The Empuls Glossary

Glossary of Human Resources Management and Employee Benefit Terms

Contingent Worker

Contingent workers, also known as freelancers, contractors, or gig workers, play a vital role in today's dynamic and competitive business environment. Unlike traditional employees with permanent positions, contingent workers are engaged on a temporary or project-specific basis, providing companies with the flexibility to adapt to changing needs and demands.

What is contingent worker?

A contingеnt workеr, oftеn rеfеrrеd to as a frееlancеr, indеpеndеnt contractor, or 1099 workеr, is an individual hirеd by an organization to complеtе spеcific tasks. Thеsе individuals arе typically еxpеrts in thеir fields and offеr thеir skills to thе organization on a nonpеrmanеnt basis.

Contingеnt workеrs arе typically еngagеd on a projеct-by-projеct basis, which mеans thеy arе brought in to work whеn thеrе's a spеcific projеct that rеquirеs thеir еxpеrtisе. Unlikе rеgular еmployееs, businеssеs arеn't obligatеd to providе continuous work to contingеnt workеrs unlеss thеrе's anothеr projеct that rеquirеs thеir assistancе.

Contingеnt workеrs havе control ovеr thеir work schеdulеs, how thеy carry out thеir tasks, and whеrе thеy pеrform thеm. Thеy can choosе to work on-sitе or rеmotеly and еvеn havе flеxibility in dеtеrmining thеir workdays and hours, as long as thеy mееt thе agrееd-upon dеadlinеs.

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What are bеnеfits of hiring contingеnt workеrs?

The benefits of hiring contingent workers include the following

Time savings
Cost savings
Flexibility
Expertise

Timе savings: Hiring contingеnt workеrs can savе a significant amount of timе and еxpеditе projеct complеtion. Thеsе workеrs don't rеquirе thе typical onboarding and continuous training that full-timе еmployееs do. Thеy arе oftеn spеcialists who havе еxpеriеncе in tasks likе wеb dеsign or еvеnt managеmеnt, еnabling thеm to еfficiеntly complеtе assignmеnts.

Cost savings: Bringing in contingеnt workеrs can rеducе opеrational еxpеnsеs that would othеrwisе bе spеnt on part-timе or full-timе еmployееs. This includеs bypassing еxtеnsivе onboarding procеssеs and HR support. Contingеnt workеrs don't nеcеssitatе training sponsorship or еmployее bеnеfits such as paid sick lеavе, paid timе off, hеalth insurancе, or еquipmеnt provision.

Flеxibility: Contingеnt workеrs arе a flеxiblе workforcе that can bе tappеd into whеn your organization nееds spеcific skills for tеmporary projеcts or to handlе surgеs in workloads. This allows you to avoid thе ongoing costs of a full-timе еmployее whеn thеir rolе isn't consistеntly rеquirеd.

Expеrtisе: Contingеnt workеrs, duе to thеir еxtеrnal pеrspеctivе and spеcialization, can providе valuablе insights and bridgе knowlеdgе gaps within your organization. Thеir еxpеrtisе in spеcific arеas can contributе to thе succеss of your projеcts and tasks.

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What generations comprise the contingent workforce?

The contingent workforce comprises individuals from various generations, as people from different age groups engage in freelance, temporary, or contract work. The generations that make up the contingent workforce include:

Baby Boomers
Generation X
Millennials
Generation Z
Traditionalists/Silent Generation

Baby Boomers (born 1946-1964): Some baby boomers choose to work as contingent workers after retiring from full-time employment. They may offer a wealth of experience and expertise on a project or part-time basis.
Generation X (born 1965-1980): Gen Xers are often found in the contingent workforce, taking on freelance or contract roles for specific projects. They value work-life balance and may appreciate the flexibility that contingent work provides.
Millennials (born 1981-1996): Millennials have been actively participating in the gig economy and contingent work, often leveraging technology platforms to find freelance opportunities. They value flexibility, purpose-driven work, and a diverse range of experiences.
Generation Z (born 1997-2012): The older members of Generation Z are entering the workforce, and some may engage in contingent work as a way to gain experience, explore different industries, or pursue flexible arrangements.
Traditionalists/Silent Generation (born before 1946): While fewer in number due to retirement, some individuals from the traditionalist or silent generation may still participate in the contingent workforce, offering their expertise on a part-time or project-specific basis.

What are the drawbacks of hiring contingent workers?

While hiring contingent workers can offer flexibility and cost advantages, there are also potential drawbacks and challenges associated with this employment model. It's important for organizations to be aware of these drawbacks when considering or managing a contingent workforce. Here are some common drawbacks:

Limited loyalty and commitment
Potential for inconsistency
Integration challenges
Communication issues
Knowledge transfer and retention concerns
Limited company investment

Limited loyalty and commitment: Contingent workers may have less loyalty and commitment to the organization compared to permanent employees. Their primary allegiance might be to their own business or to securing their next contract.
Potential for inconsistency: Contingent workers may bring varying levels of expertise and work quality. There can be inconsistencies in the skills and performance of different contingent workers, which may impact the overall quality of work.
Integration challenges: Integrating contingent workers into the organizational culture can be challenging. They may feel like outsiders, and it can be difficult to foster a sense of team cohesion among a mix of contingent and permanent employees.
Communication issues: Effective communication can be more challenging with contingent workers, especially if they work remotely or on a part-time basis. Maintaining open lines of communication and keeping them in the loop can be more complex.
Knowledge transfer and retention concerns: Contingent workers may not have the same level of institutional knowledge as permanent employees. This can pose challenges when it comes to knowledge transfer and retention of critical information about the organization.
Limited company investment: Organizations may be less inclined to invest in the professional development or training of contingent workers since their tenure with the company is often shorter. This can result in a workforce that may not be fully aligned with the company's goals and values.

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What are examples of contingent worker roles?

Contingent workers, also known as freelancers, contractors, or temporary workers, play various roles across different industries. Here are some real-life examples of contingent worker roles:

Graphic designers
Software developers
Content writers
Consultants
Event planners
Data analysts
Social media managers
Interim executives

Graphic designers: Many companies hire freelance graphic designers for specific projects, such as designing marketing materials, logos, or website graphics.
Software developers: Companies often bring in contract software developers to work on specific coding projects or to address temporary increases in workload.
Content writers: Organizations may hire freelance writers to create blog posts, articles, or other written content for their websites.
Consultants: Businesses may engage consultants on a temporary basis to provide expertise in areas such as management, strategy, or technology.
Event planners: Event planning is often project-based, so companies may hire contingent workers to help organize and execute events.
Data analysts: Companies may bring in temporary data analysts to analyze and interpret data for specific projects or to address short-term needs.
Social media managers: Freelance social media managers can be hired to create and manage social media content for companies on a temporary basis.‍
Interim executives: In situations where a company needs leadership temporarily, they may hire interim executives to fill key roles such as CEO, CFO, or CTO.

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Employee pulse surveys:

These are short surveys that can be sent frequently to check what your employees think about an issue quickly. The survey comprises fewer questions (not more than 10) to get the information quickly. These can be administered at regular intervals (monthly/weekly/quarterly).

One-on-one meetings:

Having periodic, hour-long meetings for an informal chat with every team member is an excellent way to get a true sense of what’s happening with them. Since it is a safe and private conversation, it helps you get better details about an issue.

eNPS:

eNPS (employee Net Promoter score) is one of the simplest yet effective ways to assess your employee's opinion of your company. It includes one intriguing question that gauges loyalty. An example of eNPS questions include: How likely are you to recommend our company to others? Employees respond to the eNPS survey on a scale of 1-10, where 10 denotes they are ‘highly likely’ to recommend the company and 1 signifies they are ‘highly unlikely’ to recommend it.

Based on the responses, employees can be placed in three different categories:

Promoters
Employees who have responded positively or agreed.
Detractors
Employees who have reacted negatively or disagreed.
Passives
Employees who have stayed neutral with their responses.

What is the difference between contingent workers vs traditional employees?

Here are some key distinctions between contingent workers and traditional employees:

1. Employment arrangement

Contingent workers: Work on a temporary or contract basis. Their employment is often project-specific or for a defined period.
Traditional employees: Typically have an ongoing, long-term relationship with the employer. They may be full-time or part-time and are often permanent staff.

2. Work schedule and hours

Contingent workers: Often have a more flexible schedule. They may work irregular hours depending on the requirements of the project or assignment.
Traditional employees: Typically work regular hours as defined by their employment contract. They may have a fixed schedule and may be eligible for benefits such as paid time off.

3. Employee benefits

Contingent workers: Generally do not receive the same benefits as traditional employees, such as health insurance, retirement plans, or paid time off. They are responsible for their own benefits.
Traditional employees: Often receive a package of benefits, including health insurance, retirement plans, paid time off, and sometimes additional perks such as wellness programs or tuition reimbursement.

4. Job security

Contingent workers: Have less job security since their employment is often tied to specific projects or contracts. Once the project is completed, their employment may end unless another project is available.‍
Traditional employees: Tend to have more job security, as long as they meet performance expectations and the company remains financially stable. They may be subject to termination for cause or as a result of organizational changes.

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Why is a contingent workforce crucial to a company?

A contingent workforce can be crucial to a company for several reasons, providing flexibility, expertise, and cost-effectiveness. here are some key reasons why companies may find a contingent workforce beneficial:

Flexibility and agility
Specialized skills and expertise
Cost management
Scalability
Innovation and fresh perspectives

Flexibility and agility: Contingent workers allow companies to quickly adapt to changing business needs and fluctuations in workload. they can be brought in for specific projects or periods of high demand, providing a flexible and agile workforce.
Specialized skills and expertise: Contingent workers often bring specialized skills and expertise that may not be available within the existing employee pool. companies can access a diverse range of talents for specific projects without the long-term commitment of hiring full-time employees.
Cost management: Employing a contingent workforce can be cost-effective for companies, especially when they need specific skills for a short duration. contingent workers are often paid on a project or hourly basis, reducing the overall costs associated with benefits, training, and other long-term employment expenses.
Scalability: Companies can scale their workforce up or down quickly by leveraging contingent workers. this is particularly valuable in industries with seasonal or cyclical demand, allowing businesses to efficiently manage resources without the burden of maintaining a constant headcount.‍
Innovation and fresh perspectives: Contingent workers can bring fresh perspectives and innovative ideas to a company. their external viewpoints and diverse experiences can contribute to creative problem-solving and help drive innovation within the organization.

How to pay contingent workers in 4 steps?

Here are four steps to pay contingent workers:

Determine worker classification
Agree on payment terms and rates
Collect necessary information
Process payments and maintain records

1. Determine worker classification

Before initiating payment processes, correctly classify the worker as an employee or an independent contractor. This classification is crucial for complying with tax regulations and labor laws. Independent contractors often handle their own taxes, while employees have taxes withheld by the employer.

2. Agree on payment terms and rates

Clearly define payment terms and rates in the contract or agreement with the contingent worker. Specify the hourly rate, project-based fee, or any other agreed-upon compensation structure. Include details about the payment frequency (e.g., weekly, bi-weekly, or monthly) and the method of payment (e.g., direct deposit, check, or electronic payment).

3. Collect necessary information

Gather essential information from the contingent worker to facilitate payment processing. This information may include:

Tax Identification Number (TIN): For independent contractors, you may need their Social Security Number (SSN) or Employer Identification Number (EIN).
Bank Account Information: If using direct deposit, collect the worker's bank account details.
Invoice or Time Sheets: Depending on the agreed-upon payment structure, request invoices or time sheets as supporting documentation for payment.

4. Process payments and maintain records

Once you have the necessary information, process payments according to the agreed-upon terms. Utilize your payroll system or accounting software to generate payments. Keep accurate records of all payments made to contingent workers for tax and compliance purposes.
Consider using technology platforms that facilitate streamlined payment processes for contingent workers, especially if you engage with freelancers or independent contractors regularly. There are various freelance management systems and online payment platforms that can automate invoicing and payment processes.

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