Tipalti
  • Solutions
    • Accounts Payable AutomationEnd-to-end, invoice-based payments designed for growing companies
      • Supplier Management IconSupplier Management
      • Invoice IconInvoice Management
      • PO Matching IconPurchase Order Matching
      • Global Payouts IconPayment Remittance
      • Payment Reconciliation IconPayment Reconciliation
    • Purchase Order ManagementControl and visibility over corporate spend
    • Global Partner PaymentsScalable payment solutions for creator, ad tech, sharing and marketplaces economy
      • Supplier Management IconPartner Management
      • Global Payouts IconGlobal Payments
      • Fraud Detection IconFraud Detection
      • Self Billing IconSelf-Billing Module
      • Tax Compliant IconTax and VAT Compliance
  • Technology
    • Overview
      • The Tipalti PlatformGlobal, scalable, and fully automated
    • Features
      • Multi Entity IconMulti-Entity Architecture
      • Financial Controls IconFinancial Controls
      • Payment API IconPayment API
      • Secure Cloud IconSecure Cloud
      • MSB IconMoney Services Business
      • AI IconPi Payables Intelligence
    • Integrations
      • ERP & Accounting
      • NetSuite
      • Sage Intacct
      • QuickBooks
      • Microsoft Dynamics
      • Sage Accounting
      • Xero Accounting
      • Performance Marketing
      • Custom Integrations
  • Why Tipalti
    • Overview
      • Why TipaltiA modern, holistic, powerful payables solution that scales with your changing business needs
      • Customer StoriesSee how we transform finance operations
    • Benefits
      • Accolades
      • Invoice-Based Workflow
      • Performance-Based Workflow
      • Benefits by Role
    • Additional Services
      • Currency Management
      • Accelerated Payments
      • FX Hedging
      • Implementation Services
      • Supplier Enablement Program
    • Industries
      • Business Services
      • Software and Technology
      • Ecommerce and Retail
      • Marketplaces and Gig Economy
      • Video and Digital Media
      • Video Gaming
      • Financial Services
      • Online Services
      • Education
      • Healthcare
      • Advertising Technology
      • Affiliate and Influencer Networks
      • Manufacturing and Wholesale
  • Resources
    • Blog
      • The Financial Advisor BlogStrategy and trends in payments
    • Tools
      • Cost Per Invoice Calculator
      • Payment Error Calculator
    • Guides
      • What is AP Automation?
      • Compare Payment Methods
      • Future of Finance
      • Destination IPO
      • Payments Across Borders
      • The Total Guide to ERP Integration
  • Company
    • About Us
      • About Tipalti
      • Careers
      • Partnerships
      • Contact Us
    • Help
      • Support
      • FAQs
    • News & Events
      • Events
      • Newsroom
  • Login
  • Book a Demo
Get Started

Contingent Workforce Payments. A Perfect Solution in the Gig Economy.


We've paired this article with a comprehensive guide to dealing with online marketplace global payments challenges and achieving automation benefits. Get your free copy of Top Strategies for Online Marketplaces!
Get the FREE guide
Home / Resources / Guide / Contingent Workforce Payments

The rise of the contingent workforce has triggered an evolution in the way we do business. According to the Bureau of Labor Statistics, in 2017 the US gig economy had 55 million participants. More than 40% of US workers are engaged in alternative work and 33% of companies extensively use gig workers. 

The very essence of the term “contingent” means things are subject to change. If you intend on hiring a contingent workforce, things are managed differently than regular employees.

What is a Contingent Workforce?

A contingent workforce is a group of laborers who are available on-demand. Contingent worker payments are usually made through accounts payable and do not include salary, sick pay, holiday pay, vacation time, taxes, social security, or unemployment. Hiring flexible workers will reduce labor costs and drive productivity.

A contingent worker is not a full-time employee of an organization and thus, not eligible for benefits. The gig economy encompasses a variety of contingent workers that can include (but are not limited to):

  • Freelancers
  • Temps (temporary contract workers)
  • Consultants
  • Independent contractors  
  • Gig workers
  • Taskers
  • On-call professionals
  • Other on-demand workers

Contingent Workers

Cultural expectations and shifting personal priorities have led many people to seek alternatives to traditional full-time employment. Modern workers are now exploring the gig economy. The contingent workforce is flush with skilled talent and people seeking flexible, term-based employment. Individuals who are looking to make the most out of their skills, while still maintaining a level of independence, are the most successful contingent workers. This complements contemporary business needs nicely.

What is the Difference Between a Contingent Worker and a Contractor?

The U.S. Department of Labor defines contingent workers as freelancers or independent contractors. They are not employees. The contingent worker is responsible for all taxes and benefits involved. 

When someone is employed by a company as a contractor, it is typically with the intention of being hired on part or full-time after a set amount of days (usually 60-90). In this case, the organization is responsible for ensuring taxes are deducted and paid on behalf of the employee.

The difference between the two kinds of employment is whether the worker is classified as an employee or a freelancer. Then the tax situation is figured out from there.

The Benefits of a Contingent Worker

Contingent work has a multitude of benefits for every party involved. Here are some of the reasons why individuals and businesses choose this avenue to operate:

Cost-Effective

This goes for both parties. Independent contractors are not paying for a commute every day. There’s no need for expensive work clothes or costly meals. 

A business owner never has to worry about paying things like:

  • Salary
  • Overtime 
  • Holiday pay
  • Sick time
  • Health insurance
  • 401K
  • Taxes
  • Unemployment
  • Social Security
  • Etc…

Moving to an on-demand and flexible workforce can significantly reduce a company’s labor costs. Temporary workers are usually paid through the accounts payable department. This allows a business to further stretch their payroll budgets. 

Because there is no commitment to ongoing work, a business can scale their workforce up or down depending on budget needs. Shifting fixed labor costs helps to get a hold on spending and save on overhead, onboarding, and training. It reduces the amount employers pay in taxes and benefits on who they employ. 

Niche Skillsets

The value of a contingent worker extends beyond simple cost savings. The gig economy allows a business to find unique and niche skillsets for specific projects or a set duration. Whether you seek to augment the existing workforce or amplify time capacity, these workers are typically available to start immediately and require little to no training. 

It should be noted that as contingent labor becomes more of a fundamental business model, laws will change. It has larger implications when it comes to payroll-specific challenges, like rates, budgeting, and legal compliance. Contingent payroll management can be complex and confusing. Still, what you get from the contingent worker benefits, far outweighs the disadvantages.

Transform the way
your finance team works.

Bring scale and efficiency to your business with fully-automated, end-to-end payables.

Read more

Contingent Workforce Payments

There are three main things you need to know about contingent payroll management (workforce payments) before building a team.

Legal Compliance

Legal compliance poses the greatest risk for contingent workforce payments. In particular, worker misclassification. Temporary workers can land in a grey area at times between contractor and employee. You must make sure the line is completely clear. It’s critical to assess each individual that comes on board to determine how they would be considered by the IRS and other government bodies.

Failing to classify contingent workers can lead to a failed audit, potential lawsuit, penalties, fines, and interest fees for back taxes and other premium benefits you should have been providing. 

Rates

Compensating independent contractors can be trickier than you might think. Since contingent labor is temporary by nature, many staffing policies do not apply to these workers. Especially when it comes to finance. This means inconsistencies in pay rates. Companies should ensure they are properly negotiating an equitable and fair price for the work involved. 

Oftentimes, you may be paying contractors a bit more than regular employees for the same work. This can lead to a change in employee morale, loyalty, and performance. Keep that in mind before you hire a large team of temps to work alongside your regular staff. 

Since there are a variety of rates being offered, it can be difficult and time-consuming to keep track of everything. Errors and mistakes are made a lot more when there are hundreds of pay rates to organize.

Headcount

It is critical to understand how many contingent laborers are in your workforce. This gives a business a 360-degree view of their payroll costs. If you are hiring through an agency, the best approach is to ask them. 

If hiring isn’t taking place solely through human resources, then payments aren’t being handled through a centralized payroll. You may need to perform an internal audit to get a true idea of how many temporary workers are on your staff. Otherwise, you could overshoot your payroll budget and come up short on contingent workforce payments.

More than 40% of workers in the United States are using alternative work arrangements. This number has risen 36% in just five years. It’s estimated by 2020, contingent workers will make up 40% of the average company’s global workforce. Understanding how to pay these workers now means less of a financial headache down the road.

About the Author

Brianna Blaney

Brianna Blaney began her career in Boston as a fintech writer for a major corporation. She later progressed to digital media marketing with various finance platforms in San Francisco.
She prides herself on reverse-engineering the logistics of successful content management strategies and implementing techniques that are centered around people (not campaigns).
In her spare time, she’s a self-proclaimed chef, lives in the middle of the woods, and has a frequent flyer card for birdseed and dog bones.


RELATED ARTICLES

What is a Balance Sheet? : Formula & Examples What is Inventory Management? Examples & Benefits Square vs Paypal: Which One Should You Choose? What is Business Email Compromise (BEC)? Income Statement Definition, Formula & Importance What Do You Need to Perform an ACH Transfer ? Top Procurement Softwares in 2022 Top 11 Accounting Problems & Solutions in 2022 What are Real Time Payments? How RTPs Work ACH vs Wire Transfer - What's the Difference ? What are Payment Rails & How do They Work? How to Set Up Direct Deposit [Complete Guide] Horizontal vs Vertical Integration The Complete Guide to Vendor Selection Process The Top Payoneer Alternatives for 2022

Footer

Solutions

  • Accounts Payable Automation
  • Global Partner Payments
  • PO Management

Capabilities

  • Overview
  • Supplier Management
  • Invoice Management
  • PO Matching
  • Self-Billing Module
  • Payment Reconciliation
  • Global Payments
  • Fraud Detection
  • Tax and VAT Compliance

Why Tipalti

  • Why Tipalti
  • Customer Stories
  • Invoice-Based Workflow
  • Performance-Based Workflow
  • Benefits by Role
  • Benefits by Industry
  • Bill.com Alternative

Technology

  • The Tipalti Platform
  • Multi-Entity Architecture
  • Financial Controls
  • Payment API
  • Secure Cloud
  • Money Services Business
  • Pi Payables Intelligence

Resources

  • The Financial Advisor Blog
  • What is AP Automation?
  • Compare Payment Methods
  • Future of Finance
  • Destination IPO
  • Payments Across Borders
  • The Total Guide to ERP Integration
  • Cost Per Invoice Calculator
  • Payment Error Calculator

Company

  • About Tipalti
  • Careers
  • Partnerships
  • Events
  • Press
  • In The News
  • Media Kit
  • Support
  • FAQs

REGION

  • North America
    • United Kingdom
Contact Us
LinkedIn Instagram Facebook Twitter YouTube
We Handled It.
Privacy Policy
|
Payer / Sender Rights
|
Customer Assistance Policy
© 2010–2022 Tipalti Inc.