Economic times continue to be challenging, and employers are faced with determining new ways to manage their workloads, their workforces and their labor costs. With the gig economy in play, more and more companies are looking to hire freelancers, consultants or other types of outsourced workers to share the load and reduce the cost of doing business, such as skyrocketing health care premiums.
Organizations such as Macy’s, JC Penny and many other retailers have taken advantage of contingent workers during the seasonal holidays for decades, and it’s paid off big time for their bottom lines. However, in order to know whether this strategy is advantageous to your businesses you must first understand both the positives and the negatives of hiring contingent workers.
Let’s take a look at some of the advantages and disadvantages:
Advantages of Hiring Contingent Workers
- For some businesses, workloads can fluctuate significantly and contingent employees can help combat unexpected customer demands.
- One of the major reasons these workers contribute to cost savings is because they do not typically receive employee benefits.
- Independent contractors can bring unique ideas, perspective or techniques to projects that you may have not considered.
- Because they get a chance to prove their expertise through contracted work, managers often promote them, with great confidence, to fill full-time positions.
- Organizations usually partner with a placement agency to cut down on recruiting time and paperwork. This also shifts the hiring compliance burden to the agency, putting the responsibility on them to make sure their recruiting and hiring processes are legal. Any claims of violating government regulations would be levied against the agency and not the business using contingent labor.
- They don’t require companywide training, instead they only require training for skills that are crucial to the project they’re working on. (Some instances don’t require training at all.)
Disadvantages of Hiring Contingent Workers
- Managers don’t always feel comfortable leaving contingent workers to perform tasks alone for the first few weeks, which leads to unhealthy micromanaging and the waste of time and money.
- It’s hard to keep them engaged and motivated. While this can be true of any employee, of course, many contingent workers are only in it for the paycheck.
- Since they don’t receive employee benefits, these employees may not be totally invested into your company culture and mission.
- Because they know that their time with the company might not be long, they don’t build lasting relationships with other members of the organization.
- Since a temporary agency works with many different companies, they don’t always have the opportunity to immerse themselves in those companies’ cultures, making it nearly impossible for them to understand how good a fit an interviewee might be.
- They are usually expected to be up-to-date with safety regulations but without proper safety training during onboarding, contingent employees can become a liability if they are injured on a worksite.
If you currently hire contingent workers or are considering this option, employers need to fully understand the impact and costs of contracted work. After all, the goal of hiring contingent workers is to cut down on labor costs, so analyze this strategy before pulling the trigger. For organizations that go forward, understand that you should develop policies for contingent workers that outline expectations as you would for any newly hired employee. Without this, you’re setting up contracted employees for immediate failure within your company.
No matter the type of employee you’re hiring, you need a trusted HR and payroll partner to support you along the way. For nearly 30 years, Paycor has maintained a core expertise in payroll, tax filing and compliance. We established our expertise in the Cincinnati tri-state area, one of the most complex tax jurisdictions in the country, so we’re able to handle payroll and tax complexities in a way our competitors can’t. Contact our team to learn how we can support your business.