What is a contingent worker?

What is a contingent worker?

A contingent worker is a non-employee a business hires to perform specific duties. Companies hire and pay them per project. Unlike permanent staff, contingent workers are not on the company’s payroll. They don’t have a right to bonuses or benefits apart from the pre-agreed compensation.

However, as long as they meet deadlines, they can choose their work environment and schedule when executing their tasks. There is a high demand for freelancers in various disciplines, from marketing to healthcare. You must obtain the Internal Revenue Service 1099-NEC form if you pay your independent contractors more than $600 within a year. 

Contingent work is not an entirely new development. However, it is more popular than in previous decades. When a company expands, the demand for labor increases. To meet this demand, hiring temporary workers may be the immediate solution. 

At some point, companies experience staffing changes. Some changes may be due to staff relocation; others may be due to mass retirement. Whatever the reason, hiring a contingent worker can help the company stay afloat while the company seeks a permanent replacement.

Tight labor markets also influence the demand for contingent labor. To fill the skills gap, you may seek workers internationally on a contractual basis. Hiring contractors can be significantly cheaper than employing permanent staff. As companies seek ways to reduce hiring costs, hiring contractors can be an attractive option. 

New contract hiring trends

Although the coronavirus pandemic gave rise to contract staffing, more people are choosing to be contingent workers by choice. Today, the size of the freelancing market or gig economy is ever-increasing. The availability of a global skills pool also encourages this trend.

Contingent employment holds numerous benefits for both the employer and worker. 

The total cost of hiring an employee covers more than their basic salary. It also entails the onboarding costs, training, bonuses, paid time off, and insurance plans. Since contractors have no legal rights to these benefits, employers spend less.

Onboarding can be a long and tiring process. It becomes significantly shorter when hiring a contractor. While it may take weeks or months to legally onboard employees, it may only take days to secure a contractor.

Hiring contingent workers enables employers to search for talent in the global labor market. It can bring you international brand exposure.

Contingent workers often receive payment per contract. Unlike employees who receive payments even when off-duty, contractors only earn when they work. It makes them more productive, as productivity equals compensation.

Hiring contingent workers also comes with challenges. For instance, employers risk misclassification when they do not manage remote contractors properly. Misclassifying contractors is a serious offense that can lead to harsh penalties.

Establishing the company culture becomes tricky when you involve contractors. Since contingent workers can work for multiple employers simultaneously, you cannot demand their loyalty.

Difference between contingent workers and temporary-to-permanent workers

There is a clear distinction between permanent employees and contingent workers. However, many easily confuse temporary-to-permanent hire workers with contract staff. 

A temp-to-hire staff is an employee on a trial. Companies hire these individuals to fill a permanent role. However, they set a trial period to assess their skills and ability to fit in at the company.

Admittedly, a company does not hire a contractor to employ them permanently. Although companies can convert contract employment to permanent employment, they typically do not hire contractors with this aim.