Why hire contingent workers?

It is fair to say that times continue to be challenging. Companies need to determine new ways to manage their workload, their workforce and their labour costs. With the rise of the gig-economy, scarcity in skill sets and the need to stay or get ahead of the curve, organisations increasingly invest in hiring freelancers, consultants or other types of outsourced workers. Quite often this happens without a defined strategy or specific plan, which is surprising, given the importance and the impact of these hires.

Room for improvement
Let’s take two examples from our daily practice that demonstrate room for improvement and the need for a well thought strategy:

1. We often see innovative and business critical projects or initiatives being developed with the use of (a relatively high number of) contingent workers. At the same time the organisation’s own employees are deployed on ‘ongoing business’. That is fine as long as it’s a conscious decision. But from a workforce development perspective, it may be worthwhile to leverage existing experience in your organisation. That way knowledge and future commitment are secured and employees are offered new challenges and opportunities. Their open positions can be filled with contingent workers.
2. We also often come across an ineffective recruitment function, which pushes hiring managers to pursue alternative ways to assure business continuity. Hiring contingent workers as a short term solution is justified. But it often leads to increased tenures and limited focus on fixing the problem, resulting in increased costs and potentially in blocking careers of internal employees. In this situation, the recruitment function needs to improve their performance and get closer to the hiring process of contingent workers.

Pros and cons of contingent workers
Both examples clearly show a need for contingent workers, but it is not likely that these approaches are going to result in an optimised workforce model. As a starting point for building a strategy we can have a look at some general advantages and disadvantages of working with contingent workers:

Examples of advantages are:

• For some businesses, workload fluctuates significantly. Contingent employees can help dealing with variations in demand.
• Independent contractors can bring unique ideas, perspectives or techniques that you have not considered to your project.
• Contingent workers get a chance to prove their expertise through contracted work, resulting in managers promoting them with confidence to fill full-time positions.
• Contingent workers are typically equipped with specific skills and competencies that allow quick deployment and productivity. They require limited additional training.
• Contingent workers can contribute to cost savings if both productivity and the hiring process are managed closely. Companies only pay for their productive working hours. Employee benefits need not be calculated.
• Even though a small group of contingent workers may cause a compliance burden and extra paperwork, hiring on a larger scale usually leads to partnerships with placement agencies or an MSP. These parties can cut down recruiting time and paperwork as well as make sure hiring processes are compliant, for every single external hire in your organisation.

There are also disadvantages to hiring contingent workers:

• Since contingent workers are not 100% part of the organisation, and for example can’t benefit from learning and development initiatives, these employees may not be totally linked into your company’s culture and mission.
• Because contingent workers know they are part of the company temporarily, they tend to put less effort in building lasting relationships with other members of the organisation.
• Since temporary agencies work with many different companies, they don’t always have the opportunity to immerse themselves completely in their clients’ cultures, making it difficult for them to judge how good a fit their candidate will be.
• Depending on the hiring manager, using a temporary employee might lead to micromanaging in the first weeks to build some confidence.
• There is a risk a contingent worker will leave before the project ends, as there is less bond with the organisation.
• Compliance risks increase when temporary employees are performing well, stay longer and cannot be replaced.

Improve the use of contingent workers
The advantages and disadvantages listed above are not complete and of course open for debate. Building a strategy goes beyond balancing advantages and disadvantages of using contingent workforce. Other elements like required skill sets, companies future ambitions, current workforce, processes, costs, technologies and contingent workforce model are just as important.

Making a snapshot of all these elements and having a good conversation with the right stakeholders about your talent strategy (both permanent and contingent) could be the first step in improving your use of contingent workers.