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What are issues of contingent workers in a company with a low cost strategy?

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Mizdee | Student, Undergraduate | Valedictorian

Posted June 6, 2013 at 6:27 PM via web

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What are issues of contingent workers in a company with a low cost strategy?

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Michelle Ossa | College Teacher | (Level 3) Educator Emeritus

Posted June 6, 2013 at 7:30 PM (Answer #1)

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Companies adopt a low-cost strategy for several reasons. They include:

  • too much money is being spent on salaries
  • there is a decline in company profits
  • workers are showing poor performance
  • attendance is becoming a problem
  • the company is about to go bankrupt

As a result, a strategy involves using contingent workers rather than full-time workers. Hiring contingent workers means that the workers are independent, freelance, temporary, shift, or part-time. This helps the company in that they can

  • offer lower salary rates (because the workers are not always there)
  • avoid having to pay by time in service
  • refuse to offer health benefits or other benefits
  • refuse to offer bonuses

Although that is beneficial to the company, the issues that may arise come from the fact that the employees know that their limitations may impede them from making enough earnings.

As a result they may not take their job as seriously. After all, a company that does not offer incentives cannot expect its employees to be satisfied with minimum payments. Hence, a company cannot impose specific rules when the employees, being freelance, can go away at any time. This is when attendance begins to falter, when employees quit without notice, and when their job performance becomes less effective since the motivation is not there.

Therefore, the best practice is to hire by skill, that is, to advertise the job as one which would require a part-time skilled worker. This will entice someone who really knows what he is doing, that feels "wanted" by showing off his or her expertise and that prefers to work to enhance the skill rather than to make quick cash.

Another good advice is to hire entry-level workers who need the experience more than the money. Advertising in this manner is likely to bring about better workers willing to work for less.

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