Contingent Workers (Encyclopedia of Management)
As a category, contingent workers may include temporary employees, part-time employees, independent contract workers, employees of the temporary help industry ("temps"), consultants, seasonal employees, and interns. In contrast, full-time, permanent employees frequently are referred to as core employees. The U.S. Bureau of Labor Statistics (BLS) defines contingent workers in a more selective way. The BLS differentiates between workers with what it calls "alternative work arrangements" and contingent workers, who have no explicit or implicit contract and expect their jobs to last no more than a year.
TYPES OF CONTINGENT WORKERS
There is much discussion in the literature about just how the term contingent worker should be defined. Following are descriptions of common contingent worker categories.
Temporary employees, or temps, generally work for temporary employment agencies that place workers in companies for short-term assignments. While most temporary employees earn less than their full-time counterparts and do not receive benefits, that has changed for some job specialties, particularly in the computer and information systems areas. Milwaukee-based Manpower Inc. and Kelly Services Inc. of Troy, Michigan, are two of the largest temporary agencies.
Part-time employees work fewer than 35 hours a week. They often receive fewer or no benefits from their employer, which results in a cost savings for the company. Additionally, these employees may be scheduled to meet particular peak needs of the organization. For example, clothing stores have higher night and weekend demand for staff than during the week daytime hours.
Contract workers are employees who negotiate a relationship directly with an employer for a particular piece of work or for a specific time period. Contract workers generally are self-employed and determine their own work hours. These employees may be more productive than in-house employees because they avoid much of the bureaucracy of day-to-day organizational life.
College interns are students who work for a company for either no salary or a reduced salary to gain work experience. These interns may work full-time or part-time, but they are likely to work for only a short time period, usually a semester or a summer. Interns are contingent workers because they provide a company with staffing flexibility. In addition, the company may choose to offer the intern full-time employment at the end of the internship.
After the fallout from downsizing during the 1980s, organizations have increasingly looked to various strategies for building more flexible workforces. Additionally, because of increasing and rapid changes in the world economy, including both competitive and regulatory forces, the ability to make low-cost staffing adjustments has become imperative. Factoring in the desire of many employees to have more flexible work arrangements, this has caused the contingent workforce to experience considerable growth during the 1990s and 2000s.
These variations in part-time, temporary, and/or contractual work arrangements certainly form a growing segment of the U.S. labor force. In 2001 the BLS estimated that contingent workers made up 24 percent of the American workforce. Approximately 22 million people worked part-time, 9 million were contract workers, and 1.2 million were temporary employees. This is a significant increase from BLS data in 1995, which estimated that between 2.7 and 6 million employees held contingent jobs. To some degree, contingent employment levels change due to unemployment levels. In a tight labor market, many employees find full-time core employment, but in times of higher unemployment there may be increases in contingent work.
ADVANTAGES AND DISADVANTAGES
Two of the major advantages of using contingent workers are staffing flexibility for the firm and reduced costs. Staffing becomes more flexible for a firm if it uses contingent workers because it can hire and fire new staff quickly, with few repercussions. For example, since temporary workers do not expect a long-term relationship with any one employer, the company can terminate employment at any time without causing harm to that employee, as the firm would if it were to lay off a core worker.
Additionally, having contingent workers provides the company with a buffer zone that protects its core workers. That is, in times of economic difficulty the firm always may have a group of contingent workers that it can lay off before reducing the ranks of its core employees. Another issue with improved staffing flexibility is that contingent work allows the company to hire employees who have skills that are not present in their core workforce. This is particularly likely to occur with contract or subcontract employees, who may be hired for a short-term project for which the company has no current staff.
The second major advantage that a firm has when using contingent workers is reduced costs. Contingent workers often are less expensive in terms of salary and benefits (most contingent workers receive no benefits). Additionally, many contingent workers are already trained, and therefore the company does not need to spend money on additional training. Furthermore, because the company only employs these workers when they are needed, there are fewer costs associated with carrying a large labor surplus.
There also are disadvantages associated with using contingent workers. First, many contingent workers lack commitment to the organization when compared to core workers. Contingent workers have a higher turnover rate and also may pose a security risk. Second, while some contingent employees have specialized skills, many are lacking in this regard. Thus, even when hiring from temporary agencies, a company may want to carefully screen temporary employees for needed job skills. A third problem associated with contingent workers is that they are likely to find it difficult to integrate into the company and may suffer from lower morale. Core workers may feel threatened by the presence of contingent employees, resent any lack of skill that they may have, or even overlook them due to their short employment. Thus, core and contingent workers may have more difficulty collaborating.
Historically, temporary employees have been used to substitute for employees who are on leave, to fill in for a short time while the company screens applicants to hire a new core employee, and to expand a company's short-term ability to handle an increased volume in jobs that are peripheral to core activities. This picture is changing in that, more often, contingent employees are being used in what previously were core organizational jobs. This can have an impact on morale because both contingent and core employees may be working side by side on the same job, but under different compensation and benefits terms. In addition, contingent workers may not get the same training, thereby affecting the risk level in some jobs, such as mining or petrochemical positions.
REASONS FOR CHOOSING CONTINGENT WORK
While many contingent workers may take contingent work because they prefer it to no work at all, work on a contingent basis may provide a transition to full-time employment and help workers to maintain current skills. However, contingent work may be an individual's preference for a number of reasons. Workers may choose contingent work because of preferences for certain types of work and/or flexible hours. Working parents may wish to schedule work time around child care or school hours. Some professional, technical, and managerial workers may find it advantageous to work on a contract basis. Older workers may wish to keep their earnings within the limit imposed by Social Security legislation. Additionally, some workers may choose contingent work because it provides for change and increased stimulation as they move from job to job.
Because there are many different types of contingent work and many different types of contingent workers, management must pay attention to how contingent work is used in their organization. Additionally, decisions about how to manage contingent workers and whether or not to integrate them into the core employee workforce may have a significant effect on the cost-benefit aspect of the contingent work arrangement.
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Gómez-Mejía, Luis R., David B. Balkin, and Robert L. Cardy. Managing Human Resources. 4th ed. Upper Saddle River, NJ: Pearson/Prentice Hall, 2004.
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McKie, W. Gilmore, and Laurence Lipsett. The Contingent Worker: A Human Resources Perspective. Alexandria, VA: Society for Human Resource Management, 1995.
Rice, Elizabeth M. "Capitalizing on the Contingent Workforceutsourcing Benefits Programs for Non-Core Workers Improves Companies' Bottom Line." Employee Benefit Plan Review 58, no. 8 (2004): 168.
U.S. Bureau of Labor Statistics. "Contingent and Alternative Employment Arrangements, February 2001." Available from <<a href="http://www.bls.gov/news.release/conemp.nr0.htm">http://www.bls.gov/news.release/conemp.nr0.htm>.