Contingent workers: Your flexible workforce solution
A contingent worker is an individual who is not employed on a permanent or long-term basis and instead works temporarily or on a project-by-project basis. This category includes freelancers, independent contractors, consultants, and temporary workers.
Labor demand now exceeds labor supply by approximately 2.7 million jobs, according to data from the US Bureau of Labor Statistics. In this environment, the workforce model is evolving, giving rise to an influx of contingent workers. These temporary workers—professional freelancers, independent contractors, and consultants—offer a flexible and specialized approach to meeting organizational needs.
Contingent workers bring both expertise and adaptability, allowing companies to scale their workforce up or down based on need. This flexibility not only helps organizations manage costs more effectively, but is a workforce management strategy employers are using to meet staffing needs. In situations where specific skills are required for the short-term or a new level of innovation is necessary, it’s possible to source contingent workers—anywhere in the world—to support the work that must be done.
In this article, we’ll cover everything businesses need to consider when it comes to the contingent workforce.
What is a contingent worker?
A contingent worker is someone who is not hired on a permanent or long-term basis. Instead, contingent workers take on temporary roles or work on a project-by-project basis. This group encompasses freelancers, independent contractors, consultants, and temporary staff.
Contingent workers often have more flexibility in their work schedules and may work for multiple organizations simultaneously, offering specialized skills and expertise as needed. They are typically not entitled to the same benefits and job security as permanent employees.
Contingent worker vs employee: The main differences
Contingent workers and employees differ in terms of their employment structure and benefits.
Here are some of the ways US labor laws differentiate between employees and independent contractors:
Contingent worker
Employee
Work can’t be essential to the business. Generally speaking, contractors in the US do not perform work that is central or integral to the business.
Can perform any work. Employees can perform any work, whether it’s integral to the business or a supportive role.
High level of control over their work. Contractors are considered self-employed and are free to decide when, where, and how they work.
More direction from their employer. Employees are typically supervised by a manager who can direct them on when and where to work (unless they’re on leave).
Less integrated. Contractors are more likely to work independently, off-site, and using their own tools and equipment.
Highly integrated. Employees are part of the workplace’s culture and day-to-day life. They are usually given the tools and equipment to perform their work by the company.
Less invested. Contractors generally do not make personal investments to help grow a business.
May have a financial stake or resources invested. Employees can invest money or resources into a company where they work to help it grow or succeed.
Provide their own equipment and tools. Contractors generally provide their own equipment and work tools.
Equipment and tools are provided by the employer. Employers generally provide computers, smartphones, and any other necessary tools to their employees.
No entitlement to benefits and few protections. Contractors aren’t entitled to benefits and aren’t protected by most employment laws that apply to employees in the US.
Entitled to benefits and protected by employment law. Where applicable, employees are entitled to certain benefits and protections under federal and state labor and employment laws (though these vary by location).
Non-exclusive services. Contractors can (and usually do) work for multiple clients simultaneously, even in the same industry.
Exclusive services. Employees are generally expected to render services exclusively to their employer and are typically prevented by their agreements from working for multiple employers at the same time.
Work lasts only for the duration of the contract. Contractors generally do not have work relationships that are continuous or lack a fixed end date.
Work is indefinite. Employees generally have indefinite work agreements.
Beware of misclassification
Classifying your employees and contractors accurately is a critical component of complying with global employment regulations. While government agencies and courts generally construe independent contractor status narrowly, different jurisdictions and different agencies apply different tests to determine independent contractor status.
Many states have their own worker classification rules and tests. For example, California and several other states have adopted a version of the so-called "ABC" test. Under the ABC test, a worker is considered an employee and not a contractor unless the hiring entity can establish:
- That the worker is free from the control and direction of the company
- That they perform work that is outside the usual course of the company's business
- That they are customarily engaged in an independently established trade, occupation, or business
Misclassification occurs when a business designates a worker as an independent contractor when they should have designated them an as an employee. Whether your contractors are in the US or overseas, misclassifying a worker can risk lawsuits, audits, and significant penalties. Be sure you’re regularly analyzing worker classifications to mitigate costly risks in this area.
Contingent worker examples
Contingent workers encompass a diverse range of roles and professions, each offering unique skills and flexibility to organizations. From freelancers who tackle specific projects to temporary staff filling short-term needs, these professionals play a crucial role in adapting to varying business demands. Here are common examples of contingent workers:
- Independent contractors
- Freelancers
- Consultants
- Interns
- Writers and translators
- Gig workers
- Temporary workers
Benefits of hiring contingent workers
Contingent workers provide numerous advantages to organizations, offering flexibility and specialized expertise tailored to project-specific needs. By leveraging contingent talent, companies can quickly adapt to changing demands and manage resources more efficiently. Depending on business needs, temporary staffing or partnering with independent contractors can be a smart way to fill talent gaps rather than hiring and onboarding full-time employees.
Some advantages of hiring contingent workers include:
- Quick access to specialized skills
- Fill skills gaps in the internal workforce
- Increased flexibility to hire international or remote workers on a temporary or project-by-project basis
What is contingent workforce management?
Contingent workforce management involves overseeing and optimizing the use of temporary, freelance, and contract workers within an organization. It includes tasks such as recruiting, onboarding, managing, and paying these temporary workers to ensure they effectively contribute to projects and meet organizational goals.
Effective management also means complying with legal and contractual obligations and making it as easy as possible for contingent workers to communicate with permanent staff as needed. The goal is to maximize flexibility, control costs, and leverage specialized skills while maintaining a cohesive and efficient workforce.
HR software can help manage your contingent workforce management by distributing contracts, facilitating onboarding, tracking hours worked, and monitoring compliance. With technology, it’s also possible to facilitate smoother operations and communications by providing contingent workers with access to project management and communication apps used in your organization.
Transform your contingent workforce management with Rippling
Managing contingent workers has never been easier. With Rippling, contingent worker data is housed alongside that of your full-time employees, giving you a single directory for your entire workforce. During onboarding, you can gather e-signatures, store contracts, and assign any contingent worker accounts for business apps.
When contractors or freelancers need to track their hours, they can do so in Rippling with electronic timesheets and clocks, which then connects with payroll. What’s more, you can pay both contractors and employees in a single pay run. At the end of the year, you can generate and distribute 1099 tax forms to contingent workers. Rippling simplifies every step of managing freelancers, temporary staff, and contractors.
Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.
