The Secret Weapon of People-Centric Organizations
The inclusion of contingent workers in modern talent strategies is a great way to strategically leverage the workforce. In today's labor market, companies that don't consider contingent workers risk missing out on some hard-to-find key skills and knowledge.
According to a study commissioned by ADP, organizations that take a holistic view of their workforce tend to outperform competitors that follow more segmented approaches to workforce management. They also gain revenue growth and customer success advantages.
While the study was conducted before COVID-19, its conclusions are still worth considering. In fact, the findings are perhaps even more important today as employers strive to attract and retain qualified workers, while contending with the challenges of remote recruiting and onboarding, managing a dispersed workforce and creating camaraderie and culture among workers who rarely, if ever, interact in person.
Meanwhile, trends in the labor market are shifting, and the contingent workforce continues to make great inroads into the global economy. Advancements in technology have also accelerated the transformation, impacting not just how people work but also why, where and when. All of those elements coming together have highlighted the strategic relevance of contingent workers for the sustainability of organizations and business in general.
How Do You View Contingent Workers?
Forrester Consulting, which conducted the global survey of 500 HR professionals for ADP, found that the most mature organizations — those that have done the most to incorporate workforce dynamics into their operations — use contingent workers to expand and improve their capabilities. Referred to as people-centric by the study, those companies value contractors for their specialized talent and their ability to fill skills gaps and produce high-quality work.
In contrast, less mature companies tend to view contractors as inexpensive labor. They typically hire contingent workers to reduce costs, handle seasonal work and provide extra hands when product pipelines expand or speed up.
Recruiting and onboarding strategies also differ depending on the company's view of this workforce group. Because mature organizations regard contingent workers as an extension of their workforce, rather than a temporary solution, they tend to rely more on employee recommendations than their less-mature peers to find contractors (48% compared to 37%). Similarly, 61% of low-maturity organizations find and hire contractors through procurement, while 65% of highly mature employers engage contractors through HR.
Related Article: Contingent Employees Are a Missed Opportunity for Many Employers
Shifting Employment Tides
There's been significant change in labor dynamics over the past two-and-a-half years. It's hard to say if the trends that have emerged will last or give way to new practices, but recent events have had a substantial impact on the gig economy.
“A lot of people have taken a step back to consider what they want to do, whether it’s work-life balance, live-to- work versus work-to-live,” said Bridget Quinn Kirchner, senior director of client experience at ADP's WorkMarket, in an interview. “And a lot of people are making choices to move toward a freelance economy.”
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Kirchner said that about 40% of today’s workforce is considered freelance. That’s about 66 million people. Over the next five years, ADP expects more than half of the workforce — 51% — will become freelance through consistent, incremental growth, with emphasis on "incremental." As contingent work spreads and becomes more commonplace, some freelancers will need to transition through a hybrid model, earning part of their income freelancing and part of it as an employee.
“They may be a W-2 during the day, and then they have this side gig that they’re using and leveraging their expertise for,” Kirchner said.
The reality of this seismic shift is exacerbated by the growing popularity of flexible work, which supports those W-2 employees in their side hustle endeavors as gig workers. According to Kirchner, leveraging that environment — during and after the transition — will require flexibility on the part of both organizations and workers.
Related Article: The Growing Need for Contingent Workforce Leaders
Full-time vs. Contingent Workers
In addition to work habits, the very definition of what constitutes an employee is evolving. Kirchner said most contingent workers under the age of 34 see themselves as traditional employees, and more than half of the 1099s surveyed would prefer to have W-2 status — though not for the reasons business leaders might expect.
Benefits, which are often believed to tip the W-2 vs. 1099 debate, aren't as important to younger generations. Nearly three-quarters of contingent workers, 74%, said they’d keep working as an independent contractor even if that meant losing their employer-sponsored health insurance coverage. According to Kirchner, engagement is more important.
“Engaging talent across the board, regardless of their classification, is very competitive,” Kirchner said. “The good ones will stick around if you have the right connection with them, if you are able to trust and rely on their expertise and really have a good feedback loop.”