What Is A Contingent Worker?

As the job market continues to evolve, finding the right work arrangement for you or your organization can be challenging. With an increasing number of options available, it’s crucial to understand the distinctions between various work types, including employment, contract work, and contingent work.

This article will clarify what it means to be (or to hire) a contingent worker, explore the advantages and disadvantages of this work arrangement, and provide insight into the current landscape of contingent work.

Key Takeaways:

• Contingent workers are hired by organizations to perform specific tasks but do not hold official employee status.

• Contingent workers are responsible for their own tax obligations, unlike traditional employees whose payroll taxes are managed by their employers.

• Many contingent workers operate as independent contractors or freelancers.

• While contingent work offers flexibility and independence, it may also come with a lack of stability and benefits.

What Is a Contingent Worker?

A contingent worker is an individual hired by a company for specific tasks or projects without being classified as a full-time employee. The definition of a contingent worker can vary based on multiple factors related to the nature of the work performed.

A straightforward way to think about contingent workers is that they are independent contributors delivering specific services to a company without being directly managed as employees.

They may use titles such as “freelancer” or “contract worker,” typically providing deliverables without detailed oversight on how to achieve those results.

Types of Contingent Workers

Here are several specific roles that fall under the category of contingent workers:

• Independent contractors: These self-employed individuals offer specialized services based on specific deadlines and deliverables but operate independently without direct management.

• Temporary contingent workers: Often referred to as “temps,” these individuals are hired through staffing agencies for short-term assignments, which can range from a single day to several months.

• Consultants: Professionals who leverage their expertise to provide strategic advice to organizations, particularly in areas like finance, business management, or marketing.

Pros of Contingent Working

Contingent work arrangements can benefit both individuals and organizations. Here are some reasons why businesses might opt for contingent workers:

• Reduced management burden: Contingent workers typically require less oversight compared to traditional employees, allowing companies to allocate management resources more efficiently.

• Lower tax obligations: Employers do not need to handle taxes for contingent workers, who pay their own self-employment taxes.

• No benefits obligations: Companies are not required to provide benefits like health insurance or retirement plans to contingent workers, resulting in cost savings.

• Flexible work arrangements: Organizations can engage contingent workers as needed, improving efficiency during peak periods.

• Access to specialized skills: Contingent workers often possess unique skills that can be valuable for specific projects or tasks.

For contingent workers, there are also several appealing aspects to this type of work:

• Increased independence: Many individuals appreciate the flexibility and autonomy that contingent work provides, allowing them to align their roles with personal circumstances and career aspirations.

• Flexible schedules: Contingent work often does not adhere to the traditional 9-to-5 model, accommodating varying availability.

• Broader work opportunities: Contingent work can offer access to a diverse range of projects and clients, enhancing career growth and experience.

Cons of Contingent Working

Despite the advantages, contingent work comes with potential drawbacks for both employers and workers:

• Limited control over workflow: Employers cannot dictate how contingent workers complete their tasks, which may impact consistency.

• Scheduling challenges: Organizations cannot impose fixed schedules on contingent workers, which can complicate project planning.

• Misclassification risks: Misunderstanding the nature of the working relationship can lead to legal complications and financial consequences for organizations.

For contingent workers, some challenges include:

• Job insecurity: Contingent work is inherently temporary, leading to less stability compared to traditional employment.

• Lack of direction: The independence that some find liberating may feel overwhelming to others who thrive with more structure.

• Ineligibility for benefits: Contingent workers often lack access to essential benefits like healthcare and retirement plans.

Employment Relationship Under the Fair Labor Standards Act (FLSA)

The distinctions between contingent workers and traditional employees are significant due to different legal obligations and standards. The United States Department of Labor (DOL) outlines several factors to determine the nature of a working relationship.

While there is no single criterion for defining a contingent worker, the DOL provides guidelines to help clarify these distinctions. Important factors include:

1. The permanency of the relationship.

2. The extent to which the services rendered are integral to the principal’s business.

3. The contractor’s investment in facilities and equipment.

4. The degree of control exerted by the principal.

5. The contractor’s opportunities for profit and loss.

6. The level of initiative, judgment, or foresight required for success.

7. The degree of independent business organization and operation.

Additionally, the DOL notes factors that may be considered but are not definitive in determining the working relationship:

1. The absence of a formal employment agreement.

2. The methods and timing of payment.

3. The location of the work performed.

4. Whether the worker is licensed by local or state authorities.

Contingent Workers Vs. Contract Employees

While independent contractors fall under the category of contingent workers, it’s essential to differentiate them from contract employees.

Contingent workers operate as independent entities, billing for their services, whereas contract employees are classified as employees of the organization and work under specific contract terms.

Key differences include:

• Tax responsibilities: Contingent workers handle their own self-employment taxes, while contract employees have taxes deducted from their paychecks.

• Compensation structure: Contingent workers are paid based on completed work without a fixed schedule, while contract employees receive regular paychecks.

Both companies and contingent workers should consider these differences, as well as the DOL’s guidelines, when engaging in work relationships.

Finding Contingent Workers

For organizations looking to hire contingent workers, clarity in the work arrangement is crucial. Be transparent about the temporary nature of the position to avoid misunderstandings.

Online platforms, particularly professional networks like LinkedIn, are effective for sourcing contingent workers. Referrals can also be an excellent way to find qualified individuals who have demonstrated success in similar roles.

Author

Chris Kolmar

Chris Kolmar is a co-founder of Zippia and the editor-in-chief of the Zippia career advice blog. He has hired over 50 people in his career, been hired five times, and wants to help you land your next job. His research has been featured on the New York Times, Thrillist, VOX, The Atlantic, and a host of local news. More recently, he's been quoted on USA Today, BusinessInsider, and CNBC.