What is contingent workforce management?

Although contingent work may have been relatively uncommon a few years ago, the popularity of freelancing is skyrocketing—and there’s no sign of a slowdown. In fact, the gig economy experienced 33% growth in 2020 and is expanding much faster than the US economy as a whole. Today, 35% of American employees are involved in the on-demand economy, and by 2027, it is predicted that half of the US population will participate in gig work.

The rise of contingent work can be good news for both businesses and employees: workers get more flexibility, while organizations can tap into the skills they need when they’re needed the most. Yet, managing a contingent workforce comes with its own set of challenges. Most notably, leaders often struggle to engage gig workers, integrate them into their company culture, and keep all employees on the same page.

Fortunately, the right frameworks and digital tools can help leaders effectively manage contingent workforces, in turn ensuring their business can reap all the benefits that the gig economy has to offer.

What is contingent workforce management?

Contingent workers describe people who are hired for a fixed amount of time or on a per-project basis. In the past, contingent work primarily referred to temporary workers who were employed by a third party, such as a temp agency. Today the term has taken on a broader meaning—it now encompasses all workers who are not employed in a traditional model.

A contingent workforce requires a specific style of management. Since contingent workers have different goals and expectations, they can’t be lumped in with permanent employees and managed the same way. To excel at contingent workforce management, leaders must understand the skills their full-time workforce has, their capacity levels, and how to hire and engage freelance workers to bridge gaps in capabilities and workloads.

The benefits of employing contingent workers

Organizations that effectively tap into freelance, on-demand talent pools enjoy several game-changing advantages.

More flexibility

Utilizing contingent workers enables organizations to dynamically reassess business needs on an ongoing basis. Rather than relying on a fixed number of employees with a finite amount of skills, leaders can tap contingent workers to get high-priority projects across the finish line without committing to employing them full-time.

Fewer costs

Hiring contingent workers often helps businesses cut costs, especially in the short-term, since these people won’t require health insurance or other employee benefits such as PTO or 401K-matching. The employee lifecycle also looks different for freelancers, meaning leaders can avoid many of the expenses associated with recruiting and hiring talent.

Minimize onboarding time

Onboarding a new, full-time employee typically takes a minimum of three months. In contrast, contingent workers can be brought up to speed much faster because they don’t require the same level of in-depth training in all business areas. Instead, these workers are typically highly specialized, so they can begin pitching in on key projects more efficiently.

Broader talent pools

Employing contingent workers enables leaders to tap into larger external talent pools, making it easier to ensure they can access the in-demand skills needed to execute high-priority tasks.

4 contingent workforce challenges (and how to solve them)

To tap into all of the benefits the gig economy offer, leaders must overcome the challenges associated with managing contingent workforces:

#1. Potential redundancies

In order to make hiring contingent workers a smart cost-cutting decision, leaders need to be clear about their full-time employees’ skills and capacity levels. If leaders hire a freelancer to perform a task when there’s a full-time employee who has the skills needed to complete this task internally, contingent work isn’t a cost-saving decision—it’s a waste of money.

That’s why it’s so important to have an in-depth understanding of the capabilities within your workforce before bringing contingent workers on board. Leaders can harness tools like workforce intelligence to gain a full picture of the skills within their organization and contingent workforce, their current knowledge gaps, and the capabilities that will be most essential to hire for in the future. Leading offerings even help executives identify which projects an existing employee is equipped to execute as well as the competencies that may be more challenging to develop internally.

#2. Lost learning

Contingent workers bring specialist knowledge to the table, but there’s a risk that it will leave when they do. As skills shortages become more severe, leaders must ensure that their workforce is developing the capabilities they need to push their organizations forward.

Rather than letting contingent workers serve as a quick fix for knowledge gaps, leaders should simultaneously prioritize upskilling and reskilling initiatives to develop their talent internally. By making an effort to capture the takeaways from projects that contingent workers are involved in, executives can ensure their full-time workforce gains new expertise.

#3. A lack of culture and connectivity

Without sustained effort, contingent workers may feel like outsiders. If freelancers aren’t included in company meetings and events, they might not see themselves as part of the team. As a result, morale and productivity will eventually take a serious hit.

That’s why the best contingent workforce managers should always strive to incorporate their freelancers into their company culture as much as possible. When contingent workers have the opportunity to join team gatherings, they will gain greater insight into how the business functions and develop a better understanding of the purpose behind the work they’re doing.

#4. Communication challenges

Since contingent workers don’t have as much time to adopt a company’s culture and values, miscommunications between full-time employees and freelancers can occur. To add another layer of complexity to the equation, contingent workers may not be working in the same time zone or during the same hours as the peers they’re collaborating with.

Without a strategic approach to contingent workforce management, misinterpretations and lag times will continue to build. To avoid this, leaders must clearly outline their expectations for contingent workers and the deadlines associated with them. Similarly, executives should ensure that freelancers have access to all of the systems and work tools they need, ideally before they are brought on to a new project.

To learn more about what it takes to manage contingent workers successfully, find out how a workforce agility platform will help your organization prepare for the future of work.