Explained: Contingent Workers vs Contract Workers

As the labor market continues changing and new trends and challenges appear, it can be hard to pick up all the novelties and decide what road to take. Things might be even more challenging if you're starting your career journey or considering quitting your job. 

The world is becoming an increasingly complex and rapidly changing place. Finding your place in it isn't easy, and deciding what's best for you and your ambitions can be tough. 

After all, having more opportunities to choose from often means having a more challenging time understanding which route to take. And if 2022 has given us something to offer, it's the abundance of choices. 

Today, people can take the traditional path and start from scratch in a large corporation, working hard to climb the ladders and reach a managerial position. They can dream big, create their own company, or choose the ultimate independence and join the freelance crowd. 

These choices aren't limited to only graphic designers, copywriters, and IT workers. Everyone, including HR consultants and recruiters, can benefit from the gig economy and experiment with different work approaches. 

But employers also benefit from these choices. Instead of being limited to only hiring long-term employees, they can work with temporary hires. 

However, people are often confused about the contingent worker and contract worker definitions. How are these two different, and which one is better to choose if you strive for more flexibility or want to hire temporary employees?

Keep reading to discover everything you should know about contract and contingent work.

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What are Contingent Workers?

The broadest definition describes contingent workers as professionals collaborating with a company without being its official employees. Hence, an organization hires these individuals using an on-demand basis.

Independent contractors, consultants, and freelancers all represent contingent workers because they have no long-term contract from a company and don’t receive monthly compensation. However, they can work with a client more often without being employed.

Companies can recruit contingent workers through a staffing agency or directly. They typically add these employees to their workforce on an ad-hoc basis. But contingent workers can still work in the office, although they usually work remotely.

Despite having more freedom than traditional hires, these workers rarely receive any benefits or additional support from a company. Yet, they typically must clarify their employment status to the government and enlist as self-entrepreneurs or freelancers.

As a result, contingent workers typically must identify tools and rules that guarantee they will receive the necessary compensation for their work, as most countries lack employment laws and regulations that would protect them.

Even though these professionals rarely receive the recognition and protection they deserve, they contribute significantly to the economy. Moreover, many companies would struggle if these individuals weren’t a part of their workforce strategy.

For instance, there were 51.1 million contingent workers in the US in 2020. They represent 35 percent of the nation’s workforce and generate $1.3 trillion in revenue.

However, the largest share of contingent workers is self-employed professionals without employers. Contingent work might increase in the coming years, as many companies hope to hire people for new projects without a long-term commitment.

What are Contract Workers?

Contract workers resemble contingent workers, but organizations typically hire these professionals for a pre-defined time frame or a specific task. Businesses often hire them when the need for that appears, such as temporarily filling empty positions in a company or addressing skill shortages.

Because of that, contract workers typically offer niche abilities, knowledge, and expertise. Companies may hire them for a short period to complete challenging assignments or benefit from rare industry specialists.

These professionals are a stellar solution when a company strives to meet its short-term needs and goals or requires someone skilled without investing in training and onboarding. Most contract workers are in their 40s and more likely to work with private companies than public ones. People from across industries work as contract workers. But regardless of the industry, those with a master’s degree are thought to have the highest income. For instance, many Human Resources administrative employees choose this approach.

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The Difference Between Contingent Workers and Contract Workers

Contract workers and contingent workers both work for a company temporarily. However, the period length is usually pre-defined, ensuring no surprises and abrupt endings of a collaboration.

But despite being temporary workers, these two professionals have a different connection with the companies that hire them. Here's what makes contingent and contract workers different and what aspects of their jobs overlap:

Compensation

Organizations choose to collaborate with contract workers and contingent workers because they have short-term projects, must temporarily replace one of their long-term employees, or need a professional with hard-to-find skills. But contingent workers get no salary from the company.

Instead, they get compensation per hour or commission from their completed assignment. On the other hand, if a contract worker is replacing a long-term employee, they will get compensation on an hourly basis, and the payments will arrive right on schedule.

Nevertheless, since they're only hired temporarily, they don't receive any perks or benefits. That means no insurance or covered time off for these professionals.

If a company hires a contract worker through a staffing agency, the latter will receive their paychecks from the agency. Sometimes the agency also provides health insurance or similar employment advantages.

Moreover, an independent contractor working as a freelancer or collaborating on specific projects can determine their rates and get the payment after finishing the assignment. Various companies revise and update these contracts throughout the projects, as they understand the contract employee will stay until completing the task.

Job Search

Contract workers and contingent workers look for jobs similarly to other professionals. Here are the most common methods they use to find clients and land new gigs:

• Employment Sites – Companies often use job boards to look for contingent and contract workers. Both professionals can apply for these job ads and send their resumes. However, businesses also publish short-term job openings on their websites, making it another way temporary employees can find work.
• Social Media and Online Communities – Contract workers and contingent workers typically join various professional networks and groups where they can find the latest short-term job ads. For instance, some companies look for temporary employees in Facebook groups or Discord. Others publish their job openings on social media, such as Instagram and LinkedIn.
• Staffing Agencies – These businesses typically work with contract workers and help them find a job by sending their job applications to the companies looking for candidates with similar skills and expertise. Although staffing agencies are the middleman, they are also employers, as they might pay contract workers instead of the companies hiring them.  
• Digital Portfolios – Establishing a professional online presence is vital for contract and contingent workers. Because of that, many have one-page websites where they attach their portfolios, resumes, and other relevant material. However, it might be more challenging for recruiters to find candidates that way, as their profiles may not appear on the first page of search results.
• Word of Mouth – Contract and contingent workers often get their jobs thanks to referrals and good networking skills. For instance, their friends might recommend them or share relevant job ads. However, both professionals often impress their clients with their expertise. As a result, clients may recommend them to their colleagues or other business leaders looking for temporary employees.

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Working Hours

Contingent workers and contract workers may have different working hours, depending on the project, client, and company. Clients set the collaboration timeline, and these professionals typically work on their tasks until completion.

Hence, the contract can last a few weeks or a year. Companies may also offer to extend the collaboration or ask these professionals to tackle a different project.

For instance, contingent workers usually work on specific assignments and help fill the gap until a company finds a long-term employee. They also help clients in traditionally busy periods when many long-term employees are on vacation or taking time off.

In most cases, contingent and contract workers dictate their working hours. However, sometimes they adapt to the client's needs and work outside their regular schedules.

Moreover, contract workers often become permanent employees after a long collaboration. Although the same may happen with contingent workers, most prefer the independence and flexibility of independent, non-contractual work.

Work Setting

Contract workers and contingent workers usually have more flexible schedules than long-term employees. They can choose to work from home or any other location, as their work rarely includes in-person meetings and collaboration.

Since they're not full-time hires, they work on a task-to-task basis. Because of that, clients hire them for their niche expertise, skills, and experience.

Both professionals often specialize in marketing, HR, IT, and engineering. Hence, their jobs are typically project-based instead of employee-based.

Equipment

Even though rare, some companies might provide the necessary equipment for their contingent hires (e.g., notepads, pens, notebooks). Most contract workers have their own supplies and need no support from the clients. However, job ads should clarify the nature of collaboration and whether temporary employees will receive any tools or work materials.

Taxes

Contract workers and contingent workers might encounter different requirements concerning income taxes. For instance, when a company employs a temporary employee, their HR department may pay the taxes to the government by putting the temp professional on the payroll.

On the other hand, the latter would likely be responsible for this aspect if they used a staffing agency for the recruitment process. Moreover, workers who fall into the independent contractor category often must handle their own tax regulations.

These professionals may submit official forms confirming their financial activity and work status. Because of that, both clients and temporary workers should consider this issue before starting the collaboration.

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Top 5 Benefits of Working with a Contingent or a Contract Worker

1. Access to Skilled Professionals that Can Fill Skill Gaps

Contingent and contract workers typically have specific skills and capabilities that help companies complete niche projects and assignments. These talented professionals are ideal for filling skill gaps and completing demanding tasks with a short deadline.

They can also provide expertise and helpful advice that can help a company support its workforce’s learning and development. Therefore, contract and contingent workers represent a skilled and accessible talent pool that can handle various complex projects.

2. Flexibility

Flexibility has become increasingly important in the post-pandemic world, as today’s business landscape is more fluid than ever. Short-term work aligns with that dynamic, allowing employers to only collaborate with skilled professionals on specific projects.

A contingent and contract workforce is an accessible asset a company can leverage when a business need arises. Thus, it’s a good choice when long-term employees don’t possess the needed skills or their workload leaves no room for additional tasks.

3. Cost-Efficiency

Contingent and contract workers are small businesses' best and most cost-effective solutions. Companies will only pay temporary workers for the amount of time they’ll collaborate and the project they will work on.

Moreover, working with independent professionals eliminates training and onboarding expenses. But companies also don’t have to provide perks, benefits, and financial incentives to their temporary workers.

4. Diverse Perspectives

Business needs and new projects aren’t the only reasons companies hire contract and contingent workers. Sometimes they need a different perspective and a fresh point of view.

Hiring a temporary workforce is a fast and cost-effective way to get novel insights and collaborate with people from different backgrounds. These professionals can also help companies improve their diversity efforts and become more inclusive.

5. Easier Hiring Process

The recruitment process is often challenging and lengthy. Most companies don’t have time for that step when an urgent project arises or an employee quits.

Contract and contingent workers are easy to find and collaborate with, as there’s no need for contracts, onboarding, and training. These professionals can start working instantly without requiring additional support or introduction.

How to Find Contingent or Contract Workers

The first step is to identify your business needs and skill gaps. Determine the project type, the abilities the temporary employee should have, and the timeline.

Include the details and create a job ad. The job description should be informative and clarify your expectations and what people get from collaborating with you.

Use your career page to promote the ad or integrate your ATS with relevant job boards, where you can announce you’re looking for a contingent workforce. For instance, Manatal’s ATS has an interactive recruitment pipeline, allowing you to visualize all candidate information in one place.

You can also use its features to import profile information from social media, such as LinkedIn, making it easier to connect with contract and contingent workers. For agencies looking to hire contingent workers for clients, consider adding the CRM component into your mix of tools. A CRM is necessary for efficient and continuous communication with your clients and partners, as it helps you share the latest data and give easy access to your team. As a result, you’ll have an easier time discussing the latest updates and agreeing on the best match.

Manatal’s recruitment CRM will help you manage leads, clients, email communication, and collaboration. Combining these two systems will reinforce your efforts and accelerate the process.

Remember, hiring a contingent workforce requires no contract, ensuring faster recruitment. Once you and your temporary worker agree on the work conditions, they’ll be ready to start working on the project.

Click here to find out how Manatal’s career page can help you reach jobs seekers and discover the right kind of workers within a few clicks.

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