What Is a Contingent Worker? (Pros, Cons and Tips)

By Indeed Editorial Team

Published 28 September 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Organisations that require manpower and talents urgently for time-sensitive projects may choose to hire a temporary workforce. Contingent workers are a group of temporary employees that companies typically hire on demand to fill positions, allowing businesses to save costs by outsourcing. If you're an HR professional or a manager who oversees company projects and assignments, learning more about non-permanent workers can temporarily increase your organisation's capabilities and help you to deliver successful projects. In this article, we discuss what contingent workers are, outline their advantages and disadvantages and explain how they can help complement your workforce.

What is a contingent worker?

A contingent worker is an individual who works on a temporary basis for a company, such as an independent contractor, freelancer or consultant. Organisations hire them on an ad hoc basis to work on temporary projects during peak periods when their staffing requirements are higher than usual. Non-permanent workers also contribute valuable expertise that full-time employees may not currently possess. The organisation usually ends its employment contract with temporary workers when the project or job is complete, although it may rehire them at a later date for future work.

There are different situations where a company might choose to hire non-permanent workers. Here are some examples:

  • Events: Companies may require manpower to help with the logistics and operations of large events. Non-permanent workers can prepare the venue, assist with traffic or usher and direct guests at the event.

  • Content creation: Companies may outsource content creation to independent contractors to promote their products or services. This can include hiring freelance graphic designers or video editors to create marketing collaterals or promotional materials.

  • IT support: To save costs, smaller companies may choose to engage temporary workers instead of hiring full-time IT employees. Independent contractors, such as like software developers or technicians, may assist with setting up the IT infrastructure and provide ad hoc support whenever necessary.

  • Data entry: Companies may engage temporary staff to assist with data-entry duties. This may be a more cost-effective option and allows their full-time staff to focus on the higher priority tasks.

  • Translators: Companies that transact with international customers may require translation services to market their products and services. They may contract freelance translators to help localise their content on short notice.

Related: What Is Casual Work? (Types, Payment and Strategies to Find)

Advantages of contingent workers

Here are several advantages of hiring non-permanent workers:

Greater flexibility

Businesses may want greater flexibility in organising their staff and manpower, which can enable them to undertake different projects simultaneously. Instead of hiring full-time employees who may sometimes be underutilised during off-peak periods and incur additional expenses, non-permanent workers can temporarily help companies adjust to seasonal increases in demand for work. In addition, employers can easily terminate their contracts if they don't meet expectations. Conversely, they can offer full-time employment to those who perform well and fit the organisation's culture and values.

Related: Workplace Flexibility For Employers and Employees

Enhance organisational capabilities

Companies can sometimes lack the resources or expertise to work on larger and more profitable projects, which are valuable opportunities to build the brand and expand their business. To scale their business, companies can hire temporary workers and enhance their organisation capabilities quickly enough to take on more projects during peak periods. These workers may possess unique skills or knowledge that may take workers time to acquire or build. They provide companies with the necessary competencies to successfully complete projects and fill temporary openings until the organisation can hire capable full-time employees.

Lesser administrative workload

Since they're not full-time employees, there are lesser administrative tasks and requirements associated with their placement. Some companies may outsource the hiring of temporary workers, like independent contractors, to an external recruitment agency. This effectively transfers the responsibility for processing their payroll and related administration to the third-party agency, helping the company to save costs and time. In addition, compulsory statutory obligations like the employer's CPF contributions don't apply to temporary workers, which further reduces the administrative workload for the company's HR department.

Reduce labour costs

Engaging non-permanent workers to complete essential projects when necessary can help the organisation save costs as they're not required to pay additional expenses like benefits, contributions, paid time off and health insurance coverage. Non-permanent workers who are typically paid per project or by an hourly rate for their services may also cost less compared to full-time employees. Furthermore, they can start work immediately without the organisation spending money or resources to train or onboard them for the job.

Related: General Labour Skills: Definition and Examples

Access to specialised expertise

Typically, companies invest in training to help their full-time employees acquire new skills and improve their abilities, which can help increase the organisation's productivity and performance. Organisations that hire temporary workers can gain access to their specialised expertise and competencies immediately. These workers can contribute to urgent tasks or projects straightaway without any training required, which helps save the company time and resources. This is an effective way for companies to bridge skill gaps and increase their capabilities.

Disadvantages of contingent workers

If you're looking to expand your workforce by engaging temporary workers, here are some disadvantages to note:

Limited control

Since they're not full-time employees, employers may have limited control over certain aspects of their work, such as their routine or process. Managers accustomed to face-to-face communication with their team members can't use the same hands-on approach with temporary workers. They may prescribe certain guidelines, such as the scope of the assignment and outline rules and parameters, but non-permanent workers still retain full autonomy on how to perform their jobs.

Lack of company loyalty

These workers are temporary members of your workforce and only fill positions when necessary, which makes it difficult for them to develop loyalty to a particular company. Depending on their preferences and requirements, they often work with different clients and don't commit to one organisation. While they're legally contracted to deliver work and complete their tasks within the stipulated period, they may move on from the role at the end of the contract. Non-permanent workers who desire more flexibility in their work may opt not to extend or renew their contract even when offered by the company.

Related: What Is Employee Retention and How to Improve It (With Steps)

Reduced team effectiveness

Due to the lower perceived loyalty of non-permanent workers, they may not integrate fully into the organisation and its teams. In addition, they're not formally required to abide by the same working hours as full-time employees, leading to fewer interactions and opportunities to build rapport with one another. They may not develop strong relationships with team members or colleagues as they may plan to leave after their contract ends. This dynamic can lead to lower levels of teamwork between employees and temporary workers. This lack of team cohesion may impact productivity and engagement levels at work.

Inconsistency

Full-time employees that remain with the company long-term can provide stability and consistency in their production and performance. They're familiar with company protocols and processes and understand how to meet expectations. Conversely, non-permanent workers have more autonomy and can choose their own working style to complete their tasks, which may not adhere to existing company standards. Furthermore, qualified temporary workers may not be available for hire in any emergency, like when the company requires additional manpower for an urgent project. This inconsistency can challenge organisations when planning for staff and personnel to take on new projects or business goals.

Security risk

Non-permanent workers can access your organisation's confidential data, such as customer information or product launch plans in the course of performing their job. After their contract ends, they may keep important documentation or company data from their work. This can introduce a security risk if private company information is leaked to the public or competitors. In response, organisations typically invest in security measures to secure their information, which can cost the company additional time and resources.

Tips when hiring contingent workers

To make the process as efficient as possible, learn and apply the following tips:

Identify your objectives

Since you won't have full control over non-permanent workers, it's important for organisations to define the deliverables clearly at the start of the project. Doing so helps to set expectations and create guidelines that support the temporary worker. This improves the likelihood that they can complete their work to your standards.

Consider the compensation structure

To minimise project costs, it's recommended that the organisation first decide on a suitable compensation structure for temporary workers. Depending on the nature of the work and the organisation's cash flow, the company may choose to pay them a fixed sum instead of per hour. For instance, a construction project is typically paid in phases, and some organisations can choose to pay their temporary workers at the end of the project rather than per hour.

Related: What Is Compensation: Types and Examples of Benefits

Evaluate your staff coverage

Depending on the seasonality of projects in your industry, it's advisable to examine your current staff levels and their workload. Evaluate your staff coverage to determine if you have sufficient manpower and resources to handle incoming projects. Once you've identified the shortfall, you may begin sourcing temporary workers with the skills you require.

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