly crucial for small businesses or organizations with tight budget constraints, offering them workforce solutions that align with their financial realities.

Furthermore, by hiring contingent workers, companies can save on training costs and reduce overhead associated with maintaining a larger permanent staff. They can tap into a pool of skilled workers who can hit the ground running, requiring minimal orientation and training time.

2. Flexibility

Contingent workers grant companies remarkable flexibility in managing their labor needs. They can be quickly engaged to address urgent requirements, allowing businesses to dynamically adjust their workforce in response to project demands, market changes, or unexpected events. This agility is invaluable for companies dealing with seasonal peaks, project-based work, or industries where demand can be unpredictable and staffing needs can rapidly evolve.

Additionally, the use of contingent workers can help companies avoid the lengthy and often costly hiring process associated with permanent staff, enabling them to swiftly adapt to new opportunities or challenges without being constrained by their workforce capacity.

3. Access to Specialized Skills

One of the strategic advantages of hiring contingent workers is the ability to infuse the company with specialized skills and expertise that may not be present within the existing permanent workforce. This is particularly beneficial for projects requiring niche capabilities or for companies looking to innovate without committing to long-term employment contracts.

For instance, a business may require a cybersecurity expert for a short-term initiative to enhance its digital defenses. Rather than recruiting a full-time employee, the company can engage a contractor with the precise skill set needed for the project's duration.

4. Reduced Risk

The nature of contingent work means that companies face less risk when engaging these workers compared to hiring full-time employees. Contingent workers are typically responsible for their own taxes, insurance, and other benefits. This arrangement can mitigate potential liabilities for the company, such as those related to workers' compensation, unemployment benefits, or severance packages.

Moreover, contingent workers can serve as a buffer during economic downturns, allowing companies to adjust their workforce more flexibly without the need for permanent layoffs, which can be both financially and reputationally costly.

How Contingent Workers Fit into the Modern Small Business

In today's fast-paced, ever-evolving business landscape, agility is key.  As businesses strive to become more agile and cost-effective, the integration of contingent labor into their staffing models is becoming increasingly common. According to a study by McKinsey, it is estimated that in 2022, 36% of American workers were contingent workers and the number is only rising. 

The appeal of contingent work is multifaceted. For many individuals, contingent roles offer the much-desired flexibility and autonomy that traditional employment cannot provide. This is especially appealing to those who prioritize work-life balance, seek variety in their professional experiences, or have personal commitments that require a non-standard work schedule.

On the other side, companies are recognizing the strategic value of a flexible workforce. In a competitive global market, the ability to rapidly scale operations up or down, access specialized skills on demand, and manage costs more effectively can be a game-changer. Contingent workers are increasingly seen as essential contributors to business success, able to provide fresh perspectives, specialized knowledge, and a nimble response to changing market conditions.

Contingent workers are becoming an indispensable part of the workforce, offering companies the benefits of flexibility, access to specialized skills, and cost savings. As the gig economy expands and technology continues to evolve, the prevalence of contingent workers is expected to rise. Companies that can effectively integrate and manage a contingent workforce will be well-positioned to navigate the complexities of the modern business environment and maintain a competitive edge.

How a PEO Can Support Small Business Owners with Contingent Workers

Navigating the world of contingent workers can be a daunting task, especially for small business owners with limited resources and expertise. That's where a Professional Employer Organization (PEO) like Justworks can be a game-changer. When it comes to contingent workers, Justworks can handle the administrative tasks associated with hiring, onboarding, and managing these professionals, ensuring compliance with employment laws and regulations every step of the way. Let us handle the tough stuff as a trusted partner in your contingent workforce strategy, get started today.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
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Written By
Blog Author - Keertana Anandraj
Keertana Anandraj
May 23, 20245 minutes

Keertana Anandraj is a part-time freelance writer and full-time sustainability analyst. Before Justworks, she began her freelance career writing for The Financial Diet and Career Contessa. She currently resides in New York City.

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