Why The Contingent Workforce Is Growing, And What That Means To You

by Khaleef Crumbley on June 29, 2011

in Workplace

Contingent Workforce

As the outlook on the economy remains grim for many industries, many companies are still wary about hiring full-time workers. Very few companies are hiring in great numbers, and even less are continuing with employee recognition programs. Therefore, we are witnessing a rise in the number of companies that are turning to the contingent workforce in order to fill their staffing needs.

What Is The Contingent Workforce?

At one time, the only major distinction between workers was full-time vs part-time. However, as the workplace has evolved, so have the various roles.

When one speaks of the contingent workforce, they are referring to a group of workers which includes, temporary workers (working through an agency), contracted workers, per-diem, self-employed contractors, day laborers, and direct-hire temporary workers.

When I became a part of the workforce, these types of employees were very common in warehouses and/or industrial jobs, doing manual labor, office work, and tedious projects (such as mass mailings or taping together damaged money).

However, now we see the contingent workforce filling rolls in accounting, finance, health care, and information technology. With the rise in Internet sales & marketing, and freelance writers, designers, and programmers, we can expect these numbers to rise in the future.

The Rise In The Contingent Workforce

There has been a sharp increase in the number of temporary workers employed over the last few years. According to an article on Marketwatch:

Temporary-help services employment increased to about 2.3 million in March from a recent trough of about 1.7 million in mid-2009, according to the Labor Department.

That’s an increase of over 35% in about 2 years! Keep in mind that this is just one small segment of the contingent workforce. However, information from this category is probably the most reliable, since temporary workers are employed through agencies.

Why Are Companies Looking To The Contingent Workforce?

Many companies have present staffing needs, which must be filled in order for them to be able to conduct business. However, due to the unpredictable nature of the current economy, these businesses are not willing to make long-term commitments to large groups of workers. Therefore, hiring workers on a part-time basis, or bringing them on as consultants, seems to be the best move.

Reduced Benefits

Many contingent workers do not receive health insurance coverage, life insurance, retirement benefits (such as free money through a match, or the ability to take advantage of 401k contribution limits), or paid time off. Most temporary agencies will force their employees to wait for 6 months or longer before being eligible for such benefits.

There are also certain workplace laws that do not apply to contingent workers.

This makes it much cheaper to hire someone under this type of arrangement, which is one of the main reasons why employers are seeking more contingent workers!

No Long-Term Commitment

With most forms of low and mid-level employment, your contract can be terminated “at will”. This means that you can quit or be fired/laid off at any time. However, there is usually something owed when this happens. For instance, if someone is laid off, they are sometimes given a severance package, possibly vested (meaning that they can keep employer contributions) in a retirement plan, and even paid for unused time off.

This is usually not the case with contingent workers. Once the contract is terminated, the employer usually walked away from the relationship owing nothing. If an employer is not sure of long-term funding, this can be a great option. Of course, this also makes it very easy for an employee leave the company. This risk has to be weighed against the benefits!

Low Recruitment Costs

Since there isn’t much of a commitment made to these workers, it is usually easy to bring them on board. Many in the contingent workforce are hired through an intermediary firm, that does handles the initial interviews, background checks, competency testing, etc. This way, the employer simply has to pay a fee (or a percentage of the salary) to the firm, and doesn’t have to worry about the costs of advertising, background checks, and time spent holding multiple interviews. This also works out for the employee by reducing their job hunting expenses (especially if they work through an agency).

If these employees are offered any benefits, they are usually handled though the staffing firm (and are subject to a waiting period). This way, if the employment arrangement doesn’t work out, the employer hasn’t wasted any money by adding a worker or group of workers to their various benefits plans.

Why Does This Matter?

Most people are probably wondering why this shift is important. The main impact that it will have is that we may be forced to rethink how we market ourselves. Many people are not willing to take a job on these terms, because they have been looked down upon for so long. However, if you are currently looking for a job – or if you are suddenly laid off – you may have to consider becoming part of the contingent workforce.

Depending on your status, you may have to arrange for your own health-care coverage, and start paying self-employment tax. You may also have to look into various certifications that demonstrate your competency in your field. While the contingent workforce still makes up a very small part of all workers, the numbers are growing, and the trend will most likely continue in that direction as uncertainty about the economy lingers.

For employers, this type of arrangement is a great way to grow your business, without all of the costs traditionally associated with hiring employees.

It is better to be prepared and able to adapt, than to be caught by surprise, struggling to support your family!

photo by Idea Go

© 2011 – 2012, Khaleef Crumbley. All rights reserved.

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{ 11 comments… read them below or add one }

1 Buck Inspire

Excellent points! Adapt with the times or struggle with the times. I recall just full time and part time job categories, but this move to a contingent workforce is a sign of the times. It is mutually beneficial for both employer and employee. Thanks!

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2 Squirrelers

Freelancers/contract workers are becoming much more common, even in white collar fields. It’s a good way for people between full-time jobs to make a living, though I’ve heard of some folks making more money than their full-time counterparts doing essentially the same things

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3 jana

my state uses contingent workers in many capacities throughout the state. where it becomes a problem is when retirees come back in those positions and still collect their pensions along with a paycheck. it’s been a huge debate for years, especially in the last few with all the budget issues, but there doesn’t seem to be a resolution anytime in the future.

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4 Darren

I’m currently working as a contingent worker. In fact, in my company there are tons of them. It’s a low risk investment for them.

The main reason I do it is because I’m close to home. I have a 401k, but no match, and no other benefits.

You’re right in that if you do accept a position as a contingent worker, you have to provide for your own benefits, such as insurance.

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5 Paula @ AffordAnything.org

My dad’s company really needs an admin/bookkeeper/salesperson, but just doesn’t have the budget or the need to have someone there full-time. I’ve been encouraging him to take on some kind of contingent worker — either a part-time worker, or someone on a 6-month contract, or a freelancer, or SOMETHING — to fill the need without going through the expense of staffing. Not sure if he will, though. He’s traditional.

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6 Amanda L Grossman

On the one hand, this is not good for the average worker. On the other hand, for those that have a sizable savings and/or low living expenses, this could be a great sstep in the direction of lifestyle design and more work/life balance.

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7 Everyday Tips

I work at a company that decide what it thinks about contingent workers. First, they fired a ton of people with a lot of experience to save money. Then, they signed a bunch of work and they needed all that knowledge back. So, they hired them all back as contingent workers. So, when these projects end, the workers are gone, and they don’t have to worry about any overhead if new work is not signed.

I am a contingent worker myself. I love it because I get paid for every hour I work, and I don’t need benefits as we are covered by my husband’s company. I just work part time anyway, so I wouldn’t qualify for benefits no matter where I work. However, we do not depend on my income to pay the bills, so we are in a much different position than many.

Great article Khaleef.

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8 Half-Assed Economist

Just wanted to let you know that I really enjoyed this post and linked back to it on my blog! Hope you don’t mind.

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9 Financial Samurai

Excellent write-up! We’ve got to look out for our own health care and our own insurance. Being a mercenary worker is definitely becoming more and more commonplace!

Best, Sam

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10 Half-Assed Economist

Thanks for posting this. It is very interesting to watch the evolution of the workforce as the economy changes.

The contingent workforce is an excellent source of strong long-term employees. Why hire someone after a 2 hour interview when you can use them in the interim with no commitment? You really get to know your employees over the course of months before making a longer term commitment.

On a more personal level, I love the flexibility that being part of the contingent workforce provides. I get to decide every few months how much I want to work. Do I want to teach one class at one University or six classes at 3 Universities. It really helps me manage my finances and my personal life.

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11 101 Centavos

There are some engineering companies (EPC — Engineering, Procurement, and Construction) that basically run on this model. They staff up by project, and fire accordingly once the job is done and there are no other jobs going on. The pay is good, but the stability obviously isn’t. I’ve interviewed a few candidates that are tired of the see-saw, and are looking for something a little more predictable.

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