What Businesses Need To Know When Considering a Contingent Workforce
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By Paul Hohlbein, Co-President
Many industries are experiencing challenges in attracting and retaining qualified workers. As a result, employers are having to reevaluate their business practices in an effort to appeal (and hold on) to talented employees. To help solve this issue, many employers are increasing their dependency on contingent workers.
In fact, research conducted by Gartner shows that 32% of businesses surveyed said they plan on replacing full-time employees with contingent workers as a cost-saving measure over the next year. According to Staffing Industry Analysts, business spending in the contingent workforce area has risen 22.8% year over year.
“[Contingent] workers offer employers greater workforce management flexibility; however, HR leaders will need to evaluate how performance management systems apply to these workers and determine whether they will be eligible for the same benefits as their full-time peers.”
- Brian Kropp, VP, Gartner
What is a Contingent Worker?
The career website Indeed.com defines a contingent worker as an individual who works for an organization on a temporary, on-demand basis. Typically, businesses utilize contingent workers to complete specific projects for which they currently lack internal staff.
Contingent Worker vs. Temporary Employee
The primary difference between a contingent worker and a temporary employee is that a contingent worker typically isn’t put on the business’ payroll – and therefore, the company isn’t responsible for income tax deductions.
A contingent (or contracted) worker is considered an independent contractor and is responsible for his or her own taxes. In some instances, an employer may hire a contingent worker through a staffing agency; however, if it does, tax obligations will fall on the agency.
According to Workest by Zenefits, your business clients should ask the following questions when considering a contingent worker:
- How many contingent workers will be needed to complete the job?
- What is the budget for engaging contingent workers?
- Are we able to hire remote workers easily, or does the brick-and-mortar nature of the business make hiring outside our town/city difficult?
Benefits of a Contingent Workforce
There are several benefits to filling positions with contingent workers, including:
- No long-term commitment. A business can use contracted workers for a one-off project or keep them around for a week, a few months or longer. The business may also hire an individual on a trial basis or for a probationary period and assign smaller projects to determine whether they are a good fit. When services are no longer wanted or needed, the relationship comes to an end.
- A quicker way to fill positions. Businesses that have peak seasons typically have an immediate need to fill positions. Contingent workers can be onboarded quickly and without all the administrative red tape that comes with hiring a full-time employee.
- Greater flexibility. According to HCM Works, businesses often find that their headcounts shift rapidly depending on market conditions and company growth. Contingent workers provide the perfect opportunity for businesses to identify and assess organizational needs on an ongoing basis, rather than committing to permanent employees.
- No training required. A business that needs to fill a position that requires a particular skill-set can search for a contingent worker who is already trained in that specific area.
Conclusion
Whatever the reason your business clients may have to use a contingent workforce, it’s important they understand the benefits and potential risks involved. Two steps toward mitigating risks are to standardize contingent workforce processes, and properly document all externally sourced workers.
Paul Hohlbein is the co-president of Builders & Tradesmen’s Insurance Services, Inc., an Amynta Group Company. To learn more, please email Paul at phohlbein@btisinc.com.
Looking to grow your book of small business clients? At BTIS, we have several small business preferred classes underwritten by multiple A-rated carriers. Our programs feature many different coverages to fit your clients’ individual needs.
For additional information, visit www.btisinc.com or call (877) 649-6682
