Is Contingent Labor Worth It?
A contingent workforce by definition 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 contractors or consultants. The industry itself is growing, and growing at quite a rapid rate with staffing analysts predicting that this year, 2016, we will see a 5% growth bringing the contingent workforce into a $121 billion industry. To really put that in perspective for you IT folks, Forbes predicts the global Cyber Security market to hit $170 billion by 2020. These are some incredible numbers in the grand scheme of things.
With these numbers however, we must remember that these individuals to an employer can provide crucial solutions at times but they may also be an added expense that a company regrets. Let’s take a closer look at this workforce and the pros and cons that are accompanied by it.
The Pro’s
The first pro is without any question the most obvious one. Contingent workers do not add to a company’s traditional overhead. A company is not matching these workers on their 401K, providing them health, vision and dental benefits, PTO and so on. These individuals are only paid a straight hourly rate. Whether you need them for 2 hours a day or 10, you pay them only for the work being done.
The second pro here is allowing your team to breath. During the height of a project or when an employee leaves or is on leave and their back fill has not yet been identified/hired, contingent workers can come in and fill that void until that gap is closed. Thus allowing your team to not get overworked which ultimately would lead to a handful of disgruntled employees. As we all know, disgruntled employees are soon to be ex-employees who will move on to another company. So in addition to filling in to help out with work when needed there may also be a retention association connected to their service by keeping a work life balance within a team
The third pro is contingent workers tend to bring that unique skill and are often Subject Matter Experts. I have found that a strong percentage of contingent workers are the purple squirrels and unicorns of their industry that came to realize they can in fact always find work and command higher salary/hourly rates that companies are willing to pay. They fill that void within an environment or within that team that none of your other employees are able to do. So when it comes to company wide roll outs or special projects, they are the perfect addition to any group.
The fourth pro I see is in recruitment. Most contingent workers tend to have phenomenal rolodex's. They hop from company to company, to project to project and meet everyone along the way. The referrals they have, in my experience, have always been endless. So always make sure your recruiters network with and discuss your current openings with them. You’ll be surprised with the outcome.
The Con’s
I think the first con is this; Are you able to locate a contingent worker at the time that you need them and can they actually perform the job at hand or fulfill the requirements immediately? With the majority of contingent workers being highly specialized individuals it’s not as though there is a massive pool of them waiting in line. You could find yourself with massive delays on a roll out or project as your recruitment teams scramble to try and locate an individual who can perform the work needing to get done.
The second con which I have witnessed firsthand and seems to be a theme in some instances is contingent workers can be unreliable and not loyal at times. Contingent workers do not have loyalty to a company in general and unless it’s repeat business, they really don’t have any ties which means there is a strong chance one could bail or abandon ship if a higher rate is presented to them or for whatever reason. You will always run the risk of a contingent worker backing out or leaving a project early because a better rate or a better opportunity was provided. In addition, with the higher rate these individuals command and the lack of loyalty, if they are unproductive or aren’t giving their 110%, then you are just wasting your companies’ money. And these contingent workers know that if you fire them, they can just move on to another company and say "their contract ended" (recruiters, how many times have you heard that!).
A third con is that contingent workers command higher salaries. A recent study by the Aberdeem Group suggested that on average, contingent works are seeking rates/salaries which are 20% higher than your full time employees. Based on your overhead number, you could actually be paying more than just going out and finding an FTE if you’re looking to hire this person for a long duration.
Conclusion
In today’s market there are certain fields where hiring a contingent worker can be justified and worthwhile to a company. If you are looking for someone to come in who has a particular expertise for a project or short term assignment then a contingent worker is absolutely worth it and should be highly considered by your company in my eyes. However, if you are looking for someone long term, someone who you foresee being in this role for over a year then I would recommend you go out and find an FTE employee. You’ll be avoiding a headache which is bound to happen. My overall conclusion is that for a long term assignment, the cons out way the benefits. So for short term work, consider contingent workers but for anything that would run a year plus, stick to hiring a full time employee.
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About: Christopher Langer is a seasoned Talent Acquisition professional who has supported startups to fortune 500 companies throughout the United States and abroad. He has since expanded his role to support the areas of Strategic Marketing, Social Media and Brand Recognition. In his downtime he enjoys learning about early American History, Fishing and wrangling Puggles… (I’m kind of a cowboy).
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