Pros and Cons of Contingent Workers

A little over ten years ago, I participated on a human resource round table to discuss the future of the workforce. Most of the participants focused on demographic changes in the workforce and only at the end did the conversation turn to how traditional employment will transition to a more temporary workforce in the future. The majority of the participants acknowledged that some information technology positions align with the trend, but they felt that the move to a more temporary workforce overall would not be an issue for employers until well into the future.

Today, the contingent workforce is a reality. Contingent workers include freelancers, independent contractors, consultants, or other outsourced and non-permanent workers. The Bureau of Labor Statistics (BLS) reported in 2017 that approximately ten percent of the workforce functioned in a contingent capacity. Some of the other findings included:

• contingent workers were more than twice as likely as non-contingent workers to be under 25;
• contingent workers were more likely to work in professional, construction, and extraction occupations;
• compared to traditional workers, independent contractors were more likely to be older, temporary help agency workers were more likely to be Black or Hispanic or Latino, and workers provided by contract companies were more likely to be men; and
• almost 80 percent of independent contractors preferred their status over traditional jobs.

Many analysts and researchers feel that the BLS underestimated the total and that the actual, contingent workforce is much larger (https://www.shrm.org/resourcesandtools/hr-topics/talent-acquisition/pages/experts-puzzled-new-bls-contingent-workforce-data.aspx). In keeping with that idea, according to Deloitte, more than four in ten workers or 40 percent in the current workforce may be functioning in a contingent capacity.

Employers have embraced the contingency approach due some relatively sizable benefits. The major benefits include:

cost savings – while the hourly rate might be higher in some cases, the absence of benefits and paying for unproductive time reduces overall labor costs;
workload management – allows organizations to staff up and down based on business needs;
broader labor pool – by including more talent in the selection process, an organization has more selection options;
workforce stability – contingent workers allow traditional workers to remain with the organizations during periods of economic downturns or other financial adjustments; and
administrative reduction – by employing contingent workers, an organization reduces it administrative burden associated with traditional employees.

While the advantages are compelling, what is not discussed as much are the disadvantages of growing the contingent workforce. Some of the major disadvantages include:

commitment – contingent workers typically lack commitment to the organization when compared to traditional workers;
high turnover – contingent workers have a higher turnover rate;
security issues – access to confidential or propriety information creates more of a risk for an organization than working with traditional workers;
cultural misalignment – when joining an organization as a contingent worker, there can be issues with integration, cultural alignment, and even morale;
knowledge retention – organizations have found that more temporary workers create dilemmas for documenting and retaining job-specific knowledge;
skills issues – while contingent workers can bring hard to find skills, organizational experience can vary on the quality of the skills.

Contingent workers provide a central and key element of the modern workforce. As an organization weighs its options, it is critical to use some form of cost-benefit analysis to ensure that its staffing decisions are the right ones.  Consequently, a successful implemention process should include examining what processes need to change or adjust to best address the differences in needs and behaviors.