There has been a shift from using language surrounding the “contracted worker,” because the explosion in freelance and independent work has meant a shift away from formal contracts and the emergence of freelance-promoting digital platforms, websites, and apps.
What Is a Contingent Worker?
According to the US Department of Labor, a contingent worker is an independent contractor or freelancer. Contingent workers are responsible for the business side of their taxes, whereas a full employee is not, the business which employs them is going to take care of those.
The most common form of contingent workers includes freelance writers and editors, for example. But many companies hire contingent workers to round out their sales force.
Contingent workers hold a lot more power and autonomy than regular employees. They can’t be told how to complete a project, because hiring a contingent worker means the business is more concentrated on achieving results than controlling the process.
Pros of Hiring Contingent Workers
The biggest advantage of hiring a contingent worker is that your company will not be responsible for collecting or paying quarterly taxes through paystubs. That saves your accounting team time and resources.
All you need to do for contingent workers is to create and file 1099 forms, most often the 1099-NEC for non-employee compensation. You only need to do this for contingent workers who you have paid $600 or more in a calendar year.
The other big pro of hiring contingent workers is the huge talent pool available. A survey from Glassdoor found that 63% of recruiters say talent shortage is their biggest problem, and gig work is becoming more and more popular.
Another benefit of hiring contingent workers is the fact that many of them possess more specialized skills. Since they have more control over their business, the demand for specific products and services means each gig worker has to focus on specialization and differentiation in the competitive atmosphere.
Contingent workers also require less onboarding, which saves your business time and money. And speaking of time and money, the higher specialization rates in the contingent workforce mean you are getting a better deal – faster labor for an economical price. Because the recruiting and hiring time is diminished, you can get your seasonal tasks and temporary projects done faster and cheaper.
Cons of Hiring Contingent Workers
Hiring contingent workers reduces the number of staff members you will need to hire for your company, you also have to contend with the increased freedom and control that a contingent worker possesses. They are their own manager or boss, and you only have financial control in that situation, which means you are at their mercy. While most contingent workers set expectations in a way that is amenable to all parties, this is a potential problem that could stem from hiring a contingent worker.
Optimize Your Business – Hire Contingent Workers and E-File the Tax Forms
We want to help you grow your business and streamline your tax prep so you can make some big moves this year. eFile360 has been created to simplify businesses’ filing of 1099 and other information return forms. Our simple end-to-end online solution eliminates the need for printing on preprinted forms, stamps, envelopes, and the general confusion associated with filing with paper returns.