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What is a Contingent Workforce?
by Emma • Fri, 24 Jun 2022 16:08PM
There is a shortage of people with essential skill sets in today's job market. As a result, the number and expense of the contingent labor have grown steadily year after year. But what exactly is contingent labor? Contingent labor or contingent workforce is a non-permanent employment arrangement with limited promotion opportunities, paying on a commission basis, and is often part-time (with variable hours). The people are also referred to as freelancers, independent contractors, independent professionals, temporary contract employees, or temps. Here is what you need to know about contingent workforce.
Growing Demand of Contingent Workforce
According to Oxford Economy's Workforce 2020 research, a stunning 83% of CEOs said they are increasingly hiring consultants and temporary workers. Companies increasingly claim that the contingent workforce is being used for both strategic objectives, like boosting internal talent capabilities, and operational ones, such as enhancing workforce flexibility and responsiveness. According to Deloitte, major corporations spend up to 30% of their procurement budget on contingent workers.
How Contingent Workforce Works
Contingent workers can either offer themselves to the job market individually or are managed by a staffing agency that will assign them to client companies. Usually, larger enterprises use contingent workforce agency to provide temporary workers on an as-needed basis. Perks, leaves, annual appraisals, and other standard employment benefits are often not provided for contingent workers. Contingent workers are often hired for a specific period of time or for a specific purpose and there is no contractual necessity to retain them once a project or the contract period is finished.
Contingent Workforce Reduces the Need for a Layoff
A contingent work arrangement improves business agility by allowing a company to be more flexible. Unlike a permanent staff, you can constantly grow or contract contingent workers to meet evolving demands. Having contingent employees in your company for short-term jobs can lead to cost savings. Additionally, terminating employees at times of economic downturn or when individuals lack the necessary skills and experience can be costly. Permanent and fixed-term employees must constantly be paid and employed regardless of the economic or business situation. This is where contingent workforce becomes appealing for businesses; there is no need to formally lay off or reward long-term employees if business slows if they have contingent workers employed.
While total employment expenses will always be defined by state regulations and the details of individual contracts, employing contingent employees is often less expensive in the long run than retaining permanent employees of comparable scale and nature. Permanent employees typically require extensive training or development at the outset of their careers or when embarking on a new project. When businesses employ contingent workers, they typically find staff who already have the necessary skills and expertise to begin working right away.
Anticipating Cons of Contingent Workforce
Contingent work arrangement, however, is not a foolproof method and may not be suitable for business of all kinds. Many of the positive advantages might be overshadowed by poor management. When directly recruiting contingent labor, HR and management may do less due diligence than when hiring permanent employees. This increases the possibility of exposing the company to employees who have not been as carefully security examined or screened as long-term employees. Before onboarding a contingent worker, a comprehensive screening is necessary. Research on their professional remarks and contact companies with whom they have previously worked. If you are unsure about this, it is best to trust a contingent workforce agency to find temporary workers that will fulfill your business demand.
As the contingent employment increases, so does the danger of employment misclassification, with all of its legal and tax implications. When governments pursue enterprises that misclassify contingent workers, one concern is legal and regulatory issues. This might result in severe penalties, fines, and legal fees. Businesses that operate in many countries with distinct legal systems face greater risks. Expert guidance should be sought early on, especially when entering new markets. This is also why it is important to choose the right contingent workforce staffing agency that has strong business acumen and can guarantee legal compliance.
Read Also: How to Negotiate a Counter Offer
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