How Contingent Labor Fits into Your Workforce

By MBO Partners | June 4, 2024

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Key Points

Though contingent labor has been integral to business for years, it has only recently become a significant element of workforce strategy.

While companies still engage contingent labor in traditional ways, a growing number are intentionally combining employee and non-employee workers into an optimized workforce.

Organizations that have strategically leveraged contingent labor will be well-positioned for success in the future of work.

Companies of all sizes have leveraged non-employee workers for a long time. Until recently, contingent labor was commoditized, for example, augmenting staff during seasonal upticks or temporarily replacing an employee on extended leave. While companies still engage contingent labor for purposes like these, many have extended into more strategic areas of the business. For example, a growing number of enterprises are intentionally combining employee and non-employee workers into an optimized workforce.

What Worker Types Are Contingent Labor?

We use the term “contingent labor” to refer to all the nonpermanent workers in your workforce. Under that umbrella, there are different labels for non permanent labor:

  • Contractors comprise a range of talent including light industrial, administrative, and high-skill workers. They typically work full-time for a defined contract period in a specific role. Firms typically deploy contractors with the help of a staffing agency, such as Adecco, Kelly Services, Manpower, and Young Capital. The staffing agency fills the role of an employer by paying the contractor and taking care of tax withholding.
  • Independent professionals are typically self-employed, managing their own marketing, contracts, tax filings, and benefits. Independents set their own rates and commonly have a direct relationship with clients as opposed to a third party between them. Over the past decade or so, in addition to winning business through their own marketing and networking, they have captured projects through online platforms like MBO Partners, Fiverr, and Upwork. Subsets of this worker type include:
    • Freelancers: a legacy term from the days when self-employed professionals worked in just a few specialized roles, like writers and designers.
    • Consultants: also something of a legacy term to denote professionals with deep expertise in their business areas.
    • Gig workers: new arrivals on the scene, range from commoditized work through online platforms like Instacart, Task Rabbit, and Uber, to members of the Creator Economy.
  • Service providers generally denote firms that employ their own people and are engaged to deliver projects or outcomes over specified lengths of time. Examples include advertising agencies, professional service consultancies, and technology consultants.

Contingent Labor and the Optimized Workforce

Though contingent labor has been integral to business for years, it has only recently become a significant element of workforce strategy. As the modern business environment continues to evolve, and evolve faster, enterprises must adjust the way they operate. Several key adjustments focus on the workforce, and one of these is leveraging contingent labor in an optimized workforce—that is, a strategic mix of full-time and independent talent.

An optimized workforce offers a number of benefits to the organization. Leveraging contingent talent resources can create a significant competitive advantage. An optimized workforce is also more flexible than an employee-focused workforce, allowing an enterprise to respond quickly to market changes, technology advances, and client expectations.

Strategic use of contingent labor addresses budget constraints without sacrificing the pursuit of innovation. Engaging in-demand expertise through independent talent lets management define outcomes within a specific time period, allowing better labor cost control.

Contingent labor in an optimized workforce also allows an enterprise to engage the right expertise regardless of geography. The normalization of remote work and effective online collaboration platforms supports the formation of location-dispersed teams comprised of highly skilled members.

As the market evolves, companies face the challenge of engaging workers with high-demand skills who are in low supply. In some cases, contingent labor is the only option to access needed expertise (e.g., data scientists, and machine learning experts).

The future of work will rely in large part on the nature of the workforce. Organizations that have strategically leveraged contingent labor will be well-positioned for success.

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