A contingent worker is an employee who is hired on a temporary basis. Contingent workers are also referred to as independent contractors, freelancers, and consultants. They are often hired on a per project basis depending on the needs of the company. Many contingent workers work remotely, saving the company costs on equipment and office space. When a contingent worker completes a project, a company may decide to terminate their relationship with minor risk or liability.
Many contingent workers are highly skilled and have very specialized abilities. They aren’t salaried or receive company benefits including vacation time and health insurance. They receive a Form 1099 from the employer and are required to pay their own self-employment income taxes.
Companies often contract contingent workers to cut costs and maximize efficiencies. Oftentimes, they may hire a contingent worker if their skills are required for a longer period of time and the benefits outweigh the costs. Companies experiencing high growth will often hire contingent workers to maximize profits and complete a project faster. Once a project is completed, they can end the business relationship quickly or assign the worker to another task or project.
Companies must ensure that they are following the proper protocols when hiring contingent workers. A contingent worker is considered an individual who does not usually work full-time for a company and has a flexible work schedule. They don’t require supervision. The company is focused on the result of the project assigned to the employee, not how the project is completed. Oftentimes, contingent workers will maintain their own health insurance and will provide services to other clients. The relationship is temporary and not open ended. There are times that the Department of Labor (DOL) may perform an audit of a company’s contingent labor force and determine that a worker or group of workers is misclassified. Under these circumstances, the DOL may leverage fines against the company and order them to hire the workers as regular employees.
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