When speaking of flexible and hybrid work, most people immediately picture a workplace where employees get to pick their own hours or work remotely when they need to.
While these certainly are benefits that many employers provide nowadays, this perception also highlights a common misconception – it looks at flexible and hybrid structures only in the context of permanent employees. But what about workers who have always contributed to the flexibility of the talent ecosystem? We’re talking about contingent workers of course!
So what is a contingent worker? To define them, a contingent worker would be anyone who works for your organization – without being on the company payroll. Broadly, your workforce has two kinds of workers – your permanent staff who are on the payroll, and your contingent staff who aren’t.
This blog will tell you all you need to know about the second category.
These include any self employed individuals or independent vendors your company might be working with on a contractual basis. They are typically business owners or independent entities that your organization may have engaged for a specific project or purpose. Think – a freelance social media manager, a video editor who helped with your team video, or a tech vendor who was brought on board to create that new app for your company.
These professionals are not a part of your payroll staff and are not paid a regular salary. Instead, they are paid based on their contract agreements. For example – they may have received an advance at the start of the project, and the remaining amount at the end, once they sent your company an invoice.
These are workers who may be operating under an external agency, or independently. They are typically engaged for one-off ‘gigs’ or requirements. Think of the professionals on gig platforms and marketplaces like PeoplePerHour who are engaged for shorter tasks – and paid as soon as their gig is completed.
Another common example of gig workers are rideshare drivers or delivery agents on food delivery apps, who are not on the payroll of the companies they work for, but are paid once they have provided their service.
These types of contingent workers come to you through a staffing agency – like temporary workers (or ‘temps’) who may work with you while someone from your staff is on a sabbatical or a break.
They are not a part of your payroll either. Instead, your organization pays the staffing agency that has supplied these workers to you – and they in turn, pays each temp or PAYE worker.
This refers to any third-party vendors or organizations your company engages, based on a Statement Of Work (SoW). An SoW is an agreement that defines exactly what the vendor or workers will do for you.
For example, in an effort to maintain a lean team, your company may outsource services like accounting or tax filings to an external vendor. This external team will handle responsibilities like your company’s tax filings for the financial year – and be paid as per the payment milestones in the SOW.
So what sets your contingent workers and employees apart? The key differences are based on:
For an understanding of the differences at a glance, see the table below.
Employees vs Contingent Workers: Key differences
| Employees | Contingent workers | |
| How they work | The employers can define how, when and where an employee will work, as per the company’s needs. |
The employer has no say over when, where and how they will work. The contingent worker only has to ensure they deliver the work as defined by the contract – how they do this work is up to them. |
| Who they work with | During their work hours, employees must work exclusively for their employer. They cannot take up any other employment during this time. | Contingent workers can work with several clients at once. A client organization cannot demand exclusivity from these workers. |
| How long they are engaged | Employees continue working for an employer indefinitely until they resign or are terminated with rightful reason. |
Contingent workers work with a client only for the duration of the contract. If the client wants to re-engage them, a new contract will have to be drawn up. |
| Benefits |
Employees are entitled to all legally mandated benefits like health insurance, paid time off, maternity leave or sick days. Additionally, employers may also offer certain perks like free meals, gym memberships or use of the company facilities. |
Contingent workers are not entitled to any benefits or perks. |
| Career development & growth |
Employees must be given adequate training by the employers and provided with the necessary work equipment. Employers may also give them access to ongoing training, industry certifications, and guidance in order to help them chart out a growth path within the company. |
They are not entitled to any training, equipment or certifications from the employer. A contingent worker is expected to arrange for all these themselves in order to retain a competitive advantage. |
| Tax status | Employers will need to withhold taxes, insurance payments and other deductions as per the laws of the country. | They are responsible for filing their own taxes – employers are not expected to make any withholdings or deductions. |
| Protections | Employees are entitled to protections against facing unfair practices at work or being wrongfully terminated. If they are let go, they must be paid a severance. | They are only entitled to the payments and guarantees as defined in their contract. Once the contract period is over, they may or may not be reengaged. |
Contingent workers are not uncommon. Let’s take a look at the diverse industries where they make a huge impact.
All these professionals are brought on board for a variety of purposes and organizational needs. This includes:
Building a hybrid workforce that includes contingent workers comes with lots of advantages.
Want to know more about making contractor management simple and compliant? ⬇️
We have discussed how the right strategy can help you anticipate, plan around and navigate the various intricacies of working with external workers. This overall strategy is exactly what we refer to as Contingent Workforce Management (CWM).
CWM solutions encompass all the tools, technology and services you need to manage your contingent workers. A good CWM solution helps you navigate the process end-to-end – right from sourcing your freelance and contract talent to onboarding them, managing compliance, disbursing payments and everything in between.
A Vendor Management System (VMS) is a software system that helps you handle the diverse aspects of managing a contingent workforce. This is usually a cloud-based system that automates the different aspects of sourcing, onboarding, compliance, payments and more, making the entire process more efficient.
An MSP on the other hand, is a Managed Service Provider that you can outsource your contingent workforce management to. Their responsibilities include operating your VMS tool, managing the data that goes into it, and integrating your VMS to the other HR capabilities within your organization so that you benefit from a unified strategy. Additionally, they offer guidance, advice and support around compliance, onboarding, offboarding and more.
The ideal CWM strategy should bring together both the technical and automation capabilities of a Vendor Management System and the human expertise of a Managed Service Provider.
TalentDesk does just this – bringing together the best of tech and human capabilities. Our intuitive platform streamlines all your contractor data and automates the repetitive parts of the process, saving you time and effort, while our services bring you peace of mind when it comes to classification, compliance and risk management.
We help you source talent by connecting you to a huge global marketplace, courtesy of our parent company PeoplePerHour. We then help you choose the right professionals too, through our AI-driven talent discovery assistant, Phoenix – matching the right profiles to your needs.
Our platform streamlines all your compliance protocols for you, making it easy to create contracts, upload documents and manage verifications. For complete peace of mind, you can outsource all compliance responsibilities to us through our Agent Of Record (AOR) services. We’ll take over from there and manage classification, keep you updated on all regulatory fronts and even sign contracts on your behalf, giving you an additional shield of protection.
When it comes to onboarding, our platform creates a customized process for you, gathering all relevant documentation and paperwork, and storing them securely in a cloud-based environment. There on, our project management capabilities enable you to make each freelancer and contractor engagement as smooth as possible. Think communication and data sharing features, project dashboards, deadline trackers and beyond.
Finally, our payment portal makes global payments easy for you in more ways than one. It consolidates all invoices, enables single-click approvals and disburses payments across countries and currencies.
The economic uncertainty over the last few years have made employers more wary of making permanent hires – preferring the flexibility and easy accessibility of contingent workers instead. As reports have shown, 51% of business leaders are looking to engage more contingent workers in the coming days. The economic trends that have already been observed are telling – the gross volume generated by the global gig economy increased from $368 billion to $455 billion just from 2021 to 2023!
The pandemic went to reveal the many advantages of remote and hybrid models. Companies are keen to keep leveraging those benefits – opening up their teams to include more freelancers, contractors and gig workers from around the globe. As one Upwork study predicted, 22% of the US workforce will be remote by 2025. Contingent workers make up a huge part of these numbers.
Talented professionals are looking for more than just a skill-pay match – and companies have taken note. Workplace diversity and equity are going a long way in helping companies attract great contingent talent.
Company DEI strategies thus, are now including their contingent workforce in their decision-making processes too. More employers are embracing pay transparency for freelancers and contractors and showcasing positive workforce diversity data to build reputation as a great client to work with.
AI tools are increasingly being used in overall talent management – and this extends to contingent workers. Recruiters and managers are using AI capabilities to screen talent, assess skills to find the best fit, and even use predictive analytics to ascertain how successful a candidate is likely to be in context of the company’s needs. TalentDesk’s AI tool Phoenix is a case in point!
Additionally, AI innovations are also being used to automate functions like background checks, onboarding protocols and payroll functions.
Total Talent Management (TTM) is a rising trend where employers are seeing their workforce more holistically. They are recognizing that contingent workers are now a crucial part of their workforce and are designing policies and company values that keep them in mind.
This is leading to better collaboration, more effective talent management and cross-functional teams where people’s talents complement one another in a more effective way – whether they are on the payroll or not.
As with anything good, complexities exist in Contingent Workforce Management too. But with contingent labor benefits like flexibility, easy access to specialized talent, cost efficiencies and innovations, it’s worth the effort to develop a blended workforce strategy that makes the most of these external workers!
As we have seen, most of the challenges stem from lack of awareness and planning. But with the right tools and management, working with freelancers, contractors, consultants and gig workers becomes a breeze.
The ideal strategy brings together the best of the latest tech innovations and the best of human expertise developed over decades. This is exactly what TalentDesk offers. With 15+ years in the contingent workforce space, we can help you anticipate the nuances of working with external talent, navigate complexities and stay compliant – all with the help of our state-of-the-art technology and the human understanding that our experts bring to the table.
Explore TalentDesk’s platform and services, and reach out to know how we can help you!