The rise of the contingent workforce is changing the way businesses operate. Period.
Intuit reports that the contingent workforce will bring a startling number of developments to the labor landscape in the next few years. It’s predicted that as many as 870 million women worldwide will join the contingent economy through self-employed work.
With a contingent workforce, companies can access a wide range of talent on a short-term basis, allowing them to quickly respond to changing market conditions. Unsurprisingly, this type of workforce is increasingly popular with businesses as they look for greater flexibility and cost savings while navigating the ever-concerning cost of living crisis, soaring inflation, and impending recession.
However, using contingent labor presents challenges and opportunities for organizations. So, in this article, we'll explore what a contingent workforce is, why it matters, and how businesses can best leverage this employment model.
There’s lots to sink our teeth into, so let’s jump in!
What’s a Contingent Workforce?
In short, a contingent workforce is a phrase used to describe a group of employees who work for a company on a non-permanent basis. As a result, this arrangement is often used when an enterprise needs to execute a project on a short-term basis.
Unlike traditional full-time or part-time employees, contingent workers aren’t guaranteed an exact number of work hours or days. Instead, they’re hired to undertake a specific task(s). Examples of contingent workers include freelancers, independent contractors, and temporary employees. These workers, according to reports, now represent 50% of the average company’s workforce.
As hinted at in the intro, contingent workers provide organizations with a great deal of flexibility. Not least because they don’t have to worry about the long-term cost of hiring full-time or part-time employees. They also have the plasticity to take on more or fewer projects as needed. Needless to say, this makes scaling their workforce up and down easier, allowing them to better adapt and remain competitive in a volatile market.
How the Workforce Has Shifted Over the Past Decade
There are several reasons why we're seeing a surge in contingent workers, including:
As technology advances, the need for workers to manually execute jobs decreases. As such, we’ve seen a decline in manual labor like fabricators, machinery operators, and mining technicians and a rise in demand for knowledge-based jobs that require people to think analytically and problem-solve. For example, in 2022, LinkedIn reported that marketing managers, machine learning engineers, and business system administrators were the most in-demand jobs of the year.
This surge in jobs where workers don't need to be physically present to perform their tasks has encouraged the growth of remote and contingent workers. Typically the kinds of jobs mentioned above just require workers to have internet access for them to be able to excel. Of course, many such jobs are assisted by AI and the cloud. But, the point we’re making is that thanks to technological advances, contingent workers can sufficiently work for organizations without them having to leave the comfort of their homes.
As the job market has shifted, educational requirements for jobs have increased. For instance, in 2020, it was predicted that 30% of all job openings would require some form of college or associate’s degree. As a result, many jobs that didn't traditionally require a college degree now demand a higher level of education. For example, jobs in STEM, healthcare support, and community service often require some form of post-secondary education.
This shift has impacted entry into many careers. This, combined with the ever-changing technological climate, has fuelled a significant skill gap. In fact, McKinsey notes that 87% of companies expect to experience skill gaps in the coming years - and to compensate for this, many are engaging a contingent workforce.
The Gig Economy
The rise of the gig economy has allowed more people to work from home on a self-employed basis. Statistics show that in just the last five years, the gig economy has almost doubled in worth, from $204 billion in 2018 to a whopping $401 billion in 2022. In fact, it’s estimated that by 2027, freelance workers will make up more than 50% of the US workforce. Elsewhere, in the EU, this figure is a bit more complicated. The number of self-employed workers has decreased overall in the last ten years. However, in a survey, 9% of workers wanted to be self-employed. So, watch this space; the will is there, so we reckon this figure will increase in the near future.
As you’ve probably already guessed, the gig economy fuels the contingent workforce by engaging workers who are highly educated. Often, these workers might have previously been in traditional employer-employee relationships. However, now they want the independence and freedom that gig work offers.
How Do Companies Benefit From a Contingent Workforce?
There are several benefits to hiring a contingent workforce, most notably:
Agility: With a contingent workforce, companies are better positioned to quickly adjust to changing market conditions. Namely because with a pool of contingent workers at your disposal, you can pad out your workforce at the drop of a hat, benefiting from their specialized skills and experience to plug your skills gaps.
Cost-effectiveness: With a contingent workforce, companies can easily hire additional staff without worrying about payroll taxes, benefits, and other fees associated with permanent employees.
Diversification: This is especially true if you’re looking to employ a remote contingent workforce because, with remote workers, location isn’t a barrier to your recruitment drives! Unsurprisingly, a more diverse pool of contingent workers often brings fresh perspectives to the table. In fact, McKinsey reports that ethnically and culturally diverse organizations outperform other companies without the same level of diversity in (terms of profitability) by 36%.
How to Manage a Contingent Workforce
While there are many benefits to a contingent workforce, there are also
several factors to keep in mind to ensure you make the most out of this working arrangement:
Culture gap: 60% of contingent workers say they receive the same respect as their counterparts. As such, the differences between regular and contingent workers' workplace experiences are narrowing. However, there's still work to be done. For example, 47% of contingent workers say they don’t get constructive feedback on their assignments, and 60% hardly ever receive exit surveys. One thing to remember about your contingent workforce is that although their contracts are temporary, their job satisfaction will determine their likelihood of wanting to work with you again. That’s why it’s wise for businesses to check in with their contingent workforce. This should include establishing a system for monitoring their performance and collecting feedback.
Expectations and mobility: Contingent workers with highly developed skill sets are in a position of power. As a result, they can pick and choose which roles they take. This stat speaks for itself: 45% of contingent workers report terminating an assignment because they were dissatisfied with their client. Of these workers, 49% say the position/project differed from the one described in job ads/interviews. The key takeaway for businesses? With contingent workers’ increasing mobility and choice, companies need to consider their retention plan. This includes setting realistic expectations for the role and being consistent with those promises from the get-go.
Technological hurdles: Suffice it to say if your workers aren’t given the tools to succeed, you won’t get the results you want. While there's an expectation that contingent workers come as a complete package (including access to the necessary technology to complete tasks), that isn’t to say businesses shouldn’t facilitate access where they can. Companies might also consider providing training as part of their contingent workforce’s onboarding. This might help ease them into the technical aspects of the role.
Compliance: Complying with tax, payment laws, and worker statuses is essential for avoiding legal ramifications. This includes double-checking that contingent workers are correctly classified as independent contractors, not employees. This is important for ensuring that all applicable taxes are withheld from the worker's pay.
When businesses heed the above advice, they’re better positioned to manage a happy and productive contingent workforce. However, with so much to consider, hiring contingent workers might still feel a bit daunting…
How Bubty Can Help
In a nutshell, Bubty's freelance management system can help businesses manage contingent workers by:
Streamlining onboarding with a single sign-on process, requiring only basic information for new contractors to create their profiles.
Allowing you to easily monitor project progress to ensure deadlines are met.
Providing a comprehensive financial dashboard from which you can manage freelancer payments.
These are just a few of the many features Bubty has to offer. So, to learn more about Bubty’s functionality and how we can help you to manage a contingent workforce, take a look here.