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A contingent workforce is a provisional group of workers who work for an organization on a non-permanent basis, also known as freelancers, independent professionals, temporary contract workers, independent contractors or consultants.from[1]"Workforce Planning and Employment", Quepublishing from<http://www.bls.gov/news.release/conemp.nr0.htm>"Contingent and Alternative Employment Arrangements, February 2005", US Bureau of Labor Statistics, Summer 2005 Contingent Workforce Management (CWM) is the strategic approach to managing an organization\'s contingent workforce in a way that it reduces the company\'s cost in the management of contingent employees and mitigates the company\'s risk in employing them from<http://cips.org/documents/workforce_management_pp4_oct05_pg_40-43-1.pdf>"Contingent Workforce Management: Developing a Successful Strategy" Procurement Professional, October/November 2005
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According to the US Bureau of Labor Statistics (BLS), the nontraditional workforce includes "multiple job holders, contingent and part-time workers, and people in alternative work arrangements."from "Futurework", Occupational Outlook Quarterly, US Bureau of Labor Statistics, Summer 2000, p.36 These workers currently represent a substantial portion of the U.S. workforce, and "nearly four out of five employers, in establishments of all sizes and industries, use some form of nontraditional staffing." "People in alternative work arrangements" includes independent contractors, employees of contract companies, workers who are on call, and temporary workers.from "Futurework", Occupational Outlook Quarterly, US Bureau of Labor Statistics, Summer 2000, p.36
Staffing companies represent a conventional resource of contingent workforce talent, as individuals attempting career independence commonly default to staffing companies for their placement. Staffing companies generally work by charging a fee to the business wishing to engage the consultant on top of the rate that the individual consultant charges.
Drivers of Growth
Among several other contributing factors, globalization has had a large impact on the growth in using contingent labor. Globalization contributes to rapid growth in industries, increased outsourcing, and a need for flexibility and agility to remain competitive.from<http://www.innovativeemployeesolutions.com/knowledge/articles_04/04-article-01.html>, " Ten important issues and trends shaping human resources in 2004", Innovative Employee Solutions, 2004 By engaging contract workers, organizations are able to be agile and save costs. The contingent workforce acts as a variable workforce for companies to select from to perform specific projects or complete specialized projects.from<http://www.mpsgroup.com/vNews/mpsgroup/presentations/BankofAmerica/BOA_20040601.pdf>, "Banc of America Securities Conference", MPS Group, July 2004, page 21 Also as organizations make efforts to be more agile and to quickly respond to change in order to be more competitive, they turn to the contingent workforce to have on-demand access to professionals and experts.from<http://www.businessweek.com/careers/content/may2007/ca20070523_580432.htm?campaign_id=rss_null>,"The Contingent Workforce", Business Week, May 2007 Organizations also see the opportunity to reduce benefits and retirement costs by engaging the contingent workforce.from<http://www.mpsgroup.com/vNews/mpsgroup/presentations/BankofAmerica/BOA_20040601.pdf>, "Banc of America Securities Conference", MPS Group, July 2004, page 21 However, there is risk involved in avoiding these costs if an employee is improperly classified as a contingent worker. Using the contingent workforce is also cost-effective in that using contingent labor allows for adjustments to employment levels and employment costs depending on what kind of expertise and labor is need and at what time it is needed. Trends in the contingent workforce are also impacted by the economy. A study conducted by the MPS Group shows the relationship between the contingent labor cycle and the state of the economy.from<http://www.mpsgroup.com/vNews/mpsgroup/presentations/BankofAmerica/BOA_20040601.pdf>, "Banc of America Securities Conference", MPS Group, July 2004, page 10 In a bullish economy, the demand for contingent labor is strong. This is most likely due to the fact that organizations are trying to grow with the economy, and using contingent workers allows them to work with experts when needed, without the long-term costs of hiring them. A knowledge-driven economy also contributes to the growth in the use of the contingent workforce because organizations rely more on their specific and expert knowledge and expertise.from<http://www.humancapitalinstitute.org/hci/tracks_contingent_workforce_management.guid>, "Contingent Workforce Management", The Human Capital Institute, 2006 As demand increases for highly-skilled and knowledgeable people, the expertise of contract workers becomes more attractive. Another factor for the growth in the contingent workforce comes from not benefits to organizations, but to the individual. The ease of changing jobs has increased and has made working as a contingent worker more attractive.from<http://www.taleo.com/research/articles/talent-article1.php?id=102>, "Resume Volume: Can You Handle It?", Taleo, 2007 Increased popularity of applying for jobs on-line as well as an increased need for specialists make becoming a contingent worker a possibility for several individuals.
Advantages and Disadvantages of using Contingent Workersfrom<http://www.informit.com/articles/article.aspx?p=437082&seqNum=8>, "Workforce Planning and Employment", Que Publishing, December 2005
| Advantages | Disadvantages |
|---|---|
| Flexibility in type and amount of labor resources | Loyalty to employer or company |
| Save costs in benefits and tax | Disturbs organizations core morale and culture |
| Immediate access to expertise not present internally | Training costs |
| Savings in long-term compensation costs |
The Future of the Contingent Workforce and CWM
Several reports and statistics report to an increased prominence of contractors and contingent labor to be used by organizations.from<http://www.businessweek.com/careers/content/may2007/ca20070523_580432.htm?campaign_id=rss_null>,"The Contingent Workforce", Business Week, May 2007 The US Bureau of Labor Statistics expects an increase of 68% in use of white collar contingent labor.from<http://www.mpsgroup.com/vNews/mpsgroup/presentations/BankofAmerica/BOA_20040601.pdf>, "Banc of America Securities Conference", MPS Group, July 2004, page 21 The BOL also estimates that the US staffing industry will grow faster than any other industry over the next 10 years.from<http://www.americanstaffing.net/statistics/economic.cfm>, "Staffing Industry Economic Analysis", American Staffing Association, May 2007
The concept of CWM appears to be fairly recent, dating back perhaps a few decades.from<http://www.allbusiness.com/human-resources/workforce-management/593407-1.html>, "Will employee meltdown mean a "contingent" work force?", AllBusiness.com, 1996 Yet, despite the fact that there is a trend in the workforce growing more strongly towards contingent labor, effective CWM is still not yet widely spread.from<http://www.s-ox.com/news/detail.cfm?articleID=1284>, "Contingent Workforce Management Trends", Sarbanes-Oxley Compliance Journal, 2005
Businesses could save themselves that higher cost if they were to engage the consultant directly. However, U.S. businesses have had little motivation to alter this supply chain, because engaging contractors without the staffing intermediary has carried significant risks, as the IRS could levy damaging penalties against companies that classified individuals as contractors when they should have been considered employees. Using a Portable Employer of Record (PER) is a way to enable businesses to engage internally located contractors inexpensively and is one way to mitigate risk of IRS reclassification. Many large businesses have also implemented Applicant Tracking Systems (ATS) into their Human Resources environment, in order to reduce their dependence on staffing intermediaries.
Not an Uncommon Problem
Some employers misclassify unintentionally due to the complexity of classifying employees versus contingent labor. While others do it on purpose in order to escape the costs of providing benefits to employees.from<http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1009&context=reports>,"The Cost of Worker Misclassification in New York State", Cornell University, 2007, page 5 According to a study done by the Cornell University ILR School, 10.3% of NY\'s private sector are misclassified each year.from<http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1009&context=reports>,"The Cost of Worker Misclassification in New York State", Cornell University, 2007, page 5 And according to the US GAO 15% of employers misclassified employees as Independent contractors.from<http://www.unclefed.com/GAOReports/ggd96-130t.pdf>,"Issues in Classifying Workers as Employees or Independent Contractors", US General Accounting Office, 1996, page 3 Yet another report shows that 66% of organizations are highly concerned about employee misclassification and co-employment risk, and 69% are highly concerned about their organization’s compliance with industry regulations such as Sarbanes-Oxley, SEC, FDIC, etc.from<http://www.s-ox.com/news/detail.cfm?articleID=1284>, "Contingent Workforce Management Trends", Sarbanes-Oxley Compliance Journal, 2005
Costly Problem
The risk associated with misclassifying employees is costly to the individual, the organization, the government and tax payers. As far as individuals, if not classified properly these contingent workers do not get the benefits they deserve as an employee.from<http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1009&context=reports>,"The Cost of Worker Misclassification in New York State", Cornell University, 2007, page 5 For businesses it creates an unlevel playing field, unfair advantages, and risks of penalties from IRS.from<http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1009&context=reports>,"The Cost of Worker Misclassification in New York State", Cornell University, 2007, page 5 The government and the tax payers who comply with policies and laws are greatly affected too. In New York state alone, $4,283,663,772 in taxable wages were underreported.from<http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1009&context=reports>,"The Cost of Worker Misclassification in New York State", Cornell University, 2007, page 5
Suggested Solutions
Traditional business models are slow to react to the change in the labor force and are not readily prepared to engage the contingent workfroce efficiently and risk-free.from<http://www.401khelpcenter.com/401k/cfdd_new_business_model.html>, "New Retirement Plans Business Models: Adapt & Grow Or Die", 401K Help Center, 2004 Companies in a Taleo Research survey reported that they had implemented a contingent workforce management solution because of reasons including cost/bill rate reduction (32%), visibility and process control (31%) and risk reduction (21%).from<http://www.s-ox.com/news/detail.cfm?articleID=1284>, "Contingent Workforce Management Trends", Sarbanes-Oxley Compliance Journal, 2005 Among other solutions, the following are types of CWM.
Contingent Workforce Outsourcing (CWO) denotes a provider who facilitates clients\' ability to aggregate and track spending, billing, and performance of more than one type of non-W-2 worker. This includes traditional temps and independent contractors and consultants.
The business trends behind the up-tick in contingent work are inexorable. Some retired employees with valuable skills may seek reentry to the workforce as outside consultants in their area of specialty. Two of the largest and most-talented segments of the U.S. workforce, retiring baby boomers and Generation Xers, are foregoing full-time employment as W-2 workers and opting to work as \'contingents\'. Multi-earner families where one partner has company-funded employee benefits make it possible for the other partner to work freelance. With business expenses fully deductible, a self-employed consultant with 1099 income and proper planning can have a lower effective tax rate than a worker with W-2 income. Businesses are motivated to draw upon an experienced and valuable pool of workforce talent, which in turn may be cost-effective and beneficial to both parties.
CWO is a toolkit that has evolved to handle the non-W-2 business wave. As contingent workers continue to grow at a double-digit annual pace as a percentage of the overall workforce, companies are feeling an ever greater need to have tools to manage this quickly-growing phenomenon. Capturing and managing data that allows managers to see and control their entire contingent and full-time workforces is a complex task that is now possible with contingent workforce management or CWO tools.
[Category:Working conditions]]
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