What Is A Contingent Worker? [+ Pros & Cons Explained]

What Is a Contingent Worker?

A contingent worker is a person who works for a company without being an official employee. You can think of contingent employees as gig workers.

Though, contingency workers mainly work through short-term contracts or on a project basis with specific companies, instead of having their independent gig business.

“Contingent” is a common term in the gig economy. It relates to any temporary work gig workers might perform for other entities, including individuals and businesses.

Is a Contingent Worker an Employee?

Contingent workers aren’t employed by the company. They also don’t have the same employee benefits, such as health insurance and unemployment insurance.

Instead, a contract worker is an independent contractor that a company hires to perform a set task.

The business might hire the same worker repeatedly to perform the same job, but since the job is outside the normal scope of the company, the contingent workforce isn’t officially a part of the business.

What Is the Difference Between Contingent Worker and Employee?

Not only do contingent contractors not have the same benefits as employees, but their pay significantly differs.

Contingency workers don’t have an hourly wage. The company pays depending on the project and the rate of the worker. This means contract workers might get paid significantly more than full-time employees while working fewer hours.

That’s not all:

While employees have hefty requirements, including education, previous experience, and substantial knowledge, companies have task-specific work requirements for contingent employees.

What Is the Difference Between Temporary and Contingent Workers?

Temporary workers, or part-time workers, are employees. Just like permanent workers or full-time employees, they’re part of the company and enjoy the same benefits. They also abide by the rules of the business, during and outside work.

However, temporary workers have limited work hours, which is why they’re often confused with contingent workers.

The main difference between the two is that temporary employees are hired to fill a gap in the workforce. They perform duties similar to those of full-time employees.

In contrast, contingent contractors’ duties include those outside the normal responsibilities of the company’s employees. 

For example, a bakery business might hire a contingent employee to deliver a large amount of baked goods that their normal delivery worker can’t fulfill.

On the other hand, the same bakery might hire a temporary employee as a baker or a cashier if they’re short-staffed.

Examples of Contingent Workers

Contingent employees can be many things. Simply put, any worker who’s hired by a business for a certain task is a contingent worker. Examples of gig work include:

• Freelance work
• Independent contracting
• Consulting
• Handywork

Why Do Companies Use Contingent Workers?

There are numerous reasons why companies might use contingent workers. For starters, some companies need services that are outside the scope of knowledge of their regular, full-time employees.

Yet, there are industry giants who completely depend on contract workers. That’s because these companies need flexible employees with a high turnover rate, which makes contingent contractors perfect.

When Would a Contingent Worker Be Used?

With the AB-5 legislation, most gig-based businesses must now hire their contingent workers as employees, whether they’re full-time or part-time.

For this reason, while companies could get away with hiring contingent employees to cover for absences, or in the case of a staff shortage, they can no longer do that.

This completely changes the model on which gig economy is based. Now, businesses can only hire gig workers in specific circumstances. Otherwise, the independent contractors must be on the payroll.

A contingent employee is typically hired in case a business needs the following:

• An uncommon project that requires specialized skills.
• A company needs a contractor to perform work outside its field of business.
• If a business requires an independent, impartial consultant or advisor free of their control and rules.

What Notable Companies Use Contingent Workers?

Most notably, companies that rely on gig work include rideshare and delivery companies. That’s because their entire business model is based on hiring independent contractors rather than traditional employees.

Task-based marketplaces, caregiving companies, and unit rental applications rely on gig workers. However, these companies act as staffing agencies that only connect contingent contractors with people who need their services in exchange for a fee.

These companies include:

• DoorDash
• Uber
• Lyft
• Airbnb
• TaskRabbit
• Thumbtack

Pros and Cons of Contingent Work

Contingent work has been the subject of debate since it came to be. While many independent contractors love the freedom, other contingency workers believe their work is no different from full-time employees, with none of the benefits.

Advantages of Contingent Work

Here are all the reasons why contingent employment is one of the best ways to earn a living:

• Flexibility: If you’re tired of waking up early and working for set hours, contingent labor allows you to work whenever you please.
• Profitable side hustle: Working flexible hours means contingent workers might still have full-time jobs. Then, if they have free time, they can earn some extra cash.
• Independence: Nobody likes being told what to do. Well, gig work means you’re your boss, setting the rules, the pace, and the hours.
• Valuable experience: If you’re unsure what field of business you should go into, contingent work might be the answer. You’ll be essentially sampling different businesses and work environments before sticking to one!

Disadvantages of Contingent Work

At a glance, contingent labor might seem to offer the best for both independent contractors and gig-based companies. However, there are still drawbacks to contingent work, which include:

• Low security: While contingent workers can work flexible hours and set their rates, they also have less job security – unlike a regular employee with a guaranteed monthly paycheck and social security benefits.
• Less control: Since more companies rely on the contingent workforce, these companies are monopolizing the industry and setting their specific rules regarding pay and performance. Accordingly, gig workers now have less control than ever.
• Job satisfaction: The paycheck isn’t the only reason regular employees remain in their company. Appraisals and socialization are an essential part of work life. Yet, temp workers often feel isolated due to frequently changing jobs.
• Subpar resume: If you rely on contingent work, landing a full-time position might be tricky. Recruiters might find you a job hopper, preferring to hire stable workers.

How Much Do Contingent Workers Make?

Since the definition of a gig is vast, and contingent workers can do numerous tasks and work for an array of businesses, there’s no specific salary for the contingent workforce.

According to Glassdoor, contingent contractors can make anywhere between $35 to $50K annually.

Yet, this ultimately depends on the number of projects you undertake, the businesses you’re working with, and your level of experience.

How Are Contingent Workers Paid?

Contingent workers are always paid per project. They set their rates as well as how they’d like to receive their compensation.

Accordingly, this gives the gig worker all the freedom regarding their payment. They can request to be paid in advance or after completing the project.

Contingent workers might also receive the payment in cash, through a bank transfer, or even through services like Apple Pay!

However, this flexibility isn’t usually available for the contingent workforce working with gig-based companies. That’s because gig-based businesses typically have their payment rules.

Frequently Asked Questions

Wrapping Up

Contingent workers are independent employees that companies hire on a temporary basis. They don’t have the same work hours as full-time employees or their benefits.

While contingent workers are able to set their rules, market conditions might force them to work with businesses that are far less lenient than if they were to find independent gigs. For this reason, contingent work might not be for everyone.

In fact, there are specific laws regarding companies that benefit from the contingent workforce. Nowadays, gig-based businesses have to hire full-time employees rather than contingent workers.

If you have any further questions regarding contingent work, drop it in the comments below.