The rise of the contingent workforce

 

Freelancers, consultants, temporary workers and independent contractors all fall under the banner of contingent workers and it’s a sector that is growing. In the recent 23/24 Hays Annual Salary Guide some 64 per cent of employers believe business activity will increase in the next twelve months – up from 55 per cent from last year.

 

Despite this increase in productivity only 3 per cent intend to increase permanent headcount, while 7 per cent are looking to bring in temporary staff.

 

The use of contingent staff allows organisations some flexibility and the ability to hedge their bets to some degree – rather than loading up fixed costs that may need to be met if productivity doesn’t increase, they can rely on a variable model that can be scaled up and down as necessary.

 

The sort of staff that this will include will be freelancers who provide a specific, consultants who can bring expert advice to a project, or simply temporary workers who can cover gaps for any role on a short-term basis.

 

The obvious difference between contingent workers and permanent staff is security. Temporary workers are hired for a limited period, whereas permanent staff – as the name suggests – are ongoing and have the job security that goes with that.

 

Alongside that, contingent workers don’t tend to be entitled to the same benefits as permanent staff. They will be paid Super, but not sick leave, annual leaves or redundancy pay.

Finally, contingent workers need to sort their own taxes, as it isn’t taxed at source. Contingent workers are usually paid a gross amount and must sort their own tax, although sometimes that will be done via an agency on an ongoing basis.

The main thing that contingent workers offer is flexibility and agility. The ability to scale up and down as business expands and contracts. For workers who enjoy working on a casual basis, they tend to get paid at a higher daily rate than permanent staff, but with a lack of annual leave, sick leave and other benefits, they don’t get paid if they don’t work.

 

In many instances the two-way nature suits employers and temporary employees alike.

 

Flexibility extends to the type of worker you employ. If a business begins to pivot, then it can shed contingent workers whose skills no longer apply and employ others with the correct skillset – which is quicker and less costly than re-training permanent staff.

 

Despite the higher rate at which they are paid, overall it is still cheaper for employers as there are not a lot of additional ‘on’ costs to play a contingent worker. And there is an argument that productivity increases because a contingent worker can never be complacent.

 

Many workers have become career temps because of the flexibility it affords them as well as the employer. Freelancers and consultants can often make good money on 6-month, 9-month or longer contracts, save while doing so and then indulge their passion for travel.

 

Or being a freelancer allows workers to change geographical locations for work, or even change industries on a regular basis.

 

In this way, contingent workers can avoid getting stale and continue to learn new skills and cultures, which makes them even more valuable to employers.

 

There may be a lack of security which is difficult for many people to deal with, but with the right mentality it can be the perfect career choice.

The Closing Loopholes bill that was passed in February 2024 by the Labor Government is an attempt to reduce the number of temporary positions and grow the permanent workforce. Whereas under the previous government you could simply stipulate in a contract whether someone was a contingent worker, there is now the ethos that if it looks like a duck and walks like a duck, then it’s a duck. Meaning that some contingent roles can be forced to become permanent if that’s the way the job looks.

 

Brought in more so to protect workers in the gig economy who were open to be exploited, this year’s salary guide would indicate that it is not yet affecting those who prefer to work on a temporary or casual basis.

 

While there is plenty of upside, there are also a few things to consider for employers, with payroll possibly being the number one. Temporary workers, perhaps more than anyone, need to be paid the correct amount on time and so it is vital that the appropriate processes are in place. In fact, in many instances, it may be better to use an agency, who will have a clear understanding of rates and taxation.

 

Accurate job descriptions are extremely important for contingent workers who will only be employed for a short period of time, and they will need to have the right equipment and training, and be well managed to ensure they are engaged and productive.

 

If you get everything right though, then using contingent workers can be cost-effective, flexible and excellent for productivity.

 

Explore more insights from our experts or contact Hays directly to learn more about how we can help you execute a successful contingent workforce strategy.