Your Contingent Workforce: What Is It and Why Does It Matter? 

Your contingent workforce includes all of your workers who are not on the company’s payroll. 

Understanding your contingent workforce, the trends in the industry, and how processes differ between contingent workers and employees is essential in today’s dynamic labor market. Keep reading for the 411! 

What are contingent workers?

Think about all the people who make up your workforce. While some are employees, hired as full-time or part-time payroll workers, others will serve your company without being part of the payroll processes of the business. 

Contingent workers can be hired by the hour, per deliverable, or on a monthly basis. They could be hired directly by your company or through a staffing agency or MSP. 

Alice the independent contractor who does your company taxes, Geoff the freelancer who designed that snazzy new logo, Spencer the consultant who has been working full-time for the last 4 months heading up the data strategy, and your seasonal team of customer service reps that you hire via a staffing agency to meet the Black Friday spike in sales… these are all contingent workers. 

How has the reality of the contingent workforce changed in the last decade?

According to Deloitte, “Businesses have dramatically increased their use of contingent workers over the past decade as they struggle with rising labor costs and the need for a workforce that can quickly adapt to market conditions.” Up to 30% of companies’ procurement spend is going towards a contingent workforce, and this number is growing. 

There are many reasons for this upwards trajectory of contingent workers. As baby boomers leave the workforce, the graduating Gen Z and unhappy Millennial workers are looking for greater flexibility and control over their working lives. As a result, freelancing is becoming a career of its own. 

For companies that need to supplement their internal talent capabilities, freelancers are the perfect answer. At the same time as attracting new workers, these companies find additional benefits in a readily available pool of talent who are deeply skilled, have wide experience, and are responsive, dedicated, and ready to meet short-term and ad-hoc needs as the requirements arise. 

It’s no surprise therefore that over the next 18 months, 67% of companies expect to see an increase in their use of a contingent workforce. If we zoom out to look at the next 5 years, this number jumps to almost 80%. 

Already today, independent contractors and freelancers shouldn’t be looked at as the answer to a crisis; they aren’t just workers to be called on if there’s a lack of in-house resources or a spike in demand. The contingent workforce is a strategic approach to diversity and expertise in the business, part of a broader workforce strategy that is future focused and growth-minded. 

TL:DR? Neglect your contingent workforce at your own risk — as those who do, risk falling behind in the great talent race. 

Does a contingent workforce have unique HR processes? 

Once you’ve accepted that the contingent workforce is a large slice of the future talent pool, you’ve got some work to do. There are a great many benefits in hiring non-traditional workers, but we won’t pretend there aren’t a few added considerations, too: 

Hiring: Your independent contractors, consultants and advisors won’t be found in the same channels as full-time or part-time payroll employees. You need specific approaches to attracting freelance talent, whether that’s creating a talent cloud of potential candidates, using freelance marketplaces, or relying on word of mouth. 

Compliance: The world is getting more complicated for businesses working with independent contractors, and companies need to consider workforce classification before they enter into an agreement. In the US especially, AB5 has had a significant impact on many freelancers, and the word on the street is — it might be rolled out nationwide. 

Taxation: Independent contractors pay their own taxes, which means employers won’t have to withhold federal taxes when they make payments. Workers are responsible for their own taxes, but companies are still obligated to submit a tax form for each non-employee worker once a year. 

Payments: Freelancers aren’t on your payroll, but we’ve heard they still like to be paid from time to time. #gofigure. In fact, each member of your contingent workforce might have their own invoice schedule and payment methods. It’s up to you to juggle all of those balls, and keep freelance talent remembering that you’re their #1 favorite client. 

Managing contingent workers directly: Your new competitive advantage

The majority of companies are still finding their feet when it comes to the contingent workforce, and have existing processes that are heavily focused on payroll staff. As a result, they might miss implementing processes meant for non-payroll workers, and often even outsource these tasks to a third-party to avoid compliance risk, legal headaches, and payment complexities. 

We’re here to say — take a beat! If you outsource the management of your contingent workforce, and by 2030, contingent workers could be as much as 80% of the workforce overall… you’re fast losing control of your company. (Not to mention those growing costs — Yikes.)

Instead, companies who have a strong level of digital literacy, and who can therefore adjust their processes to properly manage contingent workers directly have an opportunity at their fingertips. 

Instead of losing control and cohesion across their companies, by implementing the right technology to automate and streamline contingent workforce management, HR leaders can remain two steps ahead of the labor force. The technology handles tax documentation, compliance, payments, onboarding and offboarding, so that companies have all of the control, with none of the complexity. 

With a direct approach to managing independent contractors, freelancers, consultants and even agency workers, your workforce can be viewed through a single pane of glass, your processes remain under your control, and your relationships are stronger and more future-focused.  
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Written by
Fiverr Enterprise