Hiring Contingent Workers: Advantages and Disadvantages To Consider

The hiring landscape is experiencing a shift in demand. Between the Great Resignation and the rise of the "gig economy," employees are looking for more flexibility and value in their projects. That means, it's time to look into alternative working relationships to help companies grow and stay ahead of market competition.

Over 36% of the US working population identifies as independent workers, according to a study by McKinsey. A good portion of them are contingent workers, meaning contractors or freelancers. But what should companies consider when hiring contingent workers? 

Let's explore the upsides and potential pitfalls to consider as you weigh whether or not contingent workers are right for your business. 

What is a Contingent Worker?

A contingent worker is an individual who provides expertise and services to an organization on a short-term or project basis.

They are normally hired through independent contractors, staffing agencies, freelancers, or other third-party providers to offer a range of services in their respective fields.

Contingent workers are often a good solution for organizations with short-term or project-based needs. By hiring a contingent worker, companies can access the exact skills and expertise needed for a project without the long-term commitment of a full-time hire.

Characteristics of a Contingent Worker:

The typical traits of a contingent worker include:

• Hired for short-term engagements or specific projects.
• Receives compensation hourly or per project.
• Views their work as a source of income and short-term employment rather than a traditional long-term career.
• Often not covered by workplace benefits such as health insurance or paid time off.

Advantages of Hiring Contingent Workers

Companies increasingly turn to contingent workers to meet growing market requirements, labor skills, and new technology skills. Here are some benefits to consider if you’re deciding between hiring a permanent or a contingent worker.

Save Cost Without Compromising on Quality

Hiring contingent workers can be cost-effective for companies since they are paid on an hourly or project basis rather than a fixed salary. Cost savings is cited as one of the top five reasons companies choose to hire contingent workers, according to a study by MBO partners. This is because contract workers aren't required to be provided company benefits, such as insurance, tax, health benefits, or pensions.

For example, an accounting company may only need to hire a graphic designer once a quarter to design their tax season marketing material. This saves the company from hiring a full-time designer — or even part-time designer — when they're not needed. And, there's no need to compromise on the quality of the work, as independent workers are highly skilled and come with past experience.

Flexibility to Meet Companies Demand

Contingent workers are hired on an as-needed basis. This means companies can adapt to market demands and needs. They have the flexibility to bring in additional help when needed and scale back as necessary.

Not only does ‌this allow the company to remain lean regarding costs, it also helps organizations adjust their workforce according to new technologies or market conditions. In fact, around 52% of companies hiring contingent workers rank access to specialized talent as the most important factor, the same study by MBO partners found.

A company might, for example, choose to temporarily hire a GA4 specialist to help set up their Google and website tracking for Google’s brand new analytics platform. They can tap into highly specialized talent that's up to date with the latest technology even if they don’t have the budget for another content marketing hire.

Hire Specialized Skills for Particular Projects

Hiring contingent workers means you get access to highly specialized skills without investing in extensive training. In fact, the majority of the highly-skilled postgraduate workforce has turned to freelance in the past two years, a study by Upwork found.

Contingent employees offer a wide range of expertise. This means they can pop into your team's project, offer a fresh perspective, and deliver on-demand skill sets. For example, you could hire an onboarding SaaS specialist to jump into the final stage of product development and share their skills with the product development team. By providing extra resources to support your team, you can help them develop their skills for the future.

Faster Time to Hire

The average time to hire is 36 days, according to a report by SHRM. If there's a mis-hire, that jumps to 16 weeks between onboarding, letting go, and rehiring a new candidate, according to a study by Robert Half.

That's a lot of time for teams to suffer from a skill gap in their project. When you need to quickly fill a role, the hiring process for contingent workers is a much speedier process. Since they aren't full-time employees, they don't require extensive onboarding or long training processes. This lets companies quickly access the skills and expertise needed right away — without compromising on quality.

Disadvantages of Hiring Contingent Workers

A contingent workforce isn’t perfect. It does come with its own set of drawbacks. Companies should be aware of these challenges to prepare beforehand and find the best fit for their business needs.

Lack of Consistency and Engagement

Contingent workers may not have the same level of institutional expertise or commitment as a permanent employee. After all, they've had less training on your company's processes, products, and less exposure to the company's culture.

This could result in inconsistency in the quality of services or output. Because they’re less connected to the culture, contingent workers may also be less invested in their projects, leading to lower productivity and lessened results.

Shifting Accountability or Responsibility

Since contingent workers aren't full-time employees, it can be challenging to monitor the progress and quality of the project, making it difficult to assign responsibility or hold someone accountable for any mishaps or delays.

The responsibility can also become a gray area since contingent workers aren't under the same employment contract as full-time employees. This could lead to confusion in terms of who is accountable for any mistakes or gaps in the work.

To mitigate these risks and avoid damage to a brand's reputation, it's good practice to set up a clear scope of work, expectations, timelines, and communication channels to prevent miscommunications or address them quickly.

Team and Company Culture

Too many contingent workers that come and go can dilute company culture. Since most of them are likely to stay in the company for a short time, they can't become deeply integrated into the culture and processes of an organization.

Companies may decide against hiring contingent workers — not wanting to disrupt ‌team dynamics. But if you do decide to bring on contingent workers, you can still include them by inviting them to team activities and group meetings. This is especially important if you're working on a project where team collaboration is paramount.

Encourage Wellness Regardless of Employee Status

A company culture that puts employee wellbeing at the forefront makes your company a place people want to work for, no matter their employment classification. It's no surprise that company culture and employee wellbeing are among the top reasons contingent workers accept new assignments, according to a study by Flextrack.

Just like company arrangements and employee contracts, sometimes there's no one-size-fits-all approach. The important choice is to have a range of offerings that increase your employee's wellbeing in the workplace. From in-office meditation sessions to gym subscriptions to nutrition plans, there's a wellness plan for everyone, which lets wellness permeate your culture.

If you're interested in promoting wellness at your organization, connect with a Wellbeing Specialist today.

References

• Half, R. (2021, October 8). The Higher Cost of a Bad Hire. Robert Half. Retrieved May 09, 2023, from  https://www.roberthalf.com/blog/management-tips/the-higher-cost-of-a-bad-hire?utm_campaign=Press_Release&utm_medium=Link&utm_source=Press_Release 
• Flextrack (2023). 2023 State Of The Contingent Workforce Report - Flextrack. Flextrack. https://www.flextrack.com/2023-state-of-the-contingent-workforce-report/
• Fuller, J. (2022, March 25). The Great Resignation Didn’t Start with the Pandemic. Harvard Business Review.  Retrieved May 09, 2023, from  https://hbr.org/2022/03/the-great-resignation-didnt-start-with-the-pandemic 
• MBO partners (2023, January 27)2022 Contingent Labor Report. MBO Partners. Retrieved May 09, 2023, from https://www.mbopartners.com/state-of-independence/contingent-labor-report/ 
• McKinsey (2022, August 23) Freelance, side hustles, and gigs: Many more Americans have become independent workers. McKinsey & Company. Retrieved May 09, 2023, from https://www.mckinsey.com/featured-insights/sustainable-inclusive-growth/future-of-america/freelance-side-hustles-and-gigs-many-more-americans-have-become-independent-workers
• Robert Half (2021, March 16) Hiring Mistakes Come At A Higher Price Amid Pandemic. Retrieved May 09, 2023, from https://press.roberthalf.com/2021-03-16-Hiring-Mistakes-Come-At-A-Higher-Price-Amid-Pandemic 
• SHRM (2017) Average Time-to-hire: How to Measure and Improve it.  Retrieved May 09, 2023, from https://www.sensehq.com/blog/average-time-to-hire 
• Upwork (2021, March 15). 7 Advantages of Being a Freelancer 2023 | Upwork.  Retrieved May 09, 2023, from  https://www.upwork.com/resources/advantages-of-being-a-freelancer