The term contingent worker refers to a broad category of workers whose business relationship with the organization for whom they perform the work operates on a restricted-time basis founded on a contingency such as peak workload or special projects. The use of contingent workers allows employers to maintain a core workforce and supplement that group of employees according to changing business needs. Contingent workers fall into several classifications, such as temporary agency worker, seasonal worker and freelancer, among others.
In almost all instances of contingent workforce engagements, except with the direct hire of a contingent worker for a seasonal interval, the organization that contracts for the work has the benefit of someone else managing such things as payroll, paid vacation time, health insurance and other administrative responsibilities. Self-employed professionals manage their own benefits. In other circumstances, while the worker does work as an employee, it is through a third-party employer such as a temporary employment agency or employee leasing firm which handles payroll and benefits administration. This provides the company contracting for the work with considerable personnel-related cost savings.
The strength of the advantage profile varies with circumstances and, indeed, can vary vastly for the same contingent worker during the course of her career's evolution. Flexibility is a key advantage. Contingent workers may have highly structured work times at certain times and in certain circumstances, such as that of a seasonal worker in a greenhouse during the summer or a retail store at Christmastime, or that of a temporary receptionist who must operate the switchboard on a strict schedule. However, even in these instances, the worker has the flexibility to take time off between assignments or to use the present work as a springboard either to a full-time job or to build a more profitable freelancing or consulting business.
Disadvantages to the employer of using temporary workers fall primarily into two categories: workforce insufficiency and legal implications. A downside to using contingent workers involves the potential for lack of talent at critical times. Such lack of critical talent can result either from a lack of availability of known talent, or from the inability to locate talent for a specific project, even though such talent does exist. In the category of legalities, abuses of contingent worker status have resulted in national labor laws, and labor laws in some states, that incorporate stringent definitions of what legally constitutes a contingent worker. In some instances, even using a third-party employer such as a temporary agency has not protected employers from a legal determination that workers classified as contingent by the company qualified as employees of the company and were subject to the same benefits as other company employees.
The disadvantages for the worker also vary with the particular circumstance. The most consistent disadvantage across all levels of contingent workforce is that work may not materialize, or even exist, when the contingent worker needs income. Additionally, with some contingent work, such as retail seasonal work or some types of temporary assignment, a disadvantage involves the reality that overall compensation rates fall short of those for direct-hire employees performing similar work. Finally, contingent workers either receive few or no fringe benefits, or must implement and administer such benefits funds themselves.