Contingent workforce

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.^[1][2] 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.^[3]

Trends

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."^[4] 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.^[4]

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.^[5] 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.^[6] 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.^[7] Organizations also see the opportunity to reduce benefits and retirement costs by engaging the contingent workforce.^[8] 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.^[9] In a bullish economy, the demand for contingent labor is strong. This is most likely because 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.^[10] As demand increases for highly-skilled and knowledgeable people, the expertise of contract workers becomes more attractive.

Advantages and Disadvantages of using Contingent Workers

Advantages [11]	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

Contingent workforce outsourcing

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.

See also

• Permatemp (An employee whose status is somewhere between a temporary employee and a permanent employee.)
• Independent contractor (A person or business which provides goods or services to another entity under a contract.)
• IRS Reclassification (Independent contractors recategorized by the IRS or by state tax authorities as W-2 employees.)
• Human Resource Management
• Workforce
• Human Capital

External links

• Human Capital Institute on Contingent Workforce Management - uses term contingent workforce but not defined

References

1. ^ from [1]"Workforce Planning and Employment", Quepublishing
2. ^ from<http://www.bls.gov/news.release/conemp.nr0.htm>"Contingent and Alternative Employment Arrangements, February 2005", US Bureau of Labor Statistics, Summer 2005
3. ^ 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
4. ^ ^{a b} from "Futurework", Occupational Outlook Quarterly, US Bureau of Labor Statistics, Summer 2000, p.36
5. ^ 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
6. ^ from<http://www.mpsgroup.com/vNews/mpsgroup/presentations/BankofAmerica/BOA_20040601.pdf>, "Banc of America Securities Conference", MPS Group, July 2004, page 21
7. ^ from<http://www.businessweek.com/careers/content/may2007/ca20070523_580432.htm?campaign_id=rss_null>,"The Contingent Workforce", Business Week, May 2007
8. ^ from<http://www.mpsgroup.com/vNews/mpsgroup/presentations/BankofAmerica/BOA_20040601.pdf>, "Banc of America Securities Conference", MPS Group, July 2004, page 21
9. ^ from<http://www.mpsgroup.com/vNews/mpsgroup/presentations/BankofAmerica/BOA_20040601.pdf>, "Banc of America Securities Conference", MPS Group, July 2004, page 10
10. ^ from<http://www.humancapitalinstitute.org/hci/tracks_contingent_workforce_management.guid>, "Contingent Workforce Management", The Human Capital Institute, 2006
11. ^ from<http://www.informit.com/articles/article.aspx?p=437082&seqNum=8>, "Workforce Planning and Employment", Que Publishing, December 2005