Best Practices for Managing a Contingent Workforce
The way we work is evolving at an unprecedented pace. Traditional full-time employment is no longer the only way businesses build their teams. Instead, the rise of the contingent workforce—freelancers, contractors, consultants, and gig workers—has transformed talent strategies across industries.
But here’s the catch: While contingent workers bring flexibility, innovation, and specialized expertise, managing contingent workforce effectively is a whole different ballgame. Without a strategic approach, businesses risk compliance headaches, disjointed workflows, and missed opportunities.
The Growing Influence of the Contingent Workforce
Let’s talk numbers:
- Nearly 50% of the U.S. workforce will be contingent by 2027 (Statista).
- 75% of Chief Procurement Officers rank managing contingent labor as a top priority, yet only 35% of organizations feel they have real visibility into it (Economist Impact).
- 80% of businesses already rely on contingent workers in some capacity (Dayforce, 2023).
If you’re not proactively managing your contingent workforce, you’re falling behind.
Who Makes Up the Contingent Workforce?
Understanding who falls under this umbrella is key to leveraging their strengths:
- Freelancers – Self-employed professionals offering services across various industries.
- Consultants – Subject-matter experts providing strategic guidance.
- Independent Contractors – Hired for specific projects or tasks, working without long-term commitments.
- Gig Workers – On-demand workers engaged through digital platforms.
- Temporary Staff – Short-term employees brought in for seasonal or project-based work.
While these workers bring agility and expertise, they also introduce challenges in compliance, classification, and integration. However, to best manage a contingent workforce, organizations typically pair an MSP with a vendor management system (VMS). The VMS centralizes contingent workforce management into one cloud-based platform, where users can perform actions such as initiating talent or project requests, evaluating project bids and hiring workers, reviewing timecards and expenses, onboarding and offboarding workers, and much more.
Best Practices for Managing a Contingent Workforce
To unlock the full potential of contingent talent, companies need a structured, tech-driven, and people-centric approach.
- Define a Clear Workforce Strategy
Think of your workforce as an ecosystem, not just a collection of full-time employees and contractors. Align contingent labor with business objectives, and ensure HR, procurement, and leadership teams are on the same page.
- Prioritize Seamless Onboarding
First impressions matter. A poor onboarding experience can lead to disengagement and inefficiencies. Ensure contingent workers:
Receive clear guidelines on their roles and responsibilities.
Gain access to necessary tools and resources.
Feel connected to company culture, even if working remotely.
- Leverage Technology: VMS & MSP Solutions
If you’re still managing contingent workforce through spreadsheets and emails, it’s time for an upgrade.
A Vendor Management System (VMS) helps track spending, compliance, and performance.
Partnering with a Managed Services Provider (MSP) provides oversight, risk mitigation, and cost control.
- Stay Ahead of Compliance Risks
Misclassifying a contractor as an employee can result in fines and legal troubles. Ensure compliance by:
Accurately categorizing workers (1099 vs. W-2).
Keeping up with labor laws and tax regulations.
Utilizing third-party payroll providers when needed.
For further insights on aligning contingent workforce processes with organizational compliance frameworks, refer to our detailed discussion on contingent process outsourcing.
- Balance Workload Between Internal & External Teams
Which tasks should be outsourced, and which should remain in-house?
Outsource: Data entry, design, specialized IT work, and seasonal projects.
Keep In-House: Core business functions and strategic leadership roles.
By clearly defining these boundaries, you ensure efficiency and alignment.
- Track Performance & Engagement
Just because someone isn’t a full-time employee doesn’t mean performance shouldn’t be measured. Set key performance indicators (KPIs), conduct regular check-ins, and make contingent workers feel valued through feedback and recognition.
Why Companies Are Turning to Contingent Talent
It’s not just about cost savings (although that’s a big factor). The contingent workforce offers:
- Scalability – Businesses can expand or contract their workforce based on immediate needs.
- Cost Efficiency – No long-term salary commitments, benefits, or pensions.
- Access to Elite Talent – Specialized skills in high-demand fields like AI, cybersecurity, and digital marketing.
- Speed & Agility – Faster hiring cycles and quicker project execution compared to traditional recruitment.
But with these benefits come challenges:
- Compliance Risks – Misclassification of workers can lead to hefty legal penalties.
- Lack of Visibility – Many organizations struggle to track contingent labor costs and productivity.
- Integration Issues – Ensuring external workers align with company culture and processes can be tricky.
- Engagement Gaps – Contingent workers often feel disconnected from an organization’s mission.
- Candidate experience: Ensuring a positive candidate experience for contingent workers.
Managing compliance is a significant issue, as contingent workers must be integrated legally within organizational processes. Managing a contingent workforce comes with its share of benefits and challenges, but when done right, it can be a game-changer for your business. It’s all about finding the right balance, ensuring agility while staying compliant and keeping costs in check. A well-thought-out approach to contingent labor doesn’t just fill gaps; it strengthens your talent strategy, aligns staffing with your business goals, and gives you the flexibility to scale as needed. When businesses integrate contingent workers strategically, they create a more adaptable, efficient workforce that drives long-term success.
Why a Centralized Approach Wins
Managing contingent workforce in silos leads to inefficiencies and blind spots. A centralized strategy offers:
- Better Cost Control – No more hidden expenses.
- Stronger Compliance – Reduced legal risks.
- Seamless Collaboration – Contingent workers feel more integrated.
- Higher Productivity – Optimized workflows between internal and external teams.
Key Takeaways for Managing a Contingent Workforce
Effective management of a contingent workforce is crucial for aligning operational agility with business goals. It enhances organizational capability by providing access to specialized skills and flexible staffing solutions. Properly managed contingent labor ensures compliance with labor laws, optimizes costs, and supports strategic workforce planning.
- Flexibility and Efficiency: Contingent workforce management allows organizations to adjust staffing levels in response to project demands, ensuring business continuity and efficiency.
- Access to Specialized Skills: Engaging contingent workers provides access to expertise that may not be available internally, enabling innovation and the completion of specialized projects.
- Cost Optimization: Utilizing contingent labor can result in significant cost savings compared to traditional staffing models, especially when direct sourcing strategies are employed.
- Compliance Assurance: Implementing robust processes ensures adherence to legal standards, mitigating risks associated with worker misclassification and other compliance issues.
- Enhanced Candidate Experience: Focusing on the candidate experience for contingent workers fosters engagement and satisfaction, ultimately leading to improved performance and retention.
Organizations that master these practices can effectively integrate contingent labor into their broader talent strategies. This integration supports workforce flexibility and aligns with long-term objectives, ensuring that businesses remain competitive in a dynamic market. By prioritizing effective contingent workforce management, companies can enhance their talent acquisition processes, better meet the demands of evolving market conditions, and achieve sustainable success.
At AMS, we help businesses master the art of managing contingent workforce. Our expertise in MSP solutions, vendor management, and strategic workforce planning ensures you’re not just filling gaps—but building a competitive, agile workforce.
🔹 Need better visibility into your contingent workforce?
🔹 Struggling with compliance and classification?
🔹 Want to maximize cost efficiency and talent quality?
Let’s talk. Contact AMS today to transform your workforce strategy.
