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Contingent Employee Meaning

A growing number of companies are turning away from always hiring full-time or part-time employees, and instead hiring contingent employees, meaning employees who work on a contract, freelance, consultancy or temporary basis. It may not always make sense to hire an employee and go through the onboarding process if you only require an employee’s services for a specific task or on a temporary basis.

  • Contingent employees are not considered employees of your company but still perform tasks for you. They include those on a contract, freelancers, consultants or temp workers.
  • Contingent employees can be beneficial in a number of unique situations such as per-project work, labour-intensive short-term work, work when starting up or winding down a major endeavour, or seasonal work.
  • Be mindful that contingent employees are often independent contractors and have no connection to your company beyond the work they perform for you.

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What is a contingent employee?

Contingent employees work for your company on a contract, freelance, consultancy or temporary basis. They are not considered employees of your company. Contingent employees have different rights and responsibilities than regular employees, and as a company, your obligations towards these employees are different. There are benefits and drawbacks to such arrangements, and whether or not you should pursue one depends on the nature of your company’s work and your labour needs.

Contingent vs. regular employees

There are several differences between contingent and regular employees as far as labour protections, rights and responsibilities go. When it comes to job security, regular employees are employed on an open-ended basis, until they either decide to leave, are terminated or laid off. Contingent employees, on the other hand, have fixed employment terms that may be tied to certain dates or the completion of certain jobs. Once those terms are satisfied, they no longer have a job. Their job security isn’t tied strictly to your company but rather the condition of the market as a whole, as they can theoretically work temporarily at any company in need of their services.

Employment standards are another important difference between regular and contingent employees. While this article will give you an idea of the differences, it’s always a good idea to consult an employment lawyer. Regular employees are fully protected by labour laws and employment standards, such as minimum wage, overtime, statutory holidays and vacation pay. Contingent employees have some of the basic rights, such as the right to refuse unsafe work, but do not receive many of the other benefits regular employees receive (such as vacation pay). The terms of employment in the contract they sign largely dictate the benefits they receive. Termination and severance also differ for regular and contingent employees, with regular employees entitled to notice or pay in lieu of notice, and contingent employees bound to the terms of their contract. It’s a good idea to have an employment lawyer review matters such as employment contracts to ensure that you are meeting your legal obligations.

It’s very rare that a contingent employee will receive the same benefits as regular employees, such as health insurance and paid time off. That’s not to say it never happens. Some generous companies extend the same perks to everyone who works for them, regardless of their employment status. Other companies may choose to offer pay in lieu of such benefits. Typically, however, contingent employees are responsible for their own health insurance, retirement savings and making sure they have enough money to take time off. Given the short-term nature of their employment, it may not make financial sense to offer a full suite of benefits to temporary workers, especially given the time needed to handle the admin associated with these.

Finally, contingent employees typically don’t receive employment insurance and must handle their own taxes and deductions, as opposed to regular employees, who qualify for employment insurance and have income tax, employment insurance premiums and Canada Pension Plan deducted from their pay. This is one of the trade-offs that contingent workers accept in exchange for the freedom to work where they want, when they want.

Benefits of contingent workers

Contingent workers can be especially helpful in supplementing your existing full-time or part-time team. They allow you to scale your workforce up or down according to your needs at any given time. For example, if you own a construction company that just won a contract requiring extensive demolition and hauling away of material, it makes more sense to hire contingent labourers on a temporary basis to help demolish and haul the material over a few days or weeks, rather than hiring the same number of people and taking on the administrative burden of onboarding and training them, then finding other work for them to do. Many temp agencies offer these sorts of services, where you communicate your needs, and they assemble a workforce that can be deployed at a moment’s notice.

Many professional fields rely extensively on freelancers and consultants, such as media production, business administration, and marketing and advertising. In these fields, work fluctuates, and certain projects may call for specific skillsets that a company may not have in-house. Certain freelancers and consultants possess highly specific knowledge and experience that makes them highly in-demand, and as a result, they choose to remain as freelancers and consultants versus taking a permanent job. It is usually more expensive on a per-hour basis to hire freelancers and consultants, but given how in-demand they are, it is often your only option.

Drawbacks of contingent workers

If you’re looking to build or maintain company culture, relying extensively on contingent workers might not be a good fit for your company. This is because contingent workers lack a connection to your company beyond getting paid for doing the work you asked them to do. They’ll only be there temporarily, so they have no incentive to invest in your company’s systems or culture. If your company does the sort of work where it is important to be aware of complex, well-established operations, contingent workers won’t be able to get up to speed quickly enough to make a productive difference.

If you’ve never hired contingent workers, you’ll need to familiarize yourself with your rights and responsibilities as an employer. This can take time and, if you aren’t completely certain about your end of the agreement, cost money, in the case of hiring an employment lawyer. Some companies prefer to use a staffing or temp agency, but this also costs money, and agencies offer services of varying quality. Some also focus on specific industries, such as construction or administrative work. Doing your research on the kinds of staffing or temp agencies in your area will go a long way towards making an informed decision. You’ll also need to work to make sure you aren’t creating a two-tier system of workers, where you give preferential treatment to full- or part-time workers while treating contingent workers as objects instead of people.

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