A
contingent workforce is a provisional group of workers who work for an organization on a non-permanent basis, also known as freelancers, independent professionals, temporary contract workers,
independent contractorAn independent contractor is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a [verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when...
s or consultants.
Contingent Workforce Management (CWM) is the strategic approach to
managingManagement in all business and human organization activity is simply the act of getting people together to accomplish desired goals and objectives. Management comprises planning, organizing, staffing, leading, directing, facilitating and controlling or manipulating an organization or effort for...
an organization's
contingent workforce in a way that it reduces the company's cost in the management of contingent employees and mitigates the company's risk in employing them.
A
contingent workforce is a provisional group of workers who work for an organization on a non-permanent basis, also known as freelancers, independent professionals, temporary contract workers,
independent contractorAn independent contractor is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a [verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when...
s or consultants.
Contingent Workforce Management (CWM) is the strategic approach to
managingManagement in all business and human organization activity is simply the act of getting people together to accomplish desired goals and objectives. Management comprises planning, organizing, staffing, leading, directing, facilitating and controlling or manipulating an organization or effort for...
an organization's
contingent workforce in a way that it reduces the company's cost in the management of contingent employees and mitigates the company's risk in employing them.
Trends
According to the US Bureau of Labor Statistics (BLS), the
nontraditional workforce includes "multiple job holders, contingent and part-time workers, and people in alternative work arrangements." These workers currently represent a substantial portion of the U.S. workforce, and "nearly four out of five employers, in establishments of all sizes and industries, use some form of nontraditional staffing." "People in alternative work arrangements" includes
independent contractorAn independent contractor is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a [verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when...
s, employees of contract companies, workers who are on call, and temporary workers.
Staffing companies represent a conventional resource of contingent workforce talent, as individuals attempting career independence commonly default to staffing companies for their placement. Staffing companies generally work by charging a fee to the business wishing to engage the consultant on top of the rate that the individual consultant charges.
Drivers of growth
Among several other contributing factors,
globalizationGlobalization describes an ongoing process by which regional economies, societies, and cultures have become integrated through a globe-spanning network of communication and exchange....
has had a large impact on the growth in using contingent labor. Globalization contributes to rapid growth in industries, increased outsourcing, and a need for flexibility and agility to remain competitive. By engaging contract workers, organizations are able to be agile and save costs. The contingent workforce acts as a variable workforce for companies to select from to perform specific projects or complete specialized projects. Also as organizations make efforts to be more agile and to quickly respond to change in order to be more competitive, they turn to the contingent workforce to have on-demand access to professionals and experts. Organizations also see the opportunity to reduce benefits and retirement costs by engaging the contingent workforce. However, there is risk involved in avoiding these costs if an employee is improperly classified as a contingent worker. Using the contingent workforce is also cost-effective in that using contingent labor allows for adjustments to employment levels and employment costs depending on what kind of expertise and labor is need and at what time it is needed.
Trends in the contingent workforce are also impacted by the economy. A study conducted by the MPS Group shows the relationship between the contingent labor cycle and the state of the economy. In a bullish economy, the demand for contingent labor is strong. This is most likely because organizations are trying to grow with the economy, and using contingent workers allows them to work with experts when needed, without the long-term costs of hiring them.
A knowledge-driven economy also contributes to the growth in the use of the contingent workforce because organizations rely more on their specific and expert knowledge and expertise. As demand increases for highly-skilled and knowledgeable people, the expertise of contract workers becomes more attractive.
The ease of changing jobs has increased and has made working as a contingent worker more attractive. Increased popularity of applying for jobs on-line as well as an increased need for specialists make becoming a contingent worker a possibility for more individuals.
Advantages and Disadvantages of using Contingent Workers
| Advantages |
Disadvantages |
| Flexibility in type and amount of labor resources |
Loyalty to employer or company |
| Save costs in benefits and tax |
Disturbs organizations core morale and culture |
| Immediate access to expertise not present internally |
Training costs |
| Savings in long-term compensation costs |
History of contingent workforce management
The concept of Contingent Workforce Management appears to be fairly recent, dating back perhaps a few decades.
Contingent workforce outsourcing
Contingent Workforce Outsourcing (
CWO) denotes a provider who facilitates clients' ability to aggregate and track spending, billing, and performance of more than one type of non-W-2 worker. This includes traditional temps and independent contractors and consultants.
The business trends behind the up-tick in contingent work are inexorable. Some retired employees with valuable skills may seek reentry to the workforce as outside consultants in their area of specialty. Two of the largest and most-talented segments of the U.S. workforce, retiring baby boomers and Generation Xers, are foregoing full-time employment as W-2 workers and opting to work as 'contingents'. Multi-earner families where one partner has company-funded employee benefits make it possible for the other partner to work freelance. With business expenses fully deductible, a self-employed consultant with 1099 income and proper planning can have a lower effective tax rate than a worker with W-2 income. Businesses are motivated to draw upon an experienced and valuable pool of workforce talent, which in turn may be cost-effective and beneficial to both parties.
CWO is a toolkit that has evolved to handle the non-W-2 business wave. As contingent workers continue to grow at a double-digit annual pace as a percentage of the overall workforce, companies are feeling an ever greater need to have tools to manage this quickly-growing phenomenon. Capturing and managing data that allows managers to see and control their entire contingent and full-time workforces is a complex task that is now possible with contingent workforce management or CWO tools.
See also
- Permatemp
A permatemp is an employee whose status is somewhere between a temporary employee and a permanent employee. The word is a portmanteau of the words permanent and temporary...
(An employee whose status is somewhere between a temporary employee and a permanent employee.)
- Independent contractor
An independent contractor is a natural person, business, or corporation that provides goods or services to another entity under terms specified in a contract or within a [verbal agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works as and when...
(A person or business which provides goods or services to another entity under a contract.)
- IRS Reclassification
IRS reclassification as an employee occurs where persons claimed as independent contractors are recategorized by the Internal Revenue Service , or by state tax authorities, as W-2 employees. The reclassification can result in the imposition of fines, penalties, and back-taxes for which the...
(Independent contractors recategorized by the IRS or by state tax authorities as W-2 employees.)
- Human Resource Management
Human resource management is the strategic and coherent approach to the management of an organization's most valued assets - the people working there who individually and collectively contribute to the achievement of the objectives of the business...
- Workforce
The workforce is the labour pool in employment. It is generally used to describe those working for a single company or industry, but can also apply to a geographic region like a city, country, state, etc. The term generally excludes the employers or management, and implies those involved in...
- Human Capital
Human capital refers to the stock of skills and knowledge embodied in the ability to perform labor so as to produce economic value. It is the skills and knowledge gained by a worker through education and experience...
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