It takes more than one type of talent to keep an organization running smoothly. In uncertain economic times and with fluctuating client demand, experts agree contingent labor is an asset for weathering these waves while minimizing the impact on the bottom line.
According to HR solution provider ADP, contingent labor is growing in popularity. From 2010 to 2019, organizations increased their employment makeup from 14 percent contingent to 16 percent, and this trend is set to continue.
That leaves more than 80 percent of an organization’s staff as full-time, permanent hires, who typically carry historical company knowledge and have multi-year tenure, compared to temporary staff that can be onboard for only a project’s duration.
But the nature of that work can change over time. Coleen Johns, recruiting director of enterprise delivery at ManpowerGroup, sees companies opting for contingent workers who later transition to full time.
This provides an opportunity to understand the worker, their habits, ethics and overall place in the organization and is “a really easy way to have a 30-, 60-, 90-day interview with all of your workers,” she says. “If that’s your pipeline to hiring at the entry level or above, then it potentially reduces your need for your internal recruiting staff.”
In fact, she works with numerous companies who only use contingent workers as their pipeline for hiring full-time employees, Johns says. They have relationships with staffing partners, so they can bring on temporary workers, take the time to understand how they’ll fit into the culture, and later offer full-time employment.
Theresa Stoodley, application consultant at priint Group, started as a part-time, temporary design worker at Human Capital Media in 2015.
“I was always trying to get a full-time job,” she says, and she didn’t want to be working multiple jobs throughout the day. This was her first graphic design position, so when the organization asked if she wanted to go full time, the answer was simply, “yes.”
Still, more than 70 percent of contingent workers say this arrangement is a matter of choice, not because they can’t find full-time employment, according to ADP. And it’s difficult to push contingent workers into full-time positions if that’s not what they seek.
Stoodley recognizes that many people prefer contingent work, so aside from the financial decision, she doesn’t see much of a pathway in convincing them to go full time. When considering benefits or other perks, “You’re not going to get there with a ping pong table in the breakroom,” she says.
“The labor market is still all about what the worker wants,” Johns says, adding that flexibility is a main concern for workers, no matter their status.
But before organizations use contingent talent as a full-time pipeline, they should be clear on their goals and what they need in their staffing mix — and operate accordingly.
Choosing contingent
When it comes to temporary staff, organizational concerns include employee stability, company loyalty, project completion and finding talent that culturally fits the ethos of the organization. All these issues compound and can become more prevalent in a high-demand candidate market, such as what we are experiencing today, says Michael Berlin, SVP of permanent placement solutions at Randstad USA.
Contingent work is ideal when companies have pressing project needs with a defined short-term timeline and a defined start or end date, Berlin adds. Fluctuating client needs and seasonality of certain projects or production are also important considerations.
Managers should plan out how quickly and for what duration they need specific deliverables completed. “If speed and a defined project duration are the most critical factors, contingent can be a fantastic option,” he says. However, “if stability, career growth, long-term continuity and equity, and capital investment are a premium, permanent hiring may be the preferable option.”
Long-term talent
Full-time, permanent staff typically hold more historical knowledge of the organization, so employers tend to prioritize this cohort. That knowledge also informs a better understanding of the company’s needs, compared to staff that’s focused on finishing their contract and moving to the next job and paycheck, Johns says, adding that training doesn’t have to be as frequent with a consistent, long-term workforce.
When hiring permanent staff, long-term fit is a defined goal, so the hiring process takes more intentionality and time to identify and screen talent. With that longer timeline to hire comes a higher recruiting cost per hire. However, with a well-defined hiring process and established timelines for the completion of hiring activities — such as screening, interviews and reference checks — this timeline can be well managed, Berlin says.
“From a return-on-investment perspective, the contributions these long-term employees make by far outweigh their cost to the organization,” Berlin says.
Balancing the books
Return on investment is complicated when considering these groups, but the cost to recruit is a major factor to consider.
“Typically, companies whose primary objective is long-term continuity and equity on their teams tend to gravitate toward a heavier balance with permanent hiring than contingent hiring,” Berlin says. And companies typically only pay a one-time fee for recruiting services of permanent hires, who tend to stay on for an average of three or more years.
When recruiting temporary staff through an agency, though, the service costs a premium. Additionally, contingent workers are constantly being recruited by agencies, so competitive compensation at the next assignment keeps them moving around, creating challenges with continuity on projects, Berlin says.
Johns echoes the concern about the cost of contingent talent, which can be prohibitive. When production spikes inevitably occur, the markup for recruiting contingent talent can cut into the bottom line.
However, with a strategic staffing partner who understands the organization’s needs, the two parties can work through understanding those long-term forecasts to mitigate the risks of higher costs, John says. Recruiting for future talent needs ahead of time helps in managing the cost of reactionary, short-term hiring.
“There is a break-even point,” Johns says. For the contingent worker, there’s the marked-up bill rate. But the longer hiring timeline for permanent staff also comes with a cost. Contingent workers can be kept on longer term without a fee to the staffing partner, but if transitioning them to full time, the staffing partner might have a conversion fee.
Johns says that determining these costs goes back to understanding the staffing forecasts. Without a clear handle on those talent needs, there will be ongoing costs, whether it be only hiring full time and seeing the ongoing costs during lower production times or paying higher rates for contingent talent on a whim.
“Creating the right mix of contingent workers as well as full-time employees goes directly back to the leader’s long-term vision for their organization,” says Lauren Tunnell, VP of direct placement at Insight Global. “If managers see the roadmap for what they are trying to accomplish from a business perspective clearly, the decision of full-time vs. contingent employees becomes easier.”
Contingent considerations
If an organization wants to explore bringing in contingent staff to transition to a permanent hire later, experts agree it’s important to have that conversation at the beginning of the hiring process. Before they even potentially start as a contingent worker, hiring managers should talk with the candidate to understand their long-term plan and goals, as opposed to getting to the point of hiring them full time and learning they’re not interested, Johns says.
If the organization doesn’t yet have the resources to hire permanent staff, it should let the candidate know the company’s long-term plan, its intentions and what the offer could be. In the competition for talent in the marketplace, this could be a differentiator, as they’re trying to get folks in as quickly as they can, by whatever method they can, Johns says.
The conversation is relatively simple, Johns says. The recruiter should walk through the job description, pay and any other details, then ask about what the candidate is looking for in their next role, if they’re interested in transitioning to full time at any organization, and if so, what they’re looking for.
This also allows the worker to understand that the opportunity to go full time is available, so they can learn and train in preparation for the full-time position, Johns says.
One area to consider when bringing people on temp-to-hire is the benefits qualification timeline. There are often wait periods for receiving health insurance, such as 60 or 90 days, which can affect ability to receive important care. Johns advises that if the organization has a waiting period for benefits, consider having the clock start when the worker starts as contingent, rather than when they begin their permanent status.
Beyond the hiring process
Whether an organization is focused on hiring full-time staff or contingent workers, having a good company culture and flexible work will go a long way, sources for this story say.
Strong communication, cultural integration and consistency in coaching and performance management are always advised in either mode of hiring. Berlin says that competitive benefits, compensation, culture, growth and flexible work schedule/location will attract a wider range of talent, allowing for a higher caliber of interested candidates.
Johns works mostly in manufacturing and production, where clean and safe cultures are a must for the worker. In her experience, there are companies that have clean and safe environments, but their culture is terrible — and their high turnover speaks for itself.
“Having a brand in the marketplace of being a good place to work” is a differentiator in a competitive talent market, Johns says. “It’s a talent attraction, whether you’re going to be a temporary worker or full-time worker.”
