Ever before the pandemic hit the world, experts predicted the rise of contingent employment. A leading newspaper report stated that 10% of the Indian workforce will work as contingent hires by 2025.
Post-pandemic, contract hiring dominated the recruitment industry as more people steered towards flexibility with freelancing. 2022 APAC Workforce Insights found India among the top three countries in the APAC region, where 57% of employers planned to expand the Contingent Workforce to 15% and above in the next two years.
To keep up with this evolving landscape, it becomes imperative to understand contingent labour meaning and its nuances. Read along to delve deeper into what is contingent staffing.
What is Contingent Employment?
A contingent worker works for an organisation without being hired as their employee. The individual is hired for a specific duration for a particular project. Contingent employment is the process of hiring such contingent workers for specialised tasks in an organisation.
A contingent workforce encompasses the following kinds of employees:
- Independent contractors
- Other non-permanent workers
Features of a Contingent Employee
Here are some features of a contingent employee:
- Flexibility: Contingent workers operate on a flexible schedule. They can work at stipulated hours and often have the liberty to work from anywhere, whether their home, cafe or co-working space.
- Contract-based: Contingent staffing is done on a contract-basis. As per the agreement, the employee could be paid an hourly, monthly or lump sum project fee.
Once the contingent offer of employment ends, they will leave your organisation. It can be extended if your project is stretched or a new one is in the pipeline.
- Skills-based work: The India Skills Report 2023 finds IT domain has the highest percentage of employable talent with 65.02%. Contingent employment allows organisations to leverage this and add more skill-based talent to their workforce.
For example: An expert web animator can be roped in to create/add interactive elements to an existing website.
If you are wondering what is a contingent worker, the main distinguishing feature is that they’re not full-time, regular company employees. They are not protected by labour and employment laws. They do not enjoy any employment benefits.
Different Types of Contingent Employee
Contingent employment includes professionals who flexibly contribute to the workforce. To learn contingent labour meaning, it is vital to recognise the types of contingent employees:
1. Freelancers: Freelancers are autonomous individuals who offer their skills and services on a project basis. They operate independently and can take on multiple projects simultaneously. They enjoy the flexibility of choosing their projects and clients, making freelancing popular in creative industries, IT and other specialised fields.
Study finds over 45% of recruiters plan to outsource more jobs to freelancers and gig workers.
2. Consultants: This refers to individuals with specialised skills who can address some challenges or offer guidance in making the right decisions. They are experts in the field who contribute their learnings and perspectives to enhance company operations. Their role is limited to consulting and offering solutions while the teams handle the execution.
For example: You can hire a cybersecurity consultant to address security threats and upgrade your systems.
3. On-call Workers: These individuals are available to work as needed. As the term implies, they await a call from their employers for work. This category includes technicians, IT support specialists, home nurses, store managers, etc. They are also referred to as standby employees.
4. Temporary Workers: This contingent employee is called in to fill a specific position for a particular period. Temporary workers are engaged if there’s a staff shortage or an extra hand is needed at the workplace.
Each type of contingent hire brings unique advantages to organisations, allowing them to scale their workforce according to their requirements.
Advantages of Contingency Employment
Contingent hiring is steadily increasing as organisations discover the potential benefits of having a temporary and skills-based workforce. Here are some major advantages of contingent hiring:
Access to Global Pool of Talent: A contingent hire need not be restricted to a company’s location. Organisations can access the global talent pool by hiring across their borders. It allows diversifying the workforce and looking for more skill-based talent.
Skills-based Workforce: A Deloitte research gives excellent insights about the new model of skills-based organisations. About 60% of business executives believe fractionalised work adds value to their organisation. Hiring consultants or expert freelancers helps to fill the skill gap in a particular team.
Saves Time and Money: Finding the right skilled employees takes time and resources to get the perfect hire. However, contingent employment provides a cost-effective solution. A Gartner survey reveals that 32% of organisations are replacing full-time employees with contingent workers as a cost-saving measure.
Since a contingent employee does not operate full-time, they are not liable for additional benefits, taxes or health insurance schemes.
Builds an Inclusive Workforce: While many companies may restrict their DEI initiatives to the permanent workforce, hiring freelancers across state territories or international borders helps to take an active step in building an inclusive workforce.
A Forbes article highlights the business benefits of The Future of Diversity, Equity, and Inclusion (DEI) in the Contingent Workforce 2022. It states DEI programs helped 29% organisations to attract talent, while 16% noted a high return on investment (ROI) for their contingent labour.
Flexible Ability to Scale: Contingent staffing allows the flexibility of an organisation to scale up or down as per their needs. If there is a good flow of projects, companies can scale up by hiring more freelancers for that duration. Inversely, it avoids the problem of overstaffing during the slow months.
Offers New Expertise: With changing business needs, one can also prioritise the type of contingent employee they want. A consultant may help in the initial stage of planning a project, while a freelancer can help in executing it. Hiring different sets of workers for a fixed tenure gives access to varying levels of skills and expertise.
Depending on the levels of a project timeline, you can choose to bring in different levels of expertise with contingency employment.
These benefits of contingent staffing can help companies achieve their business goals and meet financial budgets amid the evolving recruitment landscape.
Disadvantages of Contingent Hiring
Although contingency employment seems advantageous, it also has its downsides. When navigating the true contingent labour meaning, one cannot neglect these disadvantages:
Lesser Control: A contingent employee typically works flexibly and is not bound to your rules regarding working hours or place. You can only control the output of their work rather than the way they choose to do it.
Data Security Risk: A contingent hire can access your data when working on a new project or consulting on an old one. This could include any confidential data or trade secrets of your company. Thus, a risk factor is involved, as minor negligence can pose significant threats.
Differing Labour Laws: This is especially important when you hire international freelancers or independent contractors. In India, the labour codes vary across states and union territories. You need to ensure that your contingent offer of employment complies with local rules and regulations.
With contingent staffing, there is also the risk of employee misclassification that attracts hefty penalties and lawsuits.
Lack of Team Cohesion: A contingent hire is only in a company for a short term. Due to their flexible schedules and working styles, they may only interact with some or have minimal conversations. Due to time differences, a contingent employee will also be unable to participate in team activities. This can affect team cohesion and impact collaboration.
Besides these factors, companies may face challenges managing global payroll and taxation with contingent employees. For contingent hiring, seeking assistance from a reputed local partner like PEO (Professional Employer Organisation) or EOR (Employer of Record) services can turn out to be the best option.
When Should You Resort to Contingency Employment?
When analysing the advantages and disadvantages of contingent staffing, employers must identify their business requirements before opting for this hiring strategy. Here are some situations when it is conducive to recruiting contingent employees.
Staffing Issues: If a company has an increased workload but is understaffed, it can resort to contingent hiring for the peak business period. Hiring contingent employees also allows employers to work with different types of workers and be flexible about their requirements.
Contingent staffing can be undertaken in seasonal industries during the festive and year-end periods. Most recently, Amazon hired 250,000 seasonal employees in operations for the holiday season.
Maternity Breaks/Sabbaticals: When full-time employees go on maternity leave or take sabbaticals, a contingent hire can fill their position. It ensures your operations are not affected in the absence of an experienced team member.
Reduced Costs: Contingent employment is cost-effective. It not only saves money on salaries and ongoing training, but also saves time on finding and onboarding new talent. For startups on a tight budget, contingent hiring can help during the initial period.
Case Study Example: ServiceNow, a global cloud-based company, used a high-skilled contingent workforce to decrease their labour spending by 17.5%. They partnered with a workforce management company to improve talent acquisition, diversity and saved money during negotiations.
Fill in The Skills Gap: The Global Talent Shortage Report 2023 reveals a striking challenge employers face around the world — 4 in 5 employers struggle to find skilled talent for their open roles. This issue is similar in India as well. In such a scenario, contingent staffing emerges as a strategic solution.
By leveraging the skills of experienced professionals, businesses can ensure their projects continue without interruption. This bridges the skill gap and brings additional expertise to the teams.
Choose Rapid For Contingency Employment in India
Contingency hiring is attractive with its numerous benefits but it must be done with compliance. Having a trusted partner like Rapid EOR can help companies seamlessly recruit contingent employees. Rapid, with its 25 years of experience in the Indian market, is aware of all the nuances of hiring and managing remote talent in the country.
We also assist in providing office space and leasing equipment for your employees in India. Our service marketplace offers a host of other facilities that can make the hiring process a breeze. Our deep industry expertise and knowledge of local laws ensure regulatory compliance for Indian employees. Right from hiring quality talent, drafting contingent offer of employment, undertaking HR functions and payroll management, we have an intuitive platform that makes it all easy and accessible.
We help businesses scale up in new markets and offer exciting discounts and packages for startups.
To learn more about our services, book a demo here.