Contingent Workers / Temps / Contract Employees

The use of contingent workers has increased dramatically over the past decade as businesses have struggled with rising labor costs and the need for a workforce that can quickly adapt to market conditions. Contingent workers are people who provide services to an organization but are not paid on the company payroll. Think contractors, consultants, temps, outsourcers.

Even in today’s tight job market, there is a shortage of workers with critical skill sets. This has resulted in a steady, year-over-year growth in the size and cost of a larger contingent workforce. As the baby boomer generation (about one-third of the U.S. workforce) is starting to retire, companies are bridging the critical skills gap with a more contingent workforce.1 It is also reported that the use of a contingent workforce has increased for both its strategic and operational impact on the organizations.2 Some large companies estimate that up to 30 percent of their procurement spend is focused on contingent workers.3

Though the contingent workforce is growing in importance, many organizations may not be skilled at managing this workforce segment effectively. Major challenges include the lack of an integrated workforce management strategy, ad hoc (and at times high-risk) managerial behavior, poor data management, and inadequate technology. These shortcomings can expose companies to significant business, financial, and public relations risk.

What’s driving this trend?

Workforce demographics. Demographic patterns have a direct impact on the available workforce and have created an imbalance between the supply and demand in critical workforce segments.4

Pressure to reduce headcount. Rising labor costs associated with full-time employees have put steady pressure on businesses’ bottom line. Greater use of contingent workers is a strategy used to ease some of this pressure.

Value-add strategy. Organizations increasingly need to rapidly expand their capabilities, move into new markets, and address the competency gaps created by their evolving business strategies. Contingent workers can be a solution to enable organizations to adjust with the changing market conditions.

Cost management. The increasing ratio of contingent workers in the total workforce — and their growing importance in delivering business results — is driving more focus on managing suppliers of the contingent workforce.

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