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Contingent Workforce Management: Definition, Challenges, and More

by Brian Jaenke, on December 01, 2022
Managing a contingent workforce effectively is a complex challenge. Organizations must navigate the intricacies of integrating freelancers, contractors, and gig workers into their business models while ensuring legal compliance and optimizing workforce strategies.

Contingent workforce management is crucial for operational flexibility and gaining a competitive edge. By aligning HR, procurement, and legal efforts, businesses can harness the full potential of their non-permanent workforce.

Read on to discover the best practices for integrating and optimizing your contingent workforce, and how to turn this modern workforce trend into a strategic advantage for your business.

What is Contingent Workforce Management?

Contingent Workforce Management is the process in which organizations acquire, manage, and pay contingent workers, including non-permanent employees like temporary agency workers, independent contractors, and gig workers. Contingent workforce management specifically involves managing this diverse and critical labor market segment, enabling businesses to realize the benefits of a flexible and talented workforce.

Common Industries Utilizing a Contingent Workforce

Several industries heavily rely on contingent workers to meet their dynamic needs and maintain a competitive edge. Here are some of the most common ones:
  • Technology: The tech industry frequently employs freelancers and independent contractors for software development, IT support, and cybersecurity. This allows companies to quickly scale their operations and access specialized skills for short-term projects.
  • Healthcare: Temporary nurses and allied health professionals often fill staffing gaps, manage peak demands, and provide specialized care in healthcare facilities.
  • Retail: Seasonal workers and temporary staff are crucial during peak shopping, such as holidays, to ensure customer satisfaction and operational efficiency.
  • Creative Industries: Advertising, marketing, and media companies often hire freelancers for graphic design, content creation, and campaign management, enabling them to bring fresh perspectives and specialized expertise to their projects.
  • Manufacturing: Contingent workers help manage production surges, cover for absent employees, and provide specialized skills for specific manufacturing processes.
  • Logistics and Warehousing: The logistics sector relies on temporary workers, such as warehouse operatives, delivery drivers, and inventory managers, to handle fluctuating demand and ensure timely deliveries.
  • Education: Adjunct professors, substitute teachers, and tutors are commonly used in educational institutions to address staffing shortages and provide expertise in specific subjects.

By leveraging contingent workers, these industries can adapt to changing market conditions, manage costs effectively, and access a diverse talent pool to drive innovation and growth.

A contingent workforce is a combination of:
  • freelancers
  • independent contractors
  • consultants
  • other non-permanent workers

These individuals are hired on-demand, providing businesses with the agility and adaptability they need in today’s fast-paced jobs market. They are not bound by traditional employment structures, enabling them to offer their expertise contractually and bring specialized skills to a project or problem.

The Importance of Contingent Workforce Management

With contingent workers constituting over 40% of the US workforce, the need for establishing focused management strategies has never been more crucial. This segment provides essential agility and flexibility to organizations, enabling them to respond rapidly to market changes and business demands.

As reliance on contingent workers increases, contingent workforce management becomes integral to an organization’s strategic talent acquisition and management approach.

Benefits for Organizations

The use of contingent workers gives businesses increased operational flexibility, enabling them to hire on-demand and terminate employment in alignment with fluctuating work requirements. Moreover, rapidly adjusting to changing market conditions improves overall business agility, giving companies a competitive edge by hiring workers as needed.


Types of Contingent Workers

Contingent workers are a diverse group, encompassing a variety of roles that cater to the dynamic needs of modern businesses.

They include:
  • Agency workers
  • Highly skilled specialists
  • Gig-workers
  • Freelancers
  • Professionals working through a personal service company
These categories each bring unique skills and flexibility to an organization, fulfilling specific needs ranging from short-term assignments to specialized projects. For example, a tech company might choose to hire a highly skilled specialist for a complex software development project that requires niche expertise, while a retail business might bring on temporary employees to handle increased customer traffic during the holiday season.

Temporary Employees

Temporary employees, also known as temporary workers or “temps”, are engaged by organizations for a specific period to address short-term staffing needs, such as replacing regular employees on leave or managing extra work during busy times. Their temporary status allows organizations to maintain operational efficiency while avoiding prolonged vacancies or overworking permanent staff.

Independent Contractors

Independent contractors operate their own businesses, engaging with clients to provide specific work or services without the end client's supervision or control. These self-employed individuals are free to set schedules and outline their methods for delivering services, often bringing specialized skills to a project or problem.

Gig Workers

The rise of the gig economy has significantly expanded the portion of workers engaging in freelance or gig work. Gig workers engage in a labor market characterized by short-term contracts or freelance work, often facilitated by digital platforms that connect them with short-term work engagements.

The flexibility and independence offered by gig work is a major draw for workers, creating diverse jobs from driving for ride-sharing services to writing and part-time academic roles.

Consultants and Freelancers

Consultants and freelancers serve as a skilled pool of candidates that can be leveraged to fill specific skill gaps for projects. Their specialized knowledge and flexible availability can be crucial in addressing complex business challenges and driving innovation.

Roles Involved in Contingent Workforce Management

Managing a contingent workforce requires collaboration across different roles within an organization.

The key roles involved in managing a contingent workforce are:


  • Hiring managers: Identify talent needs, define roles, select suitable candidates, and ensure integration of contingent workers with the existing workforce and culture.
  • HR: Focus on onboarding, training, and managing people, ensuring that contingent workers are effectively integrated and supported.
  • Procurement: Manage vendor contracts and negotiations and manage costs associated with contingent workers, often working with HR to develop a robust CWM framework.
  • Legal and compliance officers: Ensure engagement and employment compliance with relevant laws, manage risks like contractual disputes, and work with procurement and finance to maintain legal boundaries.
  • Finance/accounts payable departments: Manage and control costs, including budgeting and expense tracking, ensure accurate compensation, and maintain financial records for transparency and cost savings.

All these roles are important in ensuring effective contingent workforce management. Each role brings a unique perspective and set of responsibilities, helping to create a comprehensive strategy for managing non-permanent workers.

Organizations can ensure a seamless and efficient contingent workforce management process by understanding and effectively managing these key roles. Each role's contribution is vital for addressing the unique challenges and opportunities a non-permanent workforce presents.

Hiring Managers

Hiring managers are the linchpins in contingent workforce management's machinery, playing a pivotal role in the strategic planning and execution of workforce development. They bridge a company’s dynamic staffing needs with skilled contingent professionals ready to fulfill them.

Hiring managers play a crucial role in contingent workforce management, as they:
  • Identify talent needs
  • Define roles
  • Select suitable candidates
  • Influence the mix of skills and competencies brought into the organization through contingent workers
  • Ensure that contingent workers integrate effectively within the existing workforce and culture
  • Collaborate with other departments to optimize contingent workforce management

HR and Procurement Functions

A collaborative approach between HR and procurement is essential for managing a contingent workforce. HR’s ability to manage people combined with procurement’s strength in managing contracts and costs creates a robust framework for contingent workforce management. They manage various aspects of contingent workers, differing based on employment arrangements, such as agency workers or independent contractors.

Outsourcing to a Contingent Workforce Managed Services Provider (MSP) with a robust vendor management system can be an effective strategy for businesses lacking internal resources to manage their contingent workforce.

Legal and Compliance Officers

The employment landscape is ever-evolving, and the role of contingent workers has become more prominent than ever. Organizations must understand the complexity and diversity of managing a non-permanent workforce.

Legal and compliance officers are responsible for:
  • Ensuring that the engagement and employment of contingent workers comply with relevant employment laws and maintain standards set by organizational policies
  • Managing the inherent risks associated with contingent labor, including contractual disputes or compliance with industry-specific regulations
  • Ensuring that contracts with contingent workers reflect the business interests

They work closely with procurement and finance teams to ensure that a contingent workforce’s  financial and operational aspects are executed within legal boundaries.

Finance and Accounts Payable

Finance and accounts payable departments manage and control costs associated with the contingent workforce, which includes budgeting and expense tracking. Ensuring accurate and timely compensation to contingent workers influences worker satisfaction and compliance with contractual terms.

Maintaining accurate financial records provides transparency and facilitates audits and financial reporting concerning the contingent workforce, ultimately leading to cost savings.


Challenges and Solutions in Contingent Workforce Management

Managing such a diverse and fluid workforce presents challenges despite the benefits of a contingent workforce.

Some of these challenges include:
  • Reduced access to qualified candidates for contingent roles
  • Employment law compliance
  • Employee engagement
  • Forecasting accuracy

These obstacles require ongoing effort and attention to manage contingent workforces effectively.

However, these challenges can be addressed through risk management strategies such as:
  • Diversifying talent sourcing channels
  • Enhancing engagement strategies
  • Ensuring legal compliance
  • Improving forecast methods

Partnering with a workforce management partner can help alleviate these burdens by providing expertise and resources to streamline processes and ensure compliance. These partners can also offer advanced technology solutions and data insights to enhance workforce planning and engagement strategies.

Employment Law Compliance

Ensuring legal compliance is crucial in contingent workforce management. Misclassifying non-employee labor can lead to fines, penalties, and lawsuits, making legal and compliance issues a persistent challenge. Legal and compliance officers ensure that the organization adheres to labor laws and properly classifies workers.

The finance and accounts payable department plays a role in ensuring legal compliance in compensation.Understanding the rights of different contingent workers under applicable employment laws is essential. Balancing the management of employees and external contributors is a challenge for executives, compounded by the risks associated with misclassifying contingent workers.

Employee Engagement

Improving employee engagement for contingent workers can be challenging due to the temporary or project-based nature of work. However, creating opportunities for new contingent workers to connect with current staff can foster positive workplace relationships and a sense of belonging.

Furthermore, introducing a mentorship program for new contingent hires can help accelerate their learning and integration within the company.

Forecasting Accuracy

Ensuring forecasting accuracy is a crucial component of successful contingent workforce management. One-off events and variable holidays must be considered to prevent their negative impact on forecasting accuracy and worker scheduling.

Visibility into workforce data helps companies sidestep potential issues, contributing to optimized delivery in contingent workforce programs.

Best Practices for Successful Contingent Workforce Management

Contingent workforce management is the art of balancing a company's dynamic needs with the talents of non-permanent workers. When executed well, it is a strategic approach that can help businesses easily navigate market fluctuations and project demands.

To optimize contingent workforce management, it is important to:
  • Establish clear goals and expectations
  • Develop robust communication channels
  • Ensure an efficient onboarding and offboarding process
  • Provide performance feedback
  • Recognize the contributions of contingent workers

Implementing these best practices can foster motivation and loyalty among contingent workers and lead to continuous improvement in management strategies.

Clear Communication and Expectations

Defining roles, responsibilities, and measurable goals for contingent workers enables alignment with business objectives and project success. Effective communication regarding role expectations prevents misunderstandings and enhances efficiency among contingent workers. Standardized procedures for contingent labor management across different hiring managers reduce the risk of inconsistent practices and help manage spending effectively.

Aligning contingent workers with the organization’s mission through clear communication of the employer brand and values during onboarding fosters a cohesive workforce. Regular feedback sessions and periodic check-ins keep contingent workers engaged and informed throughout their assignment durations.

Training and Development

Offering learning and development opportunities to contingent workers can help integrate them into the workforce and potentially provide a pool of talent for future projects.

Offering targeted training and development opportunities to contingent workers can help keep their skills up to date and ensure productivity.

Performance Evaluation and Feedback

Regular performance reviews with contingent workers are essential for fostering a two-way dialogue that identifies improvement areas and supports professional development. Providing regular feedback and constructive critiques to contingent workers is crucial for ensuring the quality of their work and making them feel valued within the organization.

Gathering feedback from contingent employees after their onboarding can enhance the process and demonstrate that the organization values their input. Exit interviews with departing contingent workers offer valuable insights into the workforce’s experiences that can be utilized to make organizational improvements for future contingent workers.

Landrum Workforce Management Can Help

Landrum Workforce Management is here to help you and your organization with contingent workforce management. We’ve supported businesses for over 50 years in solving critical workplace challenges, including contingent workforce management.

Whether you’re looking to utilize contingent workers for the first time or struggling to manage your existing contingent labor pool, we can help. Our team has the resources and experience needed to quickly identify and implement solutions to help you get the most out of your workforce.

Contact us today to learn more about our workforce solutions, how we can help you maximize the effectiveness of your contingent workforce, and more.
Brian Jaenke

Brian Jaenke currently serves as the Director of Continuous Improvement for Landrum Workforce Management. He received his degree in aeronautics from Embry-Riddle Aeronautical University and has over twenty years’ experience working in a variety of industrial and operational settings. His passion is laser-focused on improving efficiency at all levels of manufacturing using Key Performance Indicators as a measure of success around People, Safety, Quality, Productivity, Delivery, Inventory, and Cost. He has developed his own tailored approach toward lean manufacturing—piggybacking off the Toyota Production System and Six Sigma principles that has proven to be quantifiably successful with several of our existing clients here at LandrumHR. He believes that this customizable lean approach bridges the gap between people and processes which is a critical component of a solid foundation of stability and cost predictability.

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