Talent and staffing flexibility top reasons to hire contingent workers

The vast majority of U.S. firms — 93 per cent — use contingent workers to get the job done, according to recent research conducted by the American Management Association (AMA).

The rationale for hiring such high levels of contingent workers seems to have more to do with the need for talent and staffing flexibility than with the bottom line. In fact, 73 per cent of companies cited the need to attract “specialized talent” as either “very” or “somewhat” important reasons to use contingent workers. And a full 91 per cent placed “flexibility in staffing issues” in those categories. Only 63 per cent indicated that “payroll reduction” was “very” or “somewhat” important.

The findings were part of a study conducted by the AMA in co-operation with the Seton Hall University Institute on Work in South Orange, N.J. The use of contingent workers has grown in the U.S. since the issue was last researched in 1996 by the AMA — 49 per cent of firms surveyed now employ more contingent workers, 23 per cent employ the same amount, and only 20 per cent employ fewer.

“The numbers for Canada are probably close,” says Gerry Henderson, program director at the Canadian Management Centre, who estimates the number of firms using contingent workers to be in the high 80-per-cent range. “We’re running on a bit of a lag, but we’ll get there within a year or two.” Henderson believes the lag is based on a more conservative business culture in Canada. “We’re a bit more risk-averse.”

In the U.S., 55 per cent of the largest businesses and 56 per cent of service firms have increased the number of contingent workers since 1996. Small businesses (44 per cent) and manufacturing firms (42 per cent) were not as likely to have increased the number of contingent workers.

A tight labour market may be one major factor for the increase in hiring specialized talent. The AMA’s Staffing and Structure survey, performed at the same time as the Contingent Worker survey, reveals that 66 per cent of HR directors at U.S. companies describe the current availability of skilled manpower as “scarce.”

Eric Rolfe Greenberg, director of management studies for the AMA, says “the correlation between these data suggest that in a period of great demand for skilled employees, companies are looking at contingent workers as a solution to the problems of small applicant pools and greater recruiting challenges.”

Among a variety of job sectors, those requiring skilled or specific competencies had a higher increase in the use of contingent workers than those using unskilled workers. Forty-five per cent of companies surveyed reported a higher use of contingent workers in their information systems operations. The use of contingent workers for manufacturing was up 42 per cent, and finance and accounting was up 33 per cent. These numbers compare to a rise of only 23 per cent for maintenance and cleaning and 19 per cent for transportation and distribution.

Another possible reason for the increase in contingent workers may come from management’s changing view of labour. The AMA’s Staffing and Structure survey indicated that 36 per cent of U.S. firms created new jobs and eliminated old ones concurrently during the 12 months ending in mid-1999. This workplace fluidity suggests that employers hire contingent workers to provide the flexibility needed to move their businesses quickly. Cost then becomes a secondary issue.

“We are seeing a clear reflection of the next wave in staffing issues,” says Barrie Peterson, associate director of Seton Hall’s Institute on Work. “Management is recalibrating its relationship with labour, and changing it from a fixed to a more flexible component as a means of meeting the demands of increasingly competitive and efficient markets.”

Ellen Bayer, global practice leader for AMA, says “these surveys show us the importance of approaching staffing issues from a strategic viewpoint. As companies try harder and harder to reap efficiencies and competitive advantage from their organizational structures, the sophisticated and strategic use of a variety of staffing solutions, from temporary workers and outsourcing to full-time hires, will become essential. Companies should be schooled and ready to capitalize on the variety of options at their disposal.”

Latest stories