A contingent worker is a non-permanent worker hired by an organization on a short-term basis.
Contingent workers can work remotely or onsite at a company office. They are typically self-employed and are also referred to as:
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Freelancers
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Consultants
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Independent contractors/contract workers
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Gig workers
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Temporary workers/temporary employees
What is an example of a contingent worker?
Say you run a roofing business and want to rebrand, but you don’t have a graphic designer on your team to do the work. Instead, you could outsource the task to a contingent worker by hiring a freelance graphic designer on a project basis. Once the job is done, their contract ends.
Contingent worker vs. employee
The difference between contingent workers and permanent employees is that contingent workers aren’t employed full-time, don’t have the same employment contract as employees of a company, and aren’t on a company’s payroll. They also don’t receive the same employee benefits or perks such as paid time off or health insurance coverage, though this varies by country (this article follows the American definition of contingent worker).
Advantages of hiring contingent workers
Hiring contingent workers allows companies of all sizes to increase their efficiency without increasing their hiring budgets.
Lower employment costs: For most companies, hiring contingent workers is more cost-effective than hiring full-time employees. In the United States, employers only have to pay for the work completed by the worker they hire. Contingent workers are not entitled to employment benefits such as healthcare, sick days, or paid time off. Also, employers don’t have to pay for the worker’s payroll taxes, such as Social Security, as contingent employees pay their own taxes
Flexibility: Hiring contingent workers on an as-needed basis allows your company to respond to fluctuating business needs without having to complete onboarding and training for each new hire. If your business experiences a sudden increase in demand and faces a temporary worker shortage as a result, you can bring on contingent workers to support your staff
Access to expertise: Aside from financial benefits, this hiring method can give companies a competitive advantage as it enables them to leverage the expertise of workers outside their standard workforce. If your company has a specific project requiring specialized skills, outsourcing the task to a contingent worker can give you the expertise you need without the cost of hiring a full-time employee
Disadvantages of hiring contingent workers
The working relationship between an employer and a contingent worker is quite different compared to their relationship with a part-time or full-time employee.
Lack of control: When you hire a contingent worker, you don’t have the same level of control over their work as you do with an employee. You only control the outcome of their work, and they control their pricing, process, equipment, and schedule
Tax risks: Treating a worker as a contingent worker when they should be classified as an employee may be considered misclassification, which can result in fines, penalties, and a damaged reputation
Poor company culture: If you fill your workforce with majority contingent workers, the company may end up feeling like a revolving door of short-term hires, which makes building a strong company culture difficult. Instead, contingent workers should be hired on a strategic basis
How to hire contingent workers
You can hire contingent workers through a staffing agency or by posting job ads on social media platforms and job boards. The job description should clearly state the position is contingent work and that candidates will not be hired on a permanent basis. Before publishing your job ad, research your local employment laws and labor force regulations to ensure you’re hiring compliantly.
Want to avoid potentially misclassifying your current and future workers? Take our quiz and see if you are at risk of misclassification.
