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HCMWorks Insights

The Difference Between Contract Workers And Temporary Workers?

Posted by HCM Works on 23 Sep 2016

In a recent American Staffing Association survey of over 13,000 current or former contingent workers from 186 companies, it was discovered that when they were asked to self-identify themselves, the terms "contract worker' and "temporary worker" were used interchangeably, with many of those polled using the term “contract” (43%) and “temporary” (57%).

When you look deeper into the survey results, the differences between contract worker, and temporary worker become a lot clearer.

Order From Chaos - taming the Contingent Workforce Marketplace

Interestingly, the self-described contract workers have the following characteristics in common with each other:

  • More likely to have some college education or a college degree
  • Earn higher hourly wages
  • Work longer assignments
  • More likely to work full-time
  • Significantly more likely to cite “the money is better” as a reason for choosing contingent work
  • More likely to work in IT and professional/managerial positions.
Self-described temporary workers turned out to have different profiles to contract workers - and they had a group of characteristics in common:

  • Less likely to have gone to college for any length of time
  • Earn lower hourly wages
  • Work shorter assignments
  • More likely to work part-time
  • Have worked short-term for their staffing firm, or have rotated between different firms
  • More likely to work in office/clerical, industrial and healthcare sectors.

Don't have resources to engage a contingent workforce MSP?

According to the current population survey (CPS), conducted by the United States Census Bureau for the Bureau of Labor Statistics (BLS), contract workers are classified as Independent contractors. The survey states that workers who stated that they worked as independent contractors, independent consultants, contract workers, or freelance workers are all classified as “independent contractors.”

Most companies utilize contingent workers in a variety of different ways, using a combination of both temporary workers and independent contractors. But there are significant differences between independent contractors and temporary workers that we should all know, and referring to one as the other could lead to problems. Therefore getting the description right and having clarity of the type of position and the work you have is critically important.

As the US Department of Labor explains - for temporary workers, a staffing agency, or a human capital firm may provide the temporary workers' service to a client. These staffing agencies tend to provide on-site support staff to their clients from a pool of individuals that are hired as employees of the staffing agency to a specific company for a limited period of time - on a fill-in basis, or for a finite project time span (usually less than one year).

From the company perspective, these are temporary workers, and to the staffing agency, these workers are employees. Thus defined as someone receiving an hourly wage (W-2) and any benefits offered by the staffing company, such as vacation, health insurance, and retirement plans. In addition, hourly wage workers must be paid overtime when applicable, are eligible to receive unemployment benefits, and can be covered by workers compensation and family & medical leave (FMLA) when necessary.

Managing Your Independent Contractor Program

The US Department of Labor refers to independent contractors in a different way. Independent contractors, on the other hand, are individuals who are engaged by a company to be paid a flat amount for the completion of a specific project. Legally, these workers have to be self-employed, and they may or may not perform their services at the client’s worksite. Independent contractors are specifically not temporary workers because they do not fill out timesheets, or are paid and taxed using a W-2. Instead, independent contractors are responsible for the delivery of a product or service, by a specified deadline, no matter how many hours are spent working. Independent contractors are therefore responsible for calculating and paying their own taxes (through IRS Form 1099).

If you are a business using contingent workers on an on-going basis, knowing the differences between temporary and contract workers, and how to hire and effectively manage them, is an important company priority, for which you may not have the right internal skills in place. If this is the case, you may want to consider using a managed services program or MSP.

An MSP enables you to easily streamline, simplify and manage the contingent workforce supply chain from requisition to payment and everything in between. The outcome is increased visibility on contingent headcount and spend, reduced costs and greater compliance with federal and state regulations. It's a combination of process, practice, and technology that allows you to centralize and consolidate all your temporary and contract workers, from both staffing vendors and directly sourced. You may also want to know how to leverage them effectively and build a proprietary talent pool: a centrally managed database of contingent workforce alumni who have been vetted, on-boarded, and often trained on the very positions you need to fill, at your fingertips and with no vendor markups.
request a call with a Contingent Workforce SpecialistAdditionally, a properly structured MSP, such as our own HCMWorks Managed Services Program, can protect your organization against misclassification challenges and class action lawsuits across all categories of non-permanent workers, be it through staffing vendors, directly sourced candidates, independent contractors, and SOW resources.

Ask our team of experts how we can help. Learn more about why HCMWorks could be the right choice for your Contingent Workforce Managed Services Program.

About HCMWorks

We are a contingent workforce service provider helping organizations gain better access to talent through the use of independent contractors, consultants, temporary workers, freelancers and other non-payrolled employees. We provide the expertise, the technology, and processes to help you reduce your workforce costs, mitigate against misclassification and co-employment risks, and increase the efficiency and timeliness of your contingent recruitment process. Read more about what our clients say about us here.

Tags: Independent Contractors, Managed Services Programs

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