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January 21, 2021 | Time and Attendance | Posted by Ascentis

The Rising Contingent Workforce

The American workforce has been steadily moving toward a more contingent- and contractor-based model for the past decade, and the events of 2020 have only hastened that movement. As employers scramble to implement flexible scheduling, accommodate remote workers, and promote a safer workplace, the adaptability and flexibility of the contingent workforce has become more and more appealing.  

Although there is still a misconception that contingent labor is mainly for tech and IT positions, the fact is that the field has expanded greatly in recent years. For example, around 35% of all contingent employees work in industrial or manufacturing roles, and another 8% work in healthcare. A 2017 study by the U.S. Bureau of Labor Statistics found that contingent labor made up around 10% of the American workforce, and all indications say that the number has increased substantially in the years since. Advancements in technology, an increase in younger workers, and the changes brought about by the pandemic have all moved businesses to consider hiring more contract, contingent, and temporary workers. For many employers, incorporating more contingent labor requires a thorough reassessment of the ways they approach their workforce management strategy. Here are a few key areas your HR team needs to keep in mind before integrating more contingent labor. 

Classifying workers correctly 

Proper classification is one of the biggest potential pitfalls for employers dealing with contingent workers. The U.S. Department of Labor sets clear distinctions between employees, contingent workers, and independent contractors based on their relationship to the employer, whether they are working full-time or part-time hours, and whether they are employed on a long-term or short-term basis. Employers that fail to classify each type of worker properly when filing taxes can face significant fines and sanctions.  

Staying compliant with employee classification requires a focused management strategy for your HR and payroll departments. From a risk mitigation standpoint, it may be a good idea to develop an all-around compliance strategy for contingent workers and contractors. Ensuring that your hires have all of the training and certification required for their roles is another major compliance consideration that can easily go overlooked when dealing with third-party employment agencies and independent contractors. 

Managing workplace culture 

Every company has its own unique culture, and integrating new workers into that culture is a vital part of the employee journey. Contingent workers present employers with a challenge on that front. In the recent past, freelancers and contract workers were often brought in to assist with specific projects requiring skill sets outside of the employer’s normal purview. That type of temporary employment made it less pressing to incorporate contingent workers into the company culture. With contingent labor now making up as much as 40% of the workforce in many industries, however, employers no longer have the option of keeping non-full-time employees at arm’s length. It’s also worth noting that some studies have found that nearly half of the millennial workforce is contingent, which sets up the potential for generational conflicts in workplaces that skew older. 

Setting up a workforce management strategy that approaches areas like onboarding, communications, and performance reviews with a specific eye toward contingent employees can go a long way toward making non-traditional employees feel like part of the company culture. Employers should keep in mind that many of the divisions between full-time and contingent workers are on the back end. In many cases, workers on the floor will not even know who is and is not a contractor. By providing all employees with tools that allow them to connect and collaborate on equal ground, an employer can remove potential friction before it becomes an issue, building a more harmonious culture for workers of all kinds.  

Making talent management more agile 

As much traction as contingent work has gained in recent years, the fact is that most workplaces are still built to meet the needs of a full-time workforce. That made a certain amount of sense in the past, when contingent workers were thought of more as temporary solutions who could fill in short-term gaps. With freelance and contract employees making up a larger and larger portion of the workforce, however, employers need to rethink a number of aspects of their talent management systems. Putting a specific contingent workforce management strategy in place can help integrate workers of all stripes much more smoothly. 

Performance management, for instance, requires a different approach when contingent employees are working remotely or on a short-term basis. These workers require consistent, regular feedback over the course of their projects. That kind of constant communication helps ensure that their understanding of the role is in line with the employer’s. Learning management also requires a different touch. Employers may be hesitant to invest in a full program of training and education for workers who will not be a full-time part of the workforce, but under-training contingent employees can have negative impacts on productivity, compliance, and morale. 

Keeping an eye on costs 

In recent years the contingent workforce has evolved into a multifaceted and diverse facet of the working world, with many selling points for employers. It is important to remember, though, that hiring freelance and contract employees also carries financial advantages for many employers. Since contingent workers generally do not receive a standard benefits package, the long-term costs of hiring them can offer significant savings for employers — as much as 52% annually by some accounts. Couple that with the fact that the bulk of the administrative tasks associated with contingent workers are handled by third-party employment agencies in many cases, and an employer can realize significant savings in both money and time. Keep in mind, however, that employers may want to manage budgets related to freelance and contract employees separately to avoid confusion and possible budget overruns. 

Embracing contingent labor, independent contractors, and freelance workers will be essential for American employers in the years to come. Having a multifaceted, adaptable workforce management plan in place will be vital for any company that wishes to smoothly integrate contingent workers into their model going forward.

Find out more about the many workforce management software Ascentis can provide for your contingent labor needs.