Contingent and on-demand workforce – what’s the difference?

What is contingent workforce?

Contingent workforce is a term for the workers who are not permanently employed by a company, but rather hired on a temporary or project-based basis. 

They are typically hired to fill specific roles or complete specific projects, and are not guaranteed a certain number of hours or a long-term position with the company.

Contingent workers are typically managed and paid by the company that hires them, and may be eligible for certain benefits such as workers’ compensation and unemployment insurance. However, they are never considered to be permanent employees of the company and they do not receive the same benefits and protections as full-time employees.

Illustration of three staff members from a service industry

There are many ways to deliver contingent work, for example:

  • Freelancers: These are independent workers who are hired to complete custom tasks or projects for the company, often on a short-term or project-based basis. Freelancers may work in a variety of fields, including writing, graphic design, and programming. Usually freelancers are paid based on the hours they spend on a given task.
  • Independent contractors: These are workers who are hired to provide their professional services to a company on a temporary or project-based basis. Electricians, corporate trainers and photographers can all be examples of an independent contractor. Usually independent contractors get paid based on the scope of the service they provide.

Both freelancers and independent contractors are typically self-employed, and will send an invoice from their own company once the work is completed.

  • Temporary workers: These are workers who are hired to fill in for full-time employees who are on leave, or to handle temporary increases in workload. Temporary workers are often (but not always) hired through staffing agencies.
  • Seasonal workers: These are temporary workers who are hired to meet the increased demand for a company’s products or services during a specific time of year, such as the holiday season. 

Temporary and seasonal workers are usually hired and paid directly by the company. 

How do companies manage contingent workers?

Companies typically hire and manage contingent workforce using a combination of internal processes and specialised software tools.

The specific policies and procedures in place for managing contingent workers may cover things like

  • how to hire and release workers
  • how to pay and manage their work
  • how to provide them with the necessary tools and resources to do their jobs.

In addition to these internal policies, companies may also use specialised software tools to manage their contingent workforce. These tools can help companies to track and manage workers’ hours, assignments, and pay, as well as to communicate with them and monitor their performance.

Some examples of contingent workforce management software tools that companies may use include:

  • Time tracking and project management system, which can help companies to monitor and manage workers’ schedules, hours and assignments.
  • Payroll and invoicing software, which can help companies to process and pay workers’ wages and expenses.
  • Communication and collaboration tools, which can help companies to stay in touch with workers and share information and resources.
  • Performance management software, which can help companies to evaluate and monitor workers’ performance, and to provide them with feedback and support.

What is on-demand workforce?

On-demand workforce is a specific type of contingent workforce. These are workers who are available to start work at a moment’s notice. This type of workforce is often used by companies to quickly meet changing business needs.

Having access to an on-demand workforce allows companies to easily find and hire workers when they need them. And workers will have more flexibility and control over when and where they work.

A key characteristic of an on-demand workforce is that the workers are typically paid on a per-task or per-project basis, just like independent contractors. On-demand workers do not receive a regular salary or an hourly wage. 

On-demand workers can be hired and managed..

  • through a third-party platform or gig economy app that connects on-demand workers with companies that need their services. 
  • by a staffing agency that recruits and facilitates on-demand workers to their client companies  
  • by the company directly

What is the difference between contingent and on-demand workforce?

The main difference between these two types of workforce is that: 

contingent workforce is typically…

  • hired for longer-term projects or assignments, 
  • managed and paid by the company that hires them

on-demand workforce is typically…

  • hired for shorter-term, immediate needs
  • managed and paid by a third-party platform or an agency.

Why companies prefer to work with on-demand workforce 

Companies can profit from working with on-demand workforce in several ways. One of the main advantages of using on-demand workers is that it allows companies to be more flexible and responsive to changing business needs. Because on-demand workers are not full-time employees, companies can hire and release workers as needed, without the same level of commitment or long-term obligations.

Another way that companies can profit from on-demand workforce is by reducing labor costs. Because on-demand workers are typically paid by the task or project, rather than on an hourly or salaried basis, companies can save money by only paying for the work that is actually performed. This can help companies to reduce overhead costs and improve their bottom line.

Additionally, working with an on-demand workforce can also help companies to reduce their risks. Because on-demand workers are not full-time employees, companies are not responsible for providing them with the same benefits or protections. This can help to mitigate potential liabilities and protect the company’s financial health.

Finally, working with on-demand workers can also help companies to access a wider pool of talent. On-demand platforms typically have a large and diverse pool of workers, which can provide companies with access to a wider range of skills and expertise. This can help companies to find the right workers for their specific needs, and to stay competitive in the marketplace.

How do companies manage on-demand workforce?

Companies manage on-demand workforce in much the same way as they would manage any other type of contingent workforce – with  a combination of technology and human resources management techniques to manage their workers. 

This may involve using specialised on-demand workforce management software to track and manage worker availability, schedules, and pay in real time. The same software usually also helps them provide necessary support to help workers perform their jobs effectively. The exact approach and management solutions will vary depending on the specific needs of the company and the type of work being performed.

In general, the goal of on-demand workforce management is to ensure that the right workers are available to do the job when it needs to be done, while also providing support and guidance to help them succeed.

The challenges of managing on-demand workforce

Many companies that work with on-demand workforce prefer to work with gig economy apps and staffing agencies, and not manage them in-house. This is usually because of legal issues, as in some cases businesses may be required to classify on-demand workers as employees rather than contractors.

But there are many potential downsides to recruiting workers through a gig economy app. Some of the main ones include:

  1. Increased costs. Using a gig economy app to recruit workers can be more expensive than doing it yourself. The platform may charge a fee for its services, and you may also have to pay additional fees for things like background checks or drug tests.
  2. Lack of flexibility. When you use a gig economy app, you may have limited flexibility in terms of how you can communicate with and manage your on-demand workers. The platform may have its own systems and processes that you have to follow, which can be inflexible and difficult to work with.
  3. Always new people. Gig economy apps will usually match you with a new person every time. This way you can spend an inappropriate amount of time and resources on training and onboarding the person for a single task.

Similar issues can emerge when working with an on-demand staffing agency.

Agencies typically charge a fee for their services, which can add to the overall cost of hiring workers. Additionally, the agency may require you to pay for things like background checks or drug tests, which can further increase your costs.

Another potential downside of using a staffing agency is that you may not have as much control over the talent acquisition. The agency may have its own rules and regulations, and you may not have as much say in who gets hired.

Agencies may not have access to the same pool of candidates that you would if you were recruiting on your own. This could limit your ability to find the best possible workers for your business.

Finally, using a staffing agency can also create logistical challenges. For example, you may need to coordinate with the agency to schedule workers, and you may have to work around the agency’s availability and policies. This can be time-consuming and frustrating, and it may not be as efficient as hiring workers directly.

What we can do for you

Are you a staffing agency looking for on-demand workforce management software? Zelos is a perfect app for simple on-demand staffing.

Are you a company looking for an easy way to manage on-demand staff in-house? Our job dispatch app is great for zero hour contract employees.

Get in touch with us for further information about how we can help you with on-demand staffing.