Are you hiring temporary workers to plug talent gaps and access expertise? Let's dive into the dos and don'ts of contingent workforce management.
Contingent workers. The gig economy. The liquid workforce. Fractional roles. Freelancers. Contractors. Consultants… Wherever you look these days, you find signs of a burgeoning contingent workforce.
Research from McKinsey & Co found 36% of employed respondents identified as independent workers in 2022 – a ‘notable increase’ from 27% in 2016.
As businesses increasingly turn to flexible staffing solutions, the contingent workforce plays a pivotal role in modern workforce planning processes – offering scalability, specialized expertise, and agility in adapting to market demands.
But introducing gig workers and consultants to your business isn’t always easy.
From finding the right people and deploying them effectively, to performance management and knowledge transfer, managing a contingent workforce isn’t like managing permanent staff.
It takes careful planning, cultural alignment, and specialized workforce strategies.
But don’t stress, we’ve got you covered. In this article you’ll learn:
A contingent worker is a non-permanent employee who’s hired on a temporary basis. This includes freelancers, contractors, consultants, temporary employees, and part-time workers.
Contingent workers are hired for specific purposes, projects or periods – whether that’s access to specialist expertise that isn’t available elsewhere in the candidate pool, or simply to meet fluctuating demand. ‘Contingent’ simply means their employment is contingent on specific project needs and availability of work.
Contingent workers aren’t permanent employees and hiring them requires much less administrative burden than normal hiring, so they are a quick and flexible fix for various staffing needs.
For example, say a videogame development project is nearing its deadline, but there aren't enough permanent employees to complete the work in time. To avoid overburdening existing knowledge workers – or dreaded crunch time – a resource manager can hire a contingent worker to make-up for the resource shortage.
There has been a steady growth in the contingent workforce in recent years. We hate harking back to COVID all the time, but it was a pivotal moment in many people’s career paths.
The pandemic led to a real shift in perspective for so many people. Our renewed awareness of the importance of work-life balance encouraged many to take the leap into self-employment. The ‘great resignation’ meant businesses were scrambling to fill vacancies.
The rapid development and widespread adoption of remote collaboration also opened up new remote working opportunities. And digital freelance marketplaces emerged to connect contingent workers with overstretched organizations.
These social and environmental factors created the perfect environment for workers to seize control of their work destiny – and businesses were quick to realize the many benefits too.
More businesses are turning to contingent workers because they represent good value, less stress, and provide access to in-demand expertise. The contingent workforce is now a key factor in workforce planning.
Here are some of the reasons you might benefit from leaning into the ‘liquid workforce’.
Companies can scale their workforce up or down based on project needs without long-term commitments. They can quickly adapt to market changes, meeting demand fluctuations efficiently. And they can manage economic volatility better with easy-in-easy-out employees.
Hiring contingent workers can reduce costs associated with full-time salaries, benefits, and overheads. Implementing a clear budget and monitoring expenses can help keep costs in check while leveraging contingent talent.
Companies can bring in experts for specific tasks or projects without investing in long-term training or employment. This allows businesses to tap into high-level expertise and advanced skills on a temporary basis.
Contingent workers often bring fresh perspectives and new ideas to the organization. Their diverse backgrounds and experiences can lead to increased creativity and innovation, enhancing business outcomes.
With contingent workers, companies can quickly assemble teams for urgent projects, accelerating time-to-market for new products and services. This responsiveness is crucial in competitive industries.
Businesses can efficiently manage peak workloads and seasonal demands by hiring contingent workers. This scalability ensures that the organization can meet customer needs without overworking permanent staff.
Managing a contingent workforce can reduce the administrative burden associated with full-time employment. It lets you achieve an extended workforce with less paperwork, fewer HR responsibilities, and streamlined processes.
Much as the contingent workforce can benefit a business, there are challenges too. Organizations may struggle to manage dynamic and diverse resources effectively, and integrate them into team dynamics.
There may be challenges around recruitment, onboarding and retention. And there will be contractual, compliance, and security issues to navigate. Luckily, we have tips to help with all of these issues below.
Effectively managing a workforce that constantly changes can be difficult. It requires robust scheduling, clear communication, and using appropriate workforce planning tools.
Contingent workers may not feel the same sense of loyalty as full-time employees. This can affect their motivation and performance. It’s important to make them feel valued, integrated, and part of the team.
Using contingent workers can be highly cost-effective, but managing costs requires careful tracking and negotiation. Implementing a clear budget and monitoring expenses can help keep costs in check.
Contingent workers may have access to sensitive or proprietary information. Non-disclosure agreements, limited access to critical data, and security training can help prevent accidental – or intentional – misuse.
Over-reliance on contingent workers can lead to skill gaps in your permanent staff and disrupt succession pathways. It’s important to balance the different sides of your human capital management strategies. More on this later…
Maintaining high performance and quality standards can be difficult with a diverse workforce. A strong brief, clear guidelines, and consistent feedback are essential to ensure quality work.
Finding and retaining skilled contingent workers can be time-consuming and challenging. Establishing a strong referral network and creating a positive work environment can help recruitment and retention.
This is why it’s important to have a contingent workforce strategy – to ensure effective contingent workforce management and to use independent contractors efficiently to achieve your goals.
Now you know the pros and cons of the contingent workforce, let’s look at how you can overcome the challenges and reap the benefits of a more flexible, freelance talent pool.
We’ve got 15+ best practices to help you find and retain top contingent labor – plus tips for managing contingent workers efficiently in your business. Here goes…
The first step to a more flexible and cost-efficient workforce is to identify which roles you need to fill with contingent workers. This is the same workforce planning process you’d use for hiring in-house employees – look at staffing needs for upcoming projects, conduct a skills gap analysis, and use capacity planning to identify any forthcoming peaks in demand or need for specialist skills.
Hiring contingent workers isn’t just another way to fill roles. It’s more strategic than that. It's about augmenting your existing team with the right talent at the right time, all aligned with strategic priorities.
To make sure you use temporary workers appropriately – and achieve the many benefits of workforce planning – have a strategy that sets out how, why, and when they’ll be most beneficial to your business.
It should include:
When hiring contingent workers, choose your recruitment channels wisely to streamline the process and find the best people. Seek personal referrals and check freelancers’ recommendations on LinkedIn to sort the best from the rest.
If you’re using contingent workers because time is of the essence – maybe you have an urgent project you need to staff – you mustn’t waste time on drawn-out hiring processes. Create a thorough process that does due diligence, but doesn’t delay. For example:
Your contingent workers may work independently and off-site, requiring very little interaction with other employees, customers or stakeholders. However, if the opposite is true, they may require more support from your Human Resources team, particularly around training and onboarding. This is especially true if they need to complete certain courses for compliance reasons. Providing self-service access to on-demand online training courses can streamline this process.
To foster positive and productive relationships with contingent workers – and increase their loyalty to your business – make them feel part of the team, not an outsider. Keep them informed about anything that could impact them, give them access to tools and resources they need to perform their tasks, include them in celebrations and shout-outs, invite them to your conference, send them a holiday gift, etc. This helps create a more cohesive work environment and supports workforce integration by providing opportunities for traditional employees and contingent workers to rub shoulders.
As important as it is to feel part of the team, remember they’re not on the permanent payroll. So don’t expect them to act like it.
Recognize that freelancers and contingent workers often choose that lifestyle for the flexibility. Allow them autonomy to manage their own schedules and work remotely. Don’t expect on-site attendance, 9-to-5 office hours, or constant contact. If that’s what you need, hire in-house employees.
Bad math is a significant problem in contingent workforce recruitment. A superficial comparison to in-house salaries may make a contractor’s day rate seem unjustifiable, so you keep searching for cheaper rates. But this is a false economy. Contractors charge more because they personally cover costs like health insurance, equipment, vacation days… When hiring contingent workers, do the math before racing to the bottom of the price barrel. Go too cheap and you may get what you pay for.
When you’re managing a more dynamic workforce – and perhaps a more distributed workforce – it’s important you have visibility into who they are and what they’re doing. It’s even better if you can see this information alongside your permanent resource information, so you have a single, 360° view of all available talent – contingent or otherwise. This supports better-informed decision-making about capacity, talent demand, supply, and skills management.
Everything’s better with tech, not just resource management, and you’ve got a lot of options.
In recent years, labor laws around what constitutes freelance and other contingent work have changed - and keep changing. In the UK, for example, there’s IR35 and, in the US, AB5. These have reshaped how companies classify and engage with contractors. Ensure your legal team stays on top of the current legislation to ensure a compliant working environment that protects you and your workers from any trouble.
To protect sensitive company information, ask contingent workers to sign non-disclosure agreements – even if you don’t think they’ll be exposed to any confidential data. An NDA ensures that contingent workers understand the importance of maintaining confidentiality and the consequences of breaches. Plus, safeguards proprietary information and fosters a secure working environment.
To prevent the risk of miscommunication or confusion, ensure each contingent worker has a single point of contact. If they are getting instructions, assignments and feedback from multiple people, it could lead to contradictions, clashes, and overutilization – which might result in poor quality outcomes and a higher bill than expected!
Ensure each contingent worker gets regular check-ins with their point person – to maintain clear expectations and to make them feel valued.
Contingent workers need to get to work fast and you’re responsible for reducing their learning curve. Providing a solid brief should accelerate and improve outcomes. Be sure to include need-to-know context like project objectives, timeframe, desired outcomes, available resources, constraints and limitations, key contacts, preferred communication channels, brand values, customer personas, etc. This ensures clarity and alignment from the get-go.
You also need to provide clear, fair, actionable feedback. But often businesses simply cut their losses with freelancers and contractors who are perceived to have under-delivered and move on to someone else.
This short-term approach can lead to a revolving door of recruitment and onboarding (psst, especially if you’re the source of the problem, not them!) Good contractors will welcome the chance to tailor their approach to your needs, to secure ongoing opportunities with you.
Top freelance talent can pick and choose between the best clients. Making that cut can give you serious competitive advantage – not just in terms of retaining freelancers but ensuring you have a good reputation on the gig economy grapevine.
It’s important to deliver a positive experience for non permanent employees. Just like you craft a strong employer brand for freelance staff, do the same for contingent workers. But remember they won’t want the same benefits. An on-site gym or discounted lunch is no use to a remote contractor. But preferable payment terms and free access to internal training courses might be...
One of the best ways to alienate a freelancer or contractor is to make them wait too long for payment. Unlike salaried staff – who can rely on a monthly paycheck and plan accordingly – self-employed workers have a more stressful cash flow situation.
Paying contingent workers in a prompt and fuss-free way can determine whether they’ll work with you again. Some may even require payment in advance, which can cause issues with accounts payable. Avoid complex processes and lengthy payment terms. Make the whole process of getting paid a breeze with a payment platform that keeps the complexity to a minimum.
While using freelance and contingent talent can streamline operations and cost costs, it can introduce other challenges. Over-reliance on outsourcing to contractors may reduce your internal skills profile over time, creating gaps in organizational knowledge that hinder long-term growth and stability. It can also cause problems for succession planning and internal mobility.
Aim for a balanced approach that doesn’t use external expertise at the expense of internal talent development. For example, pair traditional employees with freelancers to support on-the-job upskilling and knowledge sharing.
With Runn resource management software, you can see, manage, and schedule all of your resources from a single place.
That means better visibility into capacity, availability, and utilization for every type of employee. A 360 understanding of supply and demand. And reporting to inform data driven decisions in your workforce planning.
Try Runn for free for 14 days. No credit card, no commitment, no catches.
