What is a contingent worker?

Contingent workers are skilled experts who are hired on a per-project, temporary basis. Examples include contractors, freelancers, and consultants.

Running a business requires significant investment, and labor costs are among the largest. To remain competitive, many organizations need ways to improve workforce efficiency at lower spend. Contingent workers, consisting of consultants, freelancers, independent contractors, and other professionals brought in to work on a per-project basis, may be the answer.

More than simply being temporary employees (such as those sourced through a temp agency), contingent workers are generally highly skilled experts who operate within their specific fields. These temporary employees are hired for specific projects, rather than being expected to fulfill general duties.

Although employed by your company, contingent workers are technically not your employees. The following are three distinctions to keep in mind:

Contingent workers are for defined projects or timelines

Part-time and full-time employees are usually hired on a permanent basis; they’re contracts do not specify a specific end date. Contingent workers are individuals hired on-demand for a limited span of time, or until the completion of a specified project. A company has no commitment to retain the individual after the end of the project or contract.

Contingent workers do not receive benefits

Employees of an organization qualify for company benefits and perks, while contingent workers do not. They can still receive certain benefits, but not through the company they are working with. If a contingent worker is hired through a third-party agency, the staffing company will likely provide benefits.

Contingent workers are not on the payroll

Contingent workers will usually fall into one of two categories: independent contractors who invoice their work, or employees who work through a third-party agency. In either case, your business is not responsible for withholding or paying employment taxes, including medicare or social security.

The benefits of hiring contingent workers tend to heavily be financial. A company doesn’t have to collect and pay taxes for the worker, they don’t have to provide sick days or PTO, they don’t have to offer health benefits, and there is no need for overtime pay. This saves costs on employing a worker and administrative costs with payroll and HR.

A contingent worker can also provide increased flexibility. If there is an influx of work that is too much for the employees of an organization, a contingent worker can step in to perform the extra work and temporarily fill shoes as needed. Once business slows down or the temporary need is satisfied, the business and the contingent worker simply part ways. This helps prevent the extra costs of bringing on permanent employees and then having to either lay them off, or continue to pay ongoing salaries for unneeded workers. The ability to scale easily without the risk of having to carry a bloated workforce after demand has dropped off is a major advantage of working with contingent workers.

Finally, contingent workers bring with them abilities and expertise that you may not be able to find within their own organization, especially if there is a unique project that needs to be completed. Contingent workers can be hired based on these special skills—skills that may be essential for a current or upcoming project, but not essential to your ongoing business.

Although there are several benefits to hiring contingent workers, there are also challenges to be aware of. One such disadvantage is that managers often have less direct control over contingent workers. Contingent workers often set their own hours, and are responsible for managing their own projects. Any specific demand for availability or adherence to processes must be clearly outlined at hiring, otherwise the contingent worker will have the freedom to fulfill their obligations in the way that they see fit. For some managers, this lack of direct control can be a problem.

Contingent workers may also create issues relating to loyalty, commitment, and ownership. Generally speaking, contingent workers are dedicated to their projects, not to the company itself. And because they may be working for more than one company at a time, they likely will not push themselves to go anova and beyond what their contract specifies to ensure the success of your business.

There are also tax risks in hiring contingent workers. Tax documentation can be complex and confusing, and if an employer accidentally hires an employee as a contractor, they may end up facing steep fines and penalties—in addition to paying missed employee taxes. When working with contingent workers, be aware that if your professional relationship changes and the worker becomes a true employee, you’ll need to update your tax information accordingly.

There are three primary categories of contingent workers: consultants, temporary workers, and independent contractors.

Consultants

A consultant is an expert in their field, and they advise businesses on their area of expertise. They usually work in highly-specialized or complex industries or areas, such as marketing, business strategy, or even intellectual property. Like all contingent workers, they are non-employees. But, unlike many temporary workers, they function at a high level of independence and don’t usually execute the work associated with the guidance or strategy they provided.

Temporary workers

Temporary workers are usually staffed by third-party agencies, but they still work onsite at the location of their work assignment. The assignment can last anywhere from hours to months, depending on the staffing needs of the company. Organizations that need to scale up for seasonal demands or require specialized skills for a short-term project may use temporary workers to fill those gaps without fully employing them.

Independent contractors

This category contains consultants, freelancers, and gig workers who are not employed or represented by any consulting firm or staffing agency. They are self-employed individuals offering their services to the public or organizations. They are responsible for all employment tasks and are not eligible for any company benefits.

Regardless of the type of contingent worker you are hiring, it’s important to build solid onboarding and offboarding processes to ease transitions. Onboarding and offboarding at the enterprise level can be complex, which makes it crucial to start with a clear vision of your objectives, stakeholders, and scope. A phased approach achieves these goals more quickly, which helps you develop insights as you scale.

  • Research and Planning
  • Sourcing
  • Selection
  • Onboarding
  • Development
  • Departure
Graphic showing the contingent worker lifecycle.

ServiceNow Enterprise Onboarding and Transitions solutions are built on the Now Platform, and are designed to increase employee productivity, improve workforce flexibility, support employee journeys, and enhance the overall employee experience. Working with a contingent workforce, businesses can automate the onboarding and offboarding processes at scale, providing effective guidance and getting contingent workers up to speed quickly, no matter how many contractors are involved.

With mobile capabilities, end-to-end visibility, step-by-step guidance, workflow automation, and in-depth analytics, you’ll have all of the resources you need to ensure that you contingent workers are happy, productive, and effective, for as long as your professional relationship lasts.

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