The use of contingent workers is on the rise. A 2020 study by Success Factors and Oxford Economics found 83 percent of executives are using a contingent workforce, which includes part-time workers or consultants. Working with these types of professionals requires changes to training, technology, and compensation plans.
There’s a lot to like about a contingent workforce from an employer’s perspective.
“Because they are not employees, alternative workers save you the time and hassle of managing payroll and benefits,” writes Elizabeth Gonzalez at The Ascent. “Payments to independent workers are simply reported on Form 1099 [in the United States]. They also require less work across the human resource (HR) lifecycle, from onboarding and training to offboarding.”
But there are plenty of problems, too.
One is the culture gap that can arise between full-time staff and gig workers. According to Flextrack’s 2022 State of the Contingent Workforce report, only 60 percent of contingent workers regularly receive recognition, and only half believe they receive the same respect as full-time staff.
The good news is that HR teams have the power to close that cultural divide, make contingent workers feel recognized, and maximize their performance. How? By developing a rewards strategy specifically for their contingent workforce.
Understand the Differences Between Contingent and Full-Time Workers
The first step in creating a rewards program for contingent workers is to figure out what they want. You’ll quickly find that the needs and wants of contractors are not the same as full-time employees.
One of the biggest complaints of contingent workers is that companies don’t appreciate and recognize their efforts like full-time workers, says Dr. Rochelle Haynes, founder and CEO of Crowd Potential Consulting Group. But giving them the same rewards won’t work. Instead, choose rewards designed specifically for contingent workers, like access to coworking spaces.
Lubaina Manji, a former senior program manager at Nesta, also advises tailoring rewards to the lifestyles of contingent workers. Take pay, for instance. “With flexible working patterns comes fluctuating pay, and these workers need products that suit their needs and support with financial wellbeing,” Manji explains.
“Traditional banking products tend to be more focused on those with regular incomes and a single employer, which makes it even more important that employers explore alternative financial products and tools which can help these types of employees.”
As proof, she cites research from Nesta Challenges that shows less than half (48 percent) of gig workers and one-third of self-employed workers want personalized money advice.
You’ll also need to take into account any cultural differences that exist between your contingent and full-time workforces, particularly if the majority of contingent workers come from a different country, says Robert Greene, CEO at Reward Systems. For example, singling out employees for recognition may violate social norms in some countries. There are also legal hurdles to consider, such as citizens of some countries aren’t allowed to hold foreign stock.
Invest In Learning and Development
One traditional reward area that will entice contingent workers is learning and development opportunities.
This is one of the primary ways Andy Campbell, a human capital strategy manager at Oracle for 22 years, says businesses can engage contract workers the same way they do full-time employees.
“Our own research finds 40% of employers still think gig workers should be responsible for paying for their own training, but our view is that employers must start to treat their gig cohort as they would their normal full-time employees and train them too,” he says. “While they often bring skills the business doesn’t have, it doesn’t mean new skills can’t be offered back, like opportunities to be mentors. This is often what turns these people on.”
Because contingent workers are often hired to perform specific business functions, they understand the importance of building valuable skill sets. As such, they are always looking for new opportunities to hone their craft and build new skills, says the team at Eightfold AI.
“Talk to your contingent workers and learn more about their vision for the future. Use that information to identify potential future work opportunities with the company and how you can present learning and development opportunities to prepare them for those future roles,” they write.
“While it may seem like a risky move to invest in someone who is a temporary worker, that investment has the potential to pay off in the long run if you don’t have to spend the resources on recruiting and onboarding someone new.”
Be Careful of Employment and Labor Laws
Whatever strategies you use to reward employees, businesses need to be aware of the legal issues that can occur when using rewards to bridge the cultural divide between full-time and contingent workers.
Because contingent workers are not part of your permanent workforce, you increase your risk of running afoul of labor laws when rewarding them, writes Sam Smith, president of EMEA and global client delivery at integrated workforce management platform Magnit. “So, although flexible and convenient, the management of contingent workers brings increased complexity beyond the standard implications of workforce management, and many organisations rightly implement an additional strategy to address this.”
For example, giving rewards that are the same or very similar to those received by full-time employees could be seen as your business treating contingent workers as full-time employees (and potentially running afoul of labor laws).
One solution is to ensure that you offer the kind of differentiated rewards we’ve described above. Another is to outsource your rewards strategy to a third-party. That’s the strategy recommended by Mike Boro, a workforce transformation partner at PwC. But that isn’t foolproof, either.
“It’s clever, yes, but the benefits are not coming from the temp agency if you’re paying for them.”
Treat Contingent Rewards as a Work in Progress
It’s likely your HR team has never tackled the challenge of rewarding contingent workers before. Doing so in a way that closes the office engagement gap without infringing on workplace laws or insulting your full-time staff really is a challenge.
But the benefits of doing so are immense. When your contingent workforce feels as recognized and rewarded as full-time employees, their loyalty and output can soar. Having the right policies in place is key to your success, says Wendy Person, currently director of global HR, people operations and external worker COE at McKinsey.
Most of all, be transparent and realize that it’s an evolving process that you’ll need to continue to optimize.