A simple guide to contingent workforce management

The way people work has changed in recent years. As has the way organizations need to staff people to work. Having a fixed workforce alone used to be sufficient to run a business, but staying ahead of ever-changing conditions means it’s important to embrace contingent work and adopt modern approaches to leveraging these contract workers. Importantly, those approaches need to be designed with flexibility in mind, both to meet the needs of modern businesses and to tap into a growing pool of talented gig workers. 

As an employer, adapting and planning for this new reality is critical. Tapping into the ever-growing population of contingent workers can help organizations to become nimbler and deal with changes in demand more effectively, while helping operations run efficiently. In today’s competitive environment, you need a workforce planning strategy that can pivot swiftly while helping reduce risks associated with hiring and payroll. 

In this guide, we explain what a contingent workforce is and outline the benefits organizations can enjoy by embracing contingent workers. We also examine where organizations typically struggle to build and maintain an effective contingent workforce. Finally, this guide highlights the key considerations for developing your contingent workforce management strategy to help ensure you set your business up for long-term success. 

Chapter 1: What is a contingent workforce? 

Contingent workforces are composed of non-traditional employees such as consultants, gig workers, freelancers, temps, and independent contractors, among others. They aren’t employed full-time but are staffed for specific jobs to meet various objectives. A contingent worker might be brought on to run a project that no internal candidate has the expertise to work on, or to backfill a role when someone takes a leave of absence. Contingent workers are also hired to meet fluctuating seasonal demands, such as those typically experienced over the holidays in the retail sector or during peak summer travel in hospitality.  

While contingent workers have existed in various forms for decades, or arguably even centuries, they’ve become far more common in recent years. The post-pandemic rise of remote work and shifting attitudes toward work-life balance are just some of the reasons why as much as half of the U.S. workforce could be made up of contingent workers by 2027, according to Statista.  

The fact that most organizations — 80% according to Dayforce’s 2023 Executive Survey — use contingent workers shows that many employers not only recognize this changing dynamic, but also see the strategic benefits of embracing it. But as we’ll see, unlocking those benefits is often easier said than done without a sound strategy in place. 

Before we dive into the elements of a great strategy, let’s take a closer look at why so many companies see the value in building a contingent workforce.  

Chapter 2: The benefits of leveraging a contingent workforce 

There are many reasons why organizations might hire contingent workers. In addition to meeting pressing business needs, using contingent workers has several other strategic advantages. These include access to an expanded talent pool, increased flexibility, greater agility and productivity, higher retention rates, and lower costs. Let’s consider each of these benefits in turn: 

Access to an expanded talent pool 

Most organizations need specialized skills to support various aspects of their work. From graphic designers and accountants to front-end developers, one of the biggest benefits of using contingent workers is that it expands your access to talent. That’s because it’s a way to access a talent marketplace with tens of millions of people — from seasonal shift workers at fulfillment centers to knowledge workers with hard-to-find skills — who aren’t pursuing traditional, full-time positions.  

In many cases, contingent work also provides a pathway to removing traditional geographic barriers. It does so by empowering organizations to recruit remote contractors from around the country and even internationally, rather than being limited to the talent pool within commuting distance of their offices or facilities.  

Greater flexibility 

Using contingent workers gives organizations the flexibility to staff up or down to meet seasonal demand or execute specific short-term projects. As a result, it may be much easier for companies to respond to evolving business needs. It’s for reasons like this that 51% of surveyed executives designated increased flexibility as a top benefit of embracing flexible work in Dayforce’s 2023 Executive Survey.  

Increased agility and productivity 

Being able to ramp your workforce up at a given time based on your organization’s staffing needs gives you a lot of agility you otherwise might not have. That can make it easier to pivot to meet shifting business demands while increasing speed to market, helping drive greater productivity and enhance customer satisfaction. Not surprisingly, increased productivity and organizational agility were also among the top benefits of having a contingent workforce, cited by 54% and 50% of surveyed executives, respectively, in Dayforce’s Executive Survey.  

Higher retention rates 

At a time when workers are increasingly looking for flexible work arrangements, embracing contingent work can make you a more attractive employer and ultimately help you retain top talent. The reason for this is that it gives employees who want to scale back their hours or transition from full-time to part-time work an avenue to keep contributing to your organization rather than having to leave outright. For companies not wanting to lose talent to competitors, this can be a highly effective tactic to help keep great workers engaged in the business. 

Cost savings 

Between the cost of paying salaries and benefits and the time lost to onboarding and training, hiring new full-time employees can be a very expensive proposition. That’s particularly true for roles where there isn’t always a steady stream of work and there is a significant amount of downtime. But with contingent workers, you only pay for help when you need it and generally don’t have to cover benefits or paid time off. Importantly, in the case of highly skilled knowledge workers, you also may not need to spend much, if any, time training them to do the required work. 

With this understanding of some of the main benefits of leveraging a contingent workforce, let’s now turn to some of the challenges organizations face when managing contingent workers. 

Chapter 3: Where organizations struggle with contingent labor management 

While it’s easy to make the case for using contingent workers, that doesn’t mean organizations can automatically assume they’ll be successful doing so. Underscoring this point, 70% of leaders surveyed in Dayforce’s 2023 Executive Survey noted that they found it difficult to integrate contingent workers into their operations. Below are some of the specific difficulties today’s businesses face. 

Sourcing talent 

Finding talent is a perennial challenge at organizations around the world. In addition to having to overcome frequent labor shortages, particularly among highly skilled workers, talent acquisition is a time-consuming and expensive process for full-time and contingent workers alike. Hiring managers and HR partners can spend weeks or even months recruiting for specific roles, conducting interviews, shepherding candidates through the hiring process, and handling the administrative burdens that come along the way. And once that’s complete, additional time is required to onboard and, depending on the role, train contingent workers to help ensure they do the job correctly. 

Meanwhile, from the worker’s perspective, this entire process can often be opaque. That leaves them with little insight into the length of the hiring process and how to search for available roles or shifts, let alone how to potentially balance gig work for your organization with their other existing commitments. 

Finding the right skills 

One of the key advantages of hiring contingent workers is that it allows organizations to tap into specialized skill sets for project work without having to make the long-term investment of bringing people on full-time. But it can also be challenging to source skilled talent in a timely and efficient manner. Data from Dayforce’s recent Conquering the Frontline Manager Complexity Crisis study helps illustrate that point. In it, 65% of executives surveyed reported that their organization would use contingent workers more often if it were easier to find people with the specific skills they were looking for. 

Managing compliance 

Onboarding contingent workers can result in many logistical challenges, particularly when organizations need to move quickly to get the talent they need. One of the biggest challenges  many organizations face is accurately tracking time and payroll. And while that may sound simple enough, the reality is that not only are these processes complicated, but the rules governing them can vary by region. Failure to comply with the correct legal requirements can expose organizations to considerable compliance risk. That can result in lawsuits and costly fines or, worse yet, damage to an organization’s brand. 

Nurturing culture  

Company culture is hard to get right, particularly when it comes to bringing contingent workers into your business. And while there are many aspects to culture, one of the most important is trying to integrate contingent workers into teams and workflows as seamlessly as possible. Not only is this an important part of helping ensure they have a positive experience, but it also can go a long way toward determining whether they’ll be willing to return in the future and speak highly of the brand to others.  

Workforce planning 

Large organizations, especially those with operations at multiple locations, often struggle with managing a mix of full- and part-time workers. That can include everything from scheduling and tracking hours to managing payroll, as noted above. While workforce planning issues like these can be tough for any organization, they often become far more challenging when contingent workers get added into the mix. 

So how can your organization help plan for challenges like these and set itself and its contingent workers up for success? We’ll answer that question in the next chapter.  

Chapter 4: Key considerations when developing your contingent workforce strategy 

The adage “Measure twice, cut once” holds true in many aspects of business, including contingent workforce management. In this case, the metaphorical equivalent of measuring twice is developing a clear and thoughtful strategy. And while that strategy may vary considerably based on the unique circumstances impacting your business, there are some universal truths when it comes to effective contingent workforce management. 

Below, we look at some of the most important considerations for developing a strategy that enables flexible workforce planning and helps you manage the risk to your organization. 

Identify future skills gaps in your workforce 

As you think about your contingent workforce strategy, start by analyzing your organization’s business objectives and the specific work it will need to undertake in the months and years ahead to reach its goals. In parallel with that exercise, take an inventory of the skills in your current workforce. Next, compare your future needs with your current capabilities and look for gaps that you’ll need to fill. Finally, assess which of those gaps would be best filled by additional full-time hires and which are best suited for contingent workers. 

Plan for future flexibility 

Of all the lessons learned over the past few years, perhaps the most important is this: always expect the unexpected. Just as macroeconomic conditions or geopolitical tensions can turn on a dime, so can your business goals or demand for your product or service. The best way to account for the unknown is to develop a strategy that’s flexible rather than rigid. That means considering multiple scenarios and having plans in place to adapt and augment your workforce as needed to better meet whatever situation may arise. 

Take stock of compliance  

As you think through your strategy, make sure you fully understand all the relevant labor and tax laws and regulations that apply to your contingent workforce. Keep in mind that such requirements frequently vary by jurisdiction. As such, it’s important to understand your obligations in every state or territory where you employ contingent workers so that you don’t run afoul of legal requirements and put your business at risk of noncompliance.  

Build efficiency into your talent management 

One of the keys to getting contingent workforce management right is finding ways to make the process as efficient as possible. This is where it’s important to look for opportunities to help streamline the sourcing, screening, hiring, and onboarding processes, often with the help of technology. For example, the right platform can help accelerate the sourcing and screening processes by providing hiring managers with a database of vetted workers or make the onboarding process run more smoothly using online forms. Steps like these can go a long way to helping reduce time to hire and make the process as simple and straightforward as possible. 

Look for tools that will allow you to manage your workforce in one place  

Do you need multiple systems to manage your full-time and contingent workers? Many companies rely on a collection of disparate tools and systems that can’t integrate with each other. A better approach is to identify a single platform that allows you to manage your entire workforce in one place. Doing so empowers managers to make more informed decisions about workforce planning by providing them with a single, consolidated view of their employees, what skills they have, and where there’s increased demand or a skills gap. The best contingent workforce management platforms will also enable time tracking for these short-term workers, help manage payroll, and help support compliance. 

Set yourself up for long-term success 

In an increasingly competitive environment, where operations leaders are looking for greater flexibility, relying exclusively on a permanent workforce doesn’t always make sense. Instead, a growing number of organizations are realizing they need to staff from a talent pool that contains both fixed and contingent workers to help ensure they can access more skills, be more agile, and adapt to ever-changing business needs. 

As we’ve seen, the key to getting the most out of your contingent workforce is having a thoughtful strategy in place that takes skills gaps and compliance considerations into account, maximizes flexibility and efficiency, and embraces the right technology. Ultimately, it’s the organizations that get contingent workforce management right that will be best positioned to succeed, no matter what the future holds.