A report from Ardent Partners found that “35% of today’s total workforce is considered non-employee: freelance, independent, external, extended, contingent, etc.” In addition, “95% of organizations today perceiving their contingent workforce as important and vital not only to day-to-day operations, but also to ultimate enterprise success and growth.” This is a new staffing model for many employers and one that may hold both rewards and risks.
Often referred to as contractors, or contingent workers, this group of workers has also become known as the “gig economy.” Gigs are projects of short, but varying, lengths of duration that are performed for a wide range of clients. According to the Bureau of Labor Statistics (BLS), there are certain occupations that are more likely to lend themselves to gig work than others. These include:
- Art and design
- Computer and information technology
- Construction and extraction
- Media and communications
- Transportation and material moving
While these have traditionally been the types of jobs most likely to lend themselves to contingent or contract work, rapid advances mean that other industries are becoming amenable to this type of employment relationship, including the healthcare industry.
Why Contingent Work, Why Now?
As a May 2017 Forbes piece points out: “According to the Bureau of Labor Statistics, some of the occupations with the highest projected growth in employment through 2024 include accountants, software developers, and nurses—the healthcare industry actually hired the largest portion of contingent positions in 2016.”
The rise in number of individuals who are engaged in the gig economy has been linked both to the millennial generation’s observation of the uncertainty of job security for their parents and this generation’s desire for flexibility and independence.
Services like Uber and Lyft are highly talked about examples of the burgeoning gig economy. A Pew Research study from 2016 found that 72 percent of Americans had “used at least one of 11 different shared and on-demand services.”
Benefits for Workers and Employers
Both those who are members of the contingent workforce and those who employ them can benefit from the relationship.
The workers benefit from the independence that comes from selecting the types of projects, and clients, they wish to work with; the variety involved in their work and access to employers not necessarily located in their geographic area.
Similarly, one big benefit for employers is the ability to recruit talent from a broader geographic region—even, in some cases, from around the globe. Employers also benefit from the ability to pay for talent when they need it, avoiding taking on the long-term liability of full-time employees.
Gig work isn’t for everyone, of course, and there are disadvantages for contingent workers. These include the uncertainty of a steady flow of contingent work and lack of the traditional benefits they might receive from a traditional employer.
Employers see some negatives as well. Contingent workers, by definition, work for a variety of clients; employers are subject to their availability based on their schedules, not employer mandates. The biggest drawback for employers, though, relates to the ability to accurately define who is, and who is not, a contingent worker.
Being Sure They’re Not Employees
One major area of risk for employers working with contingent, contract or freelance employees is ensuring that they are, indeed, not considered employees and not subject to income, Social Security, Medicare and unemployment tax withholding requirements. There are stiff penalties for employers who fail to classify their employees correctly and, in recent years, the IRS has become more aggressive at finding and fining those who are not following the guidelines.
There are three broad categories that can help employers determine whether or not an employment relationship exists:
- To what extent does the employer control how the work gets done. Is the individual truly independent or is the employer telling them when and how to do their work?
- This includes such considerations as who sets the rate of pay, whether expenses are reimbursed and who provides tools and supplies.
- Type of relationship. What written contracts exist? Does the individual receive benefits such as pension, insurance or vacation pay.
Additional information can be found on the IRS.gov site. While these criteria may seem fairly straightforward, the distinctions can be complex. Employers are advised to seek legal counsel to ensure that employees are being classified correctly.
Where to Find Them
Where can employers most reliably and conveniently find contingent workers? Staffing agencies are, of course, one reliable source of qualified individuals across a range of fields and professions. Contingent workers are also often online looking for their next great project. The traditional social media channels like LinkedIn, in particular, can be a great way to connect with these individuals. In addition, there are a wide range of websites that focus on bringing together contingent workers and clients—sites like Upwork (formerly Elance), Fiverr, Toptal and TaskRabbit are just a few examples of companies that are part of a rapidly growing way to connect companies and talent.
As technology continues to develop and change the way that work gets done, as well as where it gets done, and competition heats up globally, it is likely that the prevalence of contingent workers will increase. For many employers, the opportunity to find and leverage top talent that may otherwise be hard to find, and the flexibility of the gig economy, outweigh the potential downfalls.