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Contingent workforce: Costs Add Up - Here Are 5 Ways to Reduce Them

17 May 2023

As the workforce landscape continues to evolve and businesses look for more flexibility, contingent workers have become an increasingly important part of many organisations. 

However, managing contingent workers can present a unique set of challenges related to cost management. Contingent workforce costs can quickly stack up if they are not adequately monitored and controlled. In this blog, we explore five ways to lower your contingent workforce costs and keep your budget under control.

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What is a Contingent Workforce?

A contingent workforce refers to a group of temporary or contract workers who are hired to complete specific projects, fill temporary roles, or support existing full-time staff. These individuals may be hired through an agency or directly hired by a company. Compared to traditional employees, contingent workers have a more flexible and project-based nature of employment.

How do Contingent Workforce Costs Start to Add Up?

When it comes to managing a contingent workforce, costs can quickly add up, especially when they are not carefully monitored. Here are some common ways in which companies can end up spending more:

Lack of visibility into contingent worker spending: Without clear visibility into where money is being spent, it's difficult to control costs.

Paying a premium for short-term talent: Candidates with highly specialised skills can command a higher rate in the short-term.

Inefficient hiring processes: A lack of standardisation across HR processes can lead to inefficiencies and higher costs.

Incorrect classification of contingent workers: Misclassifying workers can result in steep fines and penalties.

Poor contract management: Incomplete or unclear contract agreements can result in scope creep and cost overruns.

5 ways to lower your Contingent Workforce costs:

Controlling cost is a continuous effort that requires a dedicated effort from management. Here are five ways to lower your contingent workforce costs:

1. Implement a neutral vendor management service

A neutral vendor managed service can provide organisations with visibility into their contingent workforce spending. A neutral vendor managed service platform can monitor and control the hiring of contingent workers, automate workflows, and generate reports on hiring trends. Neutral vendor managed services can also provide performance tracking, supplier management, and payment tools, helping to reduce costs associated with administrative tasks.

2. Optimise workforce planning

Optimising workforce planning involves striking a balance between temporary, part-time, and full-time employees. Hiring temporary workers for short periods can be cost-effective if planned carefully. Review your project pipeline along with your business goals to determine the right balance of contingent and full-time employees.

3. Standardised hiring processes

Establishing a set of standard hiring processes can help streamline the hiring of contingent workers. This should include everything from the job posting and recruitment process through to background checks and onboarding. Standardising these processes will reduce administration costs and improve efficiency.

4. Implement clear contracts

Contracts should be clear, complete, and accurate before a contingent worker is hired. Organisations should ensure that they adopt standard contract templates for all their contingent role types. This will help in preventing any misunderstandings and surprises that might lead to legal issues.

5. Conduct proper worker classification

Misclassifying workers can lead to higher taxes, fines, or even costly lawsuits. Classifying workers as contingent when they should be full-time employees will lead to higher premium rates. Take the time to ensure that all workers are properly classified, either as independent contractors or employees, depending on the job nature, employment classification needs, and other related factors.


Managing a contingent workforce requires careful planning and budgeting to avoid cost overruns. Implementing a neutral vendor managed service, optimising workforce planning and standardising hiring processes are critical in managing contingent worker costs. Furthermore, it’s important to classify workers properly, implement clear contracts and ensure that hiring managers adhere to them. Managing costs with an adaptable approach and continuous improvement can help companies better manage the contingent workforce and achieve their business objectives without breaching their budgets. By adopting these tips, businesses can effectively lower costs and ensure a more streamlined, efficient workforce management system.

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