You’ll probably come across someone who isn’t listed in the employee directory if you stroll through the office of any mid-sized business on a Monday morning. They attend standups, use Slack, and are aware of the location of the coffee maker, but they are not paid. The majority of people are unaware that there are more contingent workers.
Contractors, independent consultants, freelancers, and temporary employees make up the contingent workforce, which has been steadily expanding for years. The Bureau of Labor Statistics reports that nontraditional staffing is currently used by nearly four out of five American employers. That is no longer a niche. It’s standard operating procedure.
Simple economics plays a role in this change. The overhead associated with full-time employment, such as health insurance, paid time off, retirement contributions, and frequently training, is avoided when a business hires a contingent worker. That math usually makes sense for project-specific work, such as a software migration, a rebranding campaign, or a seasonal sales spike. The flexibility argument is another. Businesses that can scale their workforce up or down without having to go through months of hiring and severance procedures have a significant operational advantage because markets move quickly.
It’s important to remember that this is nothing new. Workers in Lancashire’s textile mills were paid by the piece rather than the hour and could be hired or fired with little fanfare long before there were staffing agencies. Employment law changed as a result of trade unions’ eventual resistance to those conditions. However, as knowledge-based industries grow and manufacturing declines throughout the Western world, the same dynamic has reappeared under the more palatable names of “consulting” and “freelancing.”
The employees themselves are a diverse group. There are those who actually like the arrangement. Younger professionals in particular have chosen to base their careers on contract work, especially those who grew up during the gig economy’s ascent. It provides project variety, schedule control, and the option to charge rates that occasionally surpass those of a salaried position. A sizable portion of the contingent workforce is highly qualified, well-paid, and unwilling to return to a traditional position.
However, there is another market segment without that luxury. A harsher reality is frequently faced by lower-skilled contingent workers, such as those working in temporary warehouse positions, providing on-call service, or cycling through short-term placements. Research has repeatedly shown that contingent workers have greater rates of workplace injuries than permanent employees.
Contract workers were responsible for 17% of all fatal occupational injuries in the United States in 2015 alone—a startling statistic given how commonplace their use has become. The reasons are easy to identify: inadequate safety training, being assigned to dangerous jobs, and the subtle pressure not to voice complaints for fear of losing the position.
The task of handling all of this is less romantic for HR departments. It’s really challenging to keep track of contingent workers across departments, manage classification rule compliance, and maintain any kind of consistent worker experience. A number of large companies have learned in court that misclassifying a contractor as an independent worker when the job functions like a full-time role carries real legal and financial risk. Software—vendor management systems that interface with current HR platforms to offer some visibility into who is working, doing what, and at what cost—is increasingly the solution.
Whether the contingent workforce will eventually level off or continue to grow is still up in the air. Some economists contend that the trend is partially cyclical, with businesses depending more on contract labor during uncertain times before retreating. Others believe that the structural change is irreversible due to globalization and the increased value of specialized knowledge that no single company can afford to retain full-time employees.
The distinction between “worker” and “employee” appears to have become more hazy in ways that corporate culture and labor law haven’t fully addressed. The contingent workforce is no longer a workaround. It’s the strategy for a lot of businesses.
