Contingent Workforce: What Small Business Owners Should Know

contingent workforce

The workforce is constantly changing. With a growing number of individuals now preferring more flexible employment over its traditional alternatives, especially when it comes to younger generations, contingent workers have become a more prominent aspect of the workforce. When used correctly, contingent labor can save companies in employee expenses, while effortlessly filling necessary roles that emerge during rapid growths and demand fluctuations, thus having a number of benefits for small businesses.

What are contingent workers?

A contingent worker is a temporary employee hired on a project basis or for a predetermined amount of time, such as freelancers, contract workers, on-call workers, and independent contractors. Unlike full-time employees, contingent workers don’t receive benefits like healthcare, retirement plans, and paid time off, and are usually hired through agencies or specialized platforms.

These types of part-time workers could work with multiple clients at overlapping times, or even have specific contracts with one company. Some businesses might hire contingent workers on a trial basis at first, and then offer them a permanent position later, while others could simply take on such workers for a fixed period to work on special projects or during busy periods.

When to hire a contingent workforce

As many businesses struggle to find employees with specialized, in-demand skills, contingent workers are most commonly hired for this exact reason. Such an arrangement allows small businesses to hire appropriate, highly-skilled workers from different, more remote locations, while providing workers with the freedom to pursue more lucrative and interesting jobs.

On the other hand, part-time workers often have benefits such as flexibility and the capability to do their job from anywhere, giving them more time to pursue developmental opportunities they might not otherwise get, allowing them to further improve their skills and expertise. This often makes for a mutually beneficial arrangement, providing freedom and flexibility to contingent workers, along with a highly skilled and often younger workforce for companies.

Collaborating with an employer of record

If you’ve concluded that contingent workers are the right choice for your small business, you might benefit from collaborating with an organization that takes over the legal and administrative responsibilities of employing such staff. For instance, you could work with an experienced employer of record from the USA to help you hire and manage your employees.

Such experts will be able to simplify your payroll, take care of onboarding, handle tax issues, and set up necessary benefits, thus making the entire process much quicker and simpler to handle. What’s more, an EoR could also help you with insurances, laws, and regulations, foreign exchange and in-country money movement, as well as arranging documents for ex-pat workers, if necessary.

The benefits of a contingent workforce

While you might know what a contingent worker is and when it’s appropriate to hire one, there are a number of other benefits a contingent workforce could bring to your small business. For example, the mere flexibility of such a workforce will allow you to hire staff as needed, quickly adjusting the number of employees to any potential high demands or seasonal peaks.

As contingent workers don’t require healthcare or other employee benefits that permanent staff must legally receive, recruiting and hiring a contingent workforce will be significantly more cost-effective in most cases. Requiring no further training due to their often high specialization, contingent workers also provide you with access to high-quality talent for specific jobs and projects that wouldn’t normally require full-time employees.

The drawbacks of hiring contingent labor

Even though a contingent workforce might have a number of advantages for businesses, it can also come with its own set of challenges, especially when it comes to the legality of the matter. Labor laws regarding contingent workers can significantly vary between countries, states, and even cities, and potential misclassification, even if accidental, can have serious legal consequences.

Countries such as the US have clear definitions of what contingent workers are, as well as guidelines that must be followed for tax purposes. In case employees are misclassified, the IRS might be alerted, often leading to audits, sanctions, and even costly civil or criminal penalties.

The number of contingent workers is continuously growing, and it seems like these types of workers might even become the norm in the future. When it comes to small businesses, hiring contingent workers might be a great way of testing out the skills that are needed to support growth and success.

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