Building a Robust Contingent Workforce Strategy

Building a Robust Contingent Workforce Strategy

Charles Goretsky Charles Goretsky
17 minute read

The makeup of the modern workforce looks increasingly different from a decade ago. While utilizing contingent workers is not new, it has emerged as a critical strategy for businesses navigating the dynamic currents of the labor market. The paradigm shift towards a more flexible and adaptable approach to talent acquisition has given rise to a diverse pool of professionals, including freelancers, contractors, temporaries, and gig workers. As the relevancy of incorporating these contingent workers as a strategy rises in importance in response to talent shortages and increased employee turnover, it is imperative to understand their increasing relevance in the United States labor market. Building a contingent workforce strategy has become essential for HR teams.

The role of contingent workers has moved beyond temporary or seasonal fill-ins, now offering a unique blend of specialized skills and on-demand availability at an unprecedented scale. The trend is not merely a temporary phenomenon but a transformative force shaping the future of work. Statistics reveal a significant surge in the number of individuals choosing alternative work arrangements, fostering a gig economy and reshaping traditional employment norms. This evolution is not only a response to the changing aspirations of the workforce but also a strategic response by businesses aiming for enhanced agility in their operations. Companies increasingly recognize the need to harness the diverse talents among such workers, establishing contingent workforce management processes that integrate them seamlessly into their structures to bolster innovation and efficiency.

In exploring the contingent workforce landscape, the key is understanding their increasing prevalence, how businesses can access their skills and capabilities, and how to build a comprehensive strategy. From project-based collaborations to specialized individual expertise, the avenues for using such talent are vast, providing organizations with unprecedented flexibility in meeting their staffing needs. This will include the development of strategies for sourcing contingent workers and examining the platforms, networks, and methodologies that facilitate the seamless integration of these professionals into the workforce. Furthermore, the key steps involved in establishing a robust contingent workforce strategy will be revealed, offering insights into how HR and counterpart functions can expand their talent acquisition processes to thrive in a rapidly changing employment ecosystem.

Defining the concept

Contingent workers are those brought in for well-defined and shorter-term assignments to help fulfill business requirements that organizations cannot accomplish with current staff members.  These are typically due to a lack of suitably skilled staff members or an insufficient supply or number of employees to conduct the Such workers are known by a wide range of terms, including contractor, consultant, temp, freelancer, or on-call worker.  They may be self-employed or employed through a traditional temporary or specialized outsourced labor provider, the latter of which is commonly found supplying skilled technology-related workers. work in the desired location and timeframe necessary.  

Core to understanding this is how they contrast with those called “employees” – their work relationship is not considered “permanent,” they are not paid ongoing salaries, and they lack access to welfare, retirement, and paid time off benefits.  They, most importantly, are not typically taxed or have the employer-matched employment and related taxes paid and withholdings made on their behalf, and as such are not treated the same as “regular” employees. As a result, and/or related to such treatment,  they are not afforded the same protections under U.S. laws as their employee counterparts.  Furthermore, organizations do not generally include them in company events, skill and career development activities, and other benefits meant to engage and embrace employees into the culture.  

The strategy of employing such workers is alternatively known as supplemental staffing, staff augmentation, agile staffing, process/task/project outsourcing, or subcontracting. Other related terms, such as offshoring and onshoring, relate to outsourcing or insourcing work processes to other locations that generally involve lower cost profiles for the organization. A contingent workforce strategy is designed to address the staffing needs that regular employees cannot fulfill alone.

The rising prevalence and use of contingent workers

The value of using alternate sources of expertise is becoming increasingly important, as it provides added workforce capacity for large-scale strategic initiatives (e.g., business transformations, new product and service development or implementations, etc.), increased revenue-generating efforts (e.g., seasonal sales push, new market openings, etc.), or for resolving or bridging skills gaps (critical skill project staffing, strategic project implementation, and management, etc.).

Additionally, and critically, it brings tremendous value to mitigating two primary factors driving skill availability challenges affecting organizations across the globe – skills obsolescence and chronic labor shortages. For example, according to ongoing research by the World Economic Forum, in 2023, the share of workers’ skills that are projected to be disrupted in the following five years has risen to 44%, with those most prominent being reported as including analytical thinking, creative thinking, AI and Big Data, and leadership and social influence. The rapid spread of artificial intelligence (AI) and related technologies, increased adoption of robotization, industry downturns, and work process improvement due to automation efforts and increased efficiencies that lead to fewer workers are driving the upsurge in the need for employee upskilling.   

The trend has been identified with projections by the U.S. Government Accounting Office (GAO) as high as 50 percent of the US workforce being freelance or contingent workers by the year 2050. Clearly, a contingent workforce strategy is needed.  

Understanding the true percentage of the total US working population engaged in contingent work is complex, as many people participate in the gig economy as secondary employment.  In fact, the US Bureau of Labor Statistics (BLS) has recently issued a request for commentary on the questions it asks in the “Contingent Work Supplement” (CWS) of the Current Population Survey earlier this year. The request is relative to the proposed data's necessity, value, and accuracy.  Nonetheless, its most recent estimates are that about 16-17% of American workers were either independent contractors or temporarily employed. Statista estimates are much higher, projecting the number to be 59M (36% of the total workforce) this year, with steady growth to 90.1 M in 2028.  It predicts that over the next few years, that number will increase to 86.5 million freelance workers (50.9 percent of the total U.S. workforce).

However, it also notes that the average gig worker puts in only 11-30 hours per week in this type of work, suggesting that a mix of full-time and part-time roles will continue. Such an insight is bolstered by data reported by Pew Research that suggests that only 31% of those working through digital work platforms (Uber, DoorDash, Upwork, etc.) are working full-time. 

However, the prevalence of contingent workers continues to grow. For example, McKinsey found that 36% of the American workforce was self-employed in 2022, while ADP reported that in 40% of companies, its payroll data found that one in four (1/4) employees is a gig or part-time worker. Furthermore, the Government Accounting Office (GAO) estimates that 89% of the S&P 500 companies utilized contracted work as a regular part of their staffing solutions.

Developing a contingent workforce strategy

Developing a contingent workforce strategy   

Developing an outsourced or contingent workforce strategy to address gaps in critical skills and general talent shortages requires careful consideration of various factors. It requires the same due diligence that accompanies any business strategy – clarifying business objectives, plans and goals, assessing related talent requirements, identifying gaps to be filled, determining the best sources for the needed talent, bolstering hiring and employment processes to meet greater volumes, and installing a continuous evaluation process. Key steps include:

1. Understand/clarify business plans and objectives

Research and reflect on the specific business plans, goals, and outcomes to be achieved during the planning period. Pay close attention to the new products, services, locations, technologies, and capabilities to be developed and deployed in the coming years.  Through this, the required human capabilities can be identified.

2. Determine the governance structure

Ownership and responsibility for the entire lifecycle of employing contingent workers must be determined to avoid overlapping requirements and management confusion. The roles of purchasing or procurement, hiring managers, and HR require clarification, especially as contract labor becomes an increasingly high percentage of the workforce. As HR can provide unique planning and insights into the total labor force with strategic workforce planning (SWP), staffing requirements (via talent acquisition processes), and skills gaps, its role will continue to evolve and increase in potential for impact. At the same time, purchasing functions have well-established expertise in outsourcing and subcontracting policies, processes, technologies, finances, and external networks that are essential elements to be built upon. Shared governance with clear lines of responsibility should be included in any strategy.

3. Conduct a skills analysis

Identify the skills and expertise required for new, expanded, or different enterprise capabilities, projects, or tasks. Either relying upon that listing alone or an enterprise skills library that has been created and/or updated, conduct a comprehensive skills assessment with the current employee base to identify the specific expertise gaps within the organization. Leverage a survey method asking targeted employees to complete a self-assessment and have their managers validate/edit those. Consider which of these skills will be critical strategic capabilities that ultimately need to reside in-house versus those that can be safely and readily outsourced or assigned to short-term workers.

4. Assess talent availability by region

Research geographic locations where the needed skills/professions tend to be located, including the availability in or near existing organizational locations. This will assist in the determination of the strategies to be employed to source the necessary skills. Low availability in the immediate area might create an awareness of the need to engage with outsourced labor companies, whereas higher availability might push one towards direct employment options. Starting with the U.S. Bureau of Labor Statistics (BLS) and Census Bureau’s data expanded searches can be accessed through paid services and platforms such as those provided by Lightcast, WorkforceGPS (Labor Market Information), Chmura Economics and Analytics, etc. 

This step can also inform the decisions as to either fully outsource the work or hire gig workers to augment and integrate with existing staff, whether to offshore versus onshore the work based upon talent access and availability.

5. Source and recruit talent

Establish a robust process for sourcing and recruiting freelancers, contractors, and gig workers. This may involve using specialized platforms, working with staffing agencies, or building a talent pool through networking. Engage reputable and reliable providers or agencies that specialize in the type (and volumes) of talent needed to augment the existing employee base. Companies should evaluate potential outsourcing partners based on their expertise, reputation, and ability to meet specific skill requirements. The cultural fit and alignment of values between the organization and outsourcing partners are also crucial to ensure effective collaboration.

6. Onboard and integrate contingent workers

Develop a comprehensive onboarding process to integrate temporary workers seamlessly into the organization, focusing on core workplace values, behavior standards, and expectations. Policies, practices, and checklists should be provided that outline facility access, break time and location, security and data protection standards, and the use of equipment, facilities, and resources etc. Such workers should be introduced to project or initiative team members and have their specific roles, responsibilities, and deliverables formally documented and shared.

7. Identify and develop a technology infrastructure

Ensure the organization has the necessary technology infrastructure to support necessary work and pay-related records collection and storage, project management toolsets, and remote work and collaboration platforms for hybrid workforce effort integration. This includes communication tools, project management platforms, and security measures for protecting sensitive information. The most basic technology for the administration of these workers is a vendor management system (VMS), which can include legally required identifications (SSN, Green Card, passport number, home address, etc.), project assignments, source (including the subcontracting company) skills listing/assessments, role performance data, availability timeframes, etc.

8. Manage legal and compliance considerations

Understand and comply with legal and regulatory requirements related to temporary and freelance work. Clearly define such workers' legal status, rights, and responsibilities, and ensure that contracts are well-drafted, comprehensive, and compliant with relevant laws and regulations. Proof of the right to work in the U.S. is an essential consideration here.

9. Standardize performance management

Implement performance management processes for temporary workers, including regular feedback and evaluations, most typically derived and delivered by the assigned line manager. Clearly communicate expectations and key performance indicators. Devise standard approaches, timeframes, and cadences for feedback and correction/decision-making related to continued employment. Establishing clear communication channels, setting performance metrics, and implementing robust project management practices with both the worker and the subcontracting company (if applicable) are vital for successful collaboration.

10. Communicate and collaborate

Foster effective communication and collaboration between in-house teams and temporary workers. Utilize collaboration tools and establish channels for regular updates and information sharing unique to these workflow-related (vs. social or engagement) collaborations to avoid any assumption of equivalent status with employees.

11. Practice sound financial management

Develop a budget and decision model for contingent labor that brings overall labor cost savings to the organization. Establish a transparent and fair compensation structure for temporary workers, either directly with them as individuals or through the subcontracting or temporary employment agency. Consider skill-based hourly rates, project-based payments, and any additional benefits or bonuses that might motivate outstanding performance while ultimately driving labor savings to the organization. Plan on rate mark-ups for those hired through agencies.

12. Mitigate risk

Identify and mitigate potential risks associated with using temporary workers, such as data security concerns, intellectual property protection, and potential disruptions to project timelines.  Separate data collection, management, and storage from that of regular employees.  Create clear barriers to standard employee processes and benefits, particularly those related to social, development, and/or morale events that cross outside of the immediate project team.

13. Address the contingent worker experience

Within the context of keeping the treatment of employees from contractors separate to avoid labor-law-related claims, build consideration into the strategy for the overall experience of temporary workers within the organization. Design elements into the contingent worker hiring, employing, and management processes that provide a positive and inclusive experience, which can lead to better productivity and a positive reputation in the gig economy.

14. Measure to manage continuous improvement

Regularly assess and refine the augmented workforce strategy based on feedback, performance metrics, and changes in business needs. Strive to remain agile and adaptable to industry trends and advancements. Assess each vendor's quality, timeliness, reliability, and delivery/quality. Regular reviews and flexibility in the outsourcing strategy are also key to adapting to evolving business needs and ensuring ongoing success in talent augmentation.

Building a network of contingent resources

Building a network of contingent resources

Identifying reliable sources of individuals and companies capable of filling critical staffing needs is a core element of building an ecosystem for continuous contingent worker resourcing. Understanding where to source needed labor will be best conducted in conjunction with the procurement or purchasing function. As those tend to have specialized experience, tools and resources, and networks for supplying “purchased” or contingent labor, they can generally be relied upon as the primary source for such relationships. It is essential to understand the role of such a function, with specialized expertise and established processes related to sourcing, evaluating bids, contract negotiations and rate setting, payments, and collecting managerial feedback.  Coordination with that function is an essential element of sustainable success and a key element to cover in the contingent workforce strategy.   

However, such expertise can now be augmented with widely available and user-friendly internet- platforms and websites that provide access to an open marketplace for expertise. In general, freelancers, gig workers, contract workers, and temporary workers often use a variety of online platforms and resources to find work opportunities. These are often used in conjunction with standard networking, marketing, and direct sales approaches by both individual practitioners and agencies or companies that specialize in providing temporary or contract labor to companies in need. There are a variety of sources, listed with top examples, including:

Freelance Platforms:

Upwork: A large platform that connects freelancers with clients looking for various skills.

Freelancer: Similar to Upwork, it offers a range of freelance jobs.

Fiverr: A platform where freelancers offer services starting at $5.

Industry-Specific Platforms:

GitHub: Developers can find freelance gigs or contribute to open-source projects.

Dribbble: Designers showcase their work and may find freelance opportunities.

Gigster: Technology-related project work matching site.

Specialized Freelance Websites:

Toptal: Connects freelancers with top clients in software development/design and finance.

99designs: Specifically for freelance designers.

WriterAccess: Connects freelance writers with clients.

Hirable: Freelance software developers.

Networking Platforms:

LinkedIn: Professionals can find freelance opportunities through networking.

Twitter: Some freelancers use Twitter to promote their services and connect with clients.

Temp Agencies and Specialized Recruitment Agencies:

Robert Half, Aerotek, Adecco Staffing: Traditional temp agencies connect individuals with short-term employment opportunities, including professional, technical, and manual labor categories., GovTempsUSA: providers of temporaries for federal, state, and local governments.

As part of the contingent workforce strategy, it is also recommended that company recruiters and managers alike remain open and active in identifying potential workers while attending industry and association conferences and meetings, as professional networking remains an excellent source of talent, both regular and contingent. Similarly, leveraging traditional job boards and social media sites to promote and find temporary expertise should be considered a viable option to augment other efforts.

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