Glossary

What is a contingent worker?

A contingent worker is a non-permanent professional hired for temporary, project-based, or on-demand work. These workers operate independently and are not part of a company’s traditional payroll system, allowing businesses to access specialized skills and scale their workforce as needed without long-term commitments.

Examples of contingent workers

Contingent workers come from various fields and are often brought in to meet specific business needs. Examples include:

• Freelancers and independent contractors
• Consultants providing expert advice
• Temporary staff through staffing agencies
• Gig economy workers like rideshare drivers or delivery personnel
• Seasonal employees in retail or hospitality

Contingent worker vs. employee

The primary distinction lies in the employment relationship:

• Contingent workers are not bound by long-term contracts, typically manage their own schedules, and are responsible for their own taxes and benefits.
• Employees are on the company’s payroll, receive benefits, and work under the direct supervision of the employer.

Benefits of hiring contingent workers

1. Cost savings: Businesses save on costs associated with benefits, payroll taxes, and long-term commitments.
2. Flexibility: Companies can scale their workforce up or down based on demand.
3. Access to expertise: Enables businesses to bring in specialized skills for specific projects without permanent hires.
4. Reduced onboarding: Contingent workers often require less time and training to become productive.

Challenges of hiring contingent workers

1. Lack of control: Contingent workers have greater autonomy over how and when they perform their work.
2. Tax and classification risks: Misclassifying workers can lead to legal and financial penalties.
3. Cultural impact: Overreliance on contingent workers may dilute team cohesion and hinder a strong company culture.

How to hire contingent workers

• Define the role: Clearly outline the tasks, skills, and duration of the engagement.
• Research laws: Understand local labor laws to ensure compliance.
• Write a contract: Include the scope of work, payment terms, and confidentiality agreements.
• Onboard effectively: Provide necessary tools and resources and communicate company expectations.
• Monitor progress: Set milestones and provide feedback to ensure alignment with goals.

Compliance considerations for contingent workers

Proper classification is critical to avoid misclassification risks. Employers should:

• Use clear contracts outlining the relationship and scope of work.
• Follow local and international labor laws.
• Consider engaging an Agent of Record (AOR) to manage independent contractor compliance or an Employer of Record (EOR) for international hires.

Contingent workforce management

Managing a contingent workforce involves sourcing, onboarding, and overseeing non-permanent workers efficiently. This process may include leveraging workforce management tools to handle contracts, payments, compliance, and performance tracking at scale, ensuring seamless integration with the company’s operational goals.