Did You Know...

That companies increasingly rely on contingent or temporary workers to increase flexibility and decrease labor costs?

As companies around the world compete in the global marketplace, the use of a diverse group of contingent workers is on the rise. Traditionally, 'temps,' hired through arrangements with external staffing agencies, held short-term, low-skilled jobs in the secretarial pool. Today, temporary workers fill fixed-term contracts, work part-time or seasonally, and are hired into professional management-level positions as freelance independent contractors.

Ranging from 10-13% in European Union countries, to more than 20% in the US, to over 33% in Spain, the percentage of contingent workers in the labor force is significant. In China, 'manpower dispatching' is the term used to describe the three-way relationship among employer, staffing agency, and the 'dispatched' employee. This strategy is on the rise in Asia, as local companies in Japan, South Korea, China and Singapore flex to meet changing market demands and keep up with international competitors.

Contingent workers perform all kinds of jobs. While they are often younger, less-educated, less-experienced, and lower-skilled than their full-time counterparts, a new breed of temporary workers is emerging. Firms are hiring older, highly skilled, professional workers to fill gaps in technical expertise and to perform work once reserved for traditional full-time employees. These independent professionals, or 'iPROs,' comprise nearly ten percent of the workforce in the US. iPROs work in engineering, information technology, finance, law, and sales and marketing. These workers may be attracted to the autonomy and flexibility they enjoy as contract laborers.

Companies use contingent workers for a variety of reasons:

  • Contingent workers can be less expensive, because they do not receive benefits, such as health insurance and retirement allowances, which normally add 40% to employees' base salaries;
  • Companies can improve their ability to flex with market ebb and flow. When times are lean, contingent workers can be let go and operations can continue using a skeleton, permanent staff;
  • Short-term contracts allow employers to 'try out' a prospective employee without significant expense or commitment; and
  • Contingent workers can supplement the traditional workforce, providing special skills and technical expertise for specific projects.

Temporary employment arrangements also have their drawbacks. Since they are 'only temporary,' contingent workers may be less motivated to perform efficiently, effectively, and in the long-term best interests of the company. They may also be excluded from workplace social networks. For many temps, work is task-focused, repetitive and boring. Since employers typically fail to invest in contingent employee training, low-skilled employees may fail to develop higher-level job skills. The result can be a two-tiered employment system in which temporary workers never advance, while their traditionally employed counterparts are trained, broaden their skills, and move up the corporate ladder.

In many contingent work situations, the legal relationship between employee and employer is unclear. Is the worker employed by the staffing agency, the client company who uses the temp's services, or neither? Large-scale strikes and legal battles have occurred in several countries over temporary workers' rights. These conflicts are especially likely when economic pressures cause massive layoffs of contingent employees, or when temporary workers are fired after long periods of 'temporary' employment. When jobs are lost, contingent workers may try to claim official status as employees, entitling them to the legally guaranteed entitlements that protect permanent workers. Companies and individuals must be aware of the complexities of contingent work contracts and keep up with changing legal standards.

Leveraging contingent human assets can both create flexibility and cause conflict in the workplace. Business coaches can help individual contract workers, human resource professionals, and corporate executives as they learn to address this challenge.

HRfocus. January 2006. "More contingent workers are a blessing and sometimes a challenge for HR." HRfocus S1-S4.

Institute of Credit Management. June 2004. "Agency workers – A temporary solution or a long-term obligation?" Credit Management 28-29.

Rodriguez-Gutierrez, Cesar. 2006. "An explanation of the changes in the proportion of temporary workers in Spain." Applied Economics 38:47-62.

Shozugawa, Yuko. 2001. "The Temporary Staffing Industry – A Growth Industry in an Era of Increasing Labor Mobility." Available at http://www.nli-research.co.jp/eng/resea/life/li0109b.pdf.

Voudouris, I. 2004. "The use of flexible employment arrangements: Some new evidence from Greek firms." International Journal of Human Resource Management 15:131-146.

Return to In This Issue.
Click here to view or print entire issue for easy reading.

Copyright (C) 2006 WABC Coaches Inc. All rights reserved.