What Is a Contingent Worker?

The seeds for what has become known as the ‘gig’ economy were first sown in the early to mid-1990s with the introduction of temporary workers. However, participating in the newest segment of the global economy went viral in the wake of the worldwide recession of the early 2000s. Undoubtedly the new, non-traditional elements of the economy have benefited both those who provide and those who receive services. It is interesting, then, that while the number of individuals and companies benefiting from participation in the new economy increases daily, defining what a contingent worker is remains elusive.

Many attempt to identify gig workers through distinguishing different ways of being a service provider: freelancers, contractors, self-employed, consultants, and so forth. The trouble with such definitions, though, is that there is no general agreement as to what these additional terms mean. Furthermore, the popular media are also fond of lumping in temporary and seasonal employees into the mix, further confusing the issue.

Contingent Workers are NOT Employees

To define the term simply and precisely, a contingent worker is an individual who works for hire but is not an employee. While this definition is precise and simple, it is also somewhat unsatisfying because it requires understanding what an employee is, and then drawing inferences from what an employee is not.

Consider the nature of employment. Employees can be full or part time. They can be permanent or hired on a seasonal or temporary basis. Employees can work on-site, at home, or remotely. Employees may be subject to strict controls on their time, methods, means, and processes. However, it is equally true that employees may enjoy significant freedoms and flexibilities, exercising their own judgment on how and when to complete their tasks. It is even possible for employees to determine which tasks they will undertake. Some employees receive benefits; others do not. Some employees receive a regularly scheduled paycheck, the pay amounts and frequencies of others may vary significantly. In many ways, employment and freelancing – or whatever you prefer to call it – are quite similar.

However, there is a significant distinction. Employment involves a particular economic reality which many people misunderstand. According to the Department of Labor, the employer is economically dependent upon the employer. While an official determination of economic dependence is only possible through studying all the relevant facts on a case-by-case basis, the reality of such dependence is undeniable.

Managing Contingent Workers?

Managing Contingent Workers?

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Benefits of Economic Independence

If the definition of what constitutes being a contingent worker is not being an employee, then it is a reasonable inference that, at a fundamental level, participants in the gig economy operate and interact with one another based on economic independence. The ramifications of this independence are good news for both the workers and the employers – and undoubtedly serve as a significant driving force behind the new economy’s rapid expansion.

For example, economically independent workers are free to benefit relative to the good fortunes of their employers. When times are good for the employer, the work opportunities will be abundant and the worker benefits. However, economic independence also means the worker is free to move on and find new and better opportunities when the employer’s fortunes take a downturn. The same benefits work equally for the employer. A contingent workforce flexibly expands or contracts with the workload– allowing labor expenses to be more closely tied to revenues.

The gig economy with its highly skilled contingent workers is here to stay – and for good reason.  The inherent economic independence that defines and distinguishes the new economy provides excellent benefits for everyone involved. Both the employer and the worker win.