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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