Contingent Workers Not a Cure-All

Employers who use contingent workers to pare costs in preference to hiring regular employees may only wind up paying more and getting less.

Contingent workers are those who have no contract for continuing employment, whose hours are regulated at the pleasure of their employer and who have little or no attachment to the company.

They can include, among others, temporary workers from agencies, independent contractors and consultants paid on a project basis, or casual part-time workers paid from a company payroll.

Some unwary employers who use contingent workers have been adversely affected in a number of surprising ways: by training costs they can never recoup, high turnover, low productivity, work-team disruption, staff dissension and the loss of proprietary information.

“In the future,” two authorities on the subject write, “the frequently mentioned goals we now encounter of using contingent workers to cut labor costs and ease management tasks will largely have to be abandoned. Neither is a sure bet.”

This warning comes in a critical new book, “Managing Contingent Workers (Amacom),” coauthored by Stanley Nollen, professor of human resources at Georgetown University, and management research consultant Helen Axel of Lebanon, N.J.

“Contingent workers,” they assert, “are probably going to be a little less productive than regular employees. On both skill and effort, [they] are likely to fall a little short . . . typically have less education, training and experience . . . [and] sometimes have less motivation to work hard.”

Managers like to tell Nollen and Axel that contingent workers are about as productive as regular employees, but the scholars found that in a few factual checks they made “they were not.”

Also troubling is the difficulty management has integrating contingent workers into the growing numbers of teams. “No matter how good they are as individual workers, they cannot be really effective team members if they don’t stay with the team for a while, and contingent workers cannot stay for a long enough while,” the authors say.

Nor do contingent workers hang around long enough for companies to recoup their training costs. Most work for less than a year.

Another problem Nollen and Axel detected is that, “Different treatment of core and contingent people who work side by side might divide the work unit into two tiers of favored and disadvantaged workers; tensions might develop [and] attempts to build a corporate culture as a unifying and motivating force might be frustrated.”

When brought in to help a company achieve “flexibility to cope with long swings in the business cycle,” as opposed to just cutting costs, contingent workers--who may make up as many as 20% of all workers--can still prove their worth, Nollen and Axel state, if they are not “overused.”

They urge managers to pay the better-performing contingent workers more money and to consider them for permanent jobs as those open up.

“Get them to stay longer by raising their wages for longer service, tailoring a package of benefits to their special needs, giving them a specified certain-duration short-term contract, or hiring them into the regular work force after a certain length of time,” the authors recommend.

As one out of three temporary workers is under 25, companies that offer to pay college tuition will reduce staff turnover, Nollen and Axel note. The cost of tuition payments, they say, may be less than the cost of looking for replacement workers.