Contingent worker vs contractor: What’s the difference?
It is easy to confuse a contingent worker with a contractor. Although the terms seem interchangeable, a contingent worker is an umbrella term for workers who are hired by a company but do not work full-time. In contrast, a contractor is not employed by a company or organisation but instead, run their own business and lend their services to a company or organisation for a specific project or time.
Hays is an expert in hiring a contingent workforce. Discover our insights into the main differences between a contingent worker and a contractor.
What is a contingent worker?
The term contingent worker is an umbrella term for workers who are not employed permanently by a company. The contingent workforce encompasses temporary workers and contractors such as freelancers and consultants. Their work is often seasonal or for a period stipulated in their contracts. For example, a gig worker who works at a series of concerts is considered contingent as they only work throughout a festival season, as opposed to long term.
What is a contractor?
A contractor is usually self-employed. Clients hire contractors to complete a specific task or provide a particular service under the terms of a contract.
Types of contractors
- Independent contractors: Independent contractors are self-employed and lend their services contractually.
- Consultants: A consultant provides expert advice on a niche topic. For example, employing an environmental consultant to advise on a project's impact on the surrounding habitat. Consultants are hired temporarily.
- Freelancers: Freelancers are workers with specialised skills who offer their services on a case-by-case basis. Examples of freelancers include graphic designers, creative writers, and musicians.
- Subcontractors: A subcontractor is an individual hired by an overarching contractor to perform a particular task.
- On-call workers: Employees with flexible schedules, known as on-call workers, commit to working on specific tasks and projects as needed. They remain available for assignments, which they complete when called upon to do so. Examples include doctors and pilots.
Differences between a contingent worker and a contractor
Employment status
One of the main differences between contingent workers and contractors is the nature of their employment and their legal status. Contingent workers are employed by the relevant company or organisation and, although not full-time, might be part-time or casual and entitled to company benefits such as health insurance, overtime pay and leave. Various employment laws (e.g. minimum wage) will govern the specificities regarding employee benefits.
An independent contractor, however, is not technically employed by a specific company or organisation. They lend their services to others and are classified as independent contractors who work for themselves. Contractors will not be entitled to employee benefits. Consequently, they must take care of their own taxes and retirement savings.
Work hours
Contractors are normally hired for a specific duration or project. Their work hours will be dependent on the needs of their assigned task. They may work sporadically or for several days on a temporary basis. Contingent workers, on the other hand, are employed by a relevant entity and work in accordance with a contractual term.
Taxes
Contingent workers and contractors have different tax implications. Independent contractors are usually responsible for their own taxes because they are self-employed, whereas contingent workers might have a HR team who can assist them with their tax obligations. Most contingent workers will have taxes withheld from their pay.
Management involvement
A contractor is brought in to offer expertise, but they maintain their independence, working alongside the team without being a permanent part of it. Contractors typically oversee their own work and rely on business management for direction rather than operational control. Contingent workers, however, are managed directly by their employers.
Remuneration
Contractors are generally paid per hour worked, whereas contingent workers are on a salary. Independent entities are generally also paid at a higher rate for their services. Companies might also pay temporary employees differently as they may not be hired on a long-term contractual basis.
Advantages and disadvantages of a contingent worker
Benefits:
- Flexibility.
- A quick solution to address short-term business needs.
- Lower costs compared to hiring full-time employees.
- Access to niche skills.
Disadvantages:
- Reduced loyalty and availability.
- Integration into the wider team.
- High turnover due to temporary nature of employment.
Advantages and disadvantages of a contractor
Benefits:
- Access to specialised skills.
- Greater flexibility for both contractor and hiring team.
- Cost savings.
- Increased availability to meet ad-hoc demands.
Disadvantages:
- Higher hourly rates compared to permanent employees.
- Less management over contractor work.
- Integration into a wider team.
- Challenges hiring multiple contractors.
- Loyalty to work and company or organisation.
Hiring a contingent workforce or contractors
Although they’re not core employees, your contingent personnel contribute significantly to your business' success, which is why it’s equally vital to hire dependable temporary workers.
Hays is not only a staffing agency with recruitment expertise, but contractor onboarding too. Contact us today or visit your local Hays office.