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When Hiring a Contingent Workforce Makes Sense
By Richard Hadden and Bill Catlette
Your company has just closed a multimillion dollar contract for new work with a new customer. It'll turn your organization on its ear for about a year. Congratulations!
Now, do you go out and hire a bunch of new employees, or do you look to the so-called "contingent work force" -- temporaries and independent contractors (ICs)?
Well, are you looking for a date or a spouse?
The Bureau of Labor Statistics defines contingent workers, estimated to make up about 5 percent of the American work force, as those who feel they don't have an implicit or explicit contract for ongoing employment.
Not that they're complaining. A Federal Reserve Bank of Chicago study found that a vast majority of contingent workers are contingent by choice. Rather than seeing it as something to be "settled for," most temps and ICs say they like the autonomy of the arrangement, and just like the employing organizations, the flexibility it affords.
Contingent workers have an important place in today's work force. In a recent Conference Board survey, more than 80 percent said they use temps and contractors to respond to fluctuations in business demand without making commitments they can't keep.
Critics claim that employers use contingents to avoid paying benefits, Social Security and other employment taxes. This is like saying people rent their homes to escape property taxes.
Linda Gantt, central Florida area manager for AccountTemps, a division of Robert Half International, helps clients fill their temporary employment needs. "From my perspective, there are lots of good uses for temporary employees," Gantt says. "Our clients especially like temp- to-perm arrangements, in which both employee and employer get to `try each other out' for a specified period of time."
The dating analogy becomes stronger.
Gantt says that their employees, who are placed in clients' organizations, are screened and tested and assigned where they'll have the greatest chance for success. She says her clients generally call her when they need help, but don't want to add to their "head count."
Positive though it may be for both worker and company, you're unlikely to get the same level of commitment from a contingent worker as a regular employee.
According to personnel consultant Loretta Weirauch of Jacksonville's Professional Consultants, "Employees and employers have a business relationship. The loyalties are defined by the perception of that relationship. A temporary arrangement suggests minimal commitment from both employer and employee."
That's OK, as long as both parties have realistic expectations from the beginning. Weirauch states it plainly: "Temporary workers are ideal for temporary tasks." But using contingent workers on an ongoing basis, for core business functions, has serious implications for organizational commitment.
Not to mention government compliance. Call them independent contractors if you like, but the IRS, among others, considers anyone who appears to be an employee as such. As the Smothers Brothers so often observed on their '70s variety show, "If it looks, tastes and smells like tomato juice ...," you know the rest.
The Web site ContingentLaw.com outlines the IRS's "right of control" test with more information than we have room for here.
If you're weighing the pros and cons of supplementing your work force with temporaries and contractors, here are some points to ponder:
Contingent workers are best for projects of definite scope and duration. The practice of using ICs in information technology, for example, is as old as computers themselves. Long before Y2K loomed, this industry relied heavily on contractors to staff special projects.
Temporaries are ideal when you need to fill in for an employee on parental or medical leave, extended vacation or military duty. And like ICs, they're a great help when you're faced with a sudden, but temporary increase in work volume. Just make sure everyone knows up front it's a temporary arrangement.
Make it permanent later if you want, but don't make any promises you can't keep. It's not fair, and the resultant resentment can't help but show up in the work.
Don't expect ICs or temps to share your excitement in or commitment to your company. Use contingent workers to meet short-term needs and add flexibility, not to save cash.
Good temp agencies provide valuable services and are entitled to earn a profit. You'll have to help them pay for that. And ICs will build taxes, benefits and entrepreneurial risk into their rates. Contingent or not, they're real people, so treat them as such. You'll get more for your money.
If you want teamwork, treat them like team members. Let them read the company newsletter. Invite them to all-employee meetings and other company events, and for goodness sake, if you're getting everyone a T-shirt, offer them one, too.
Temporary workers and ICs can get the short-term job done. But let's face it. Nothing can take the place of a committed work force moving full steam ahead toward achieving your organization's mission.
Please print the following attribution for this article: Bill Catlette and Richard Hadden, co-authors of Contented Cows Give Better Milk, help clients clobber the competition by having a focused, fired up, and capably led workforce. They deliver powerful conference keynotes and leadership training. They can be reached at 800-940-7006 (+1-904-720-0870 from outside North America) or www.ContentedCows.com.