Difference Between Contingent Workers, Contractors, and Core Employees

In the modern employment landscape, various terms like contingent workers, contractors, and core employees are used often. While all of them refer to some employee/worker, each carries its distinct purpose and implication. The classification among the three plays a pivotal role in shaping the nature of work relationships and their overall organizational dynamics. 

To have clearly defined roles and responsibilities in your company, it is vital to understand their subtle yet significant differences. 

Through this article, you can better understand contingent worker vs. contractor vs. employee, shedding light on how these distinctions impact your work arrangements.

Who is a Contingent Worker?

An individual who works for a company on a ‘condition’ but is not officially appointed as an employee is known as a contingent worker. These workers may offer their services on a permanent, temporary, or as-needed basis. Most of the time, the condition their work is contingent upon depends on specific projects or outputs. 

Type of Contingent Workers

In general, contingent workers can be divided into one of four categories:

Independent Contractors

Sole traders, PSCs, freelancers, and independent workers, including the self-employed, all fall under the legal definition of "self-employed." Any self-employed person with a contract to perform services for clients falls under the description of an independent contractor. 

Because self-employed people run their businesses, employment laws usually do not cover them. The company hiring them has the right to manage or direct only the outcome of the job (the ends) and not what will be done or how it will be done (the means). The individuals are not subject to the client's supervision, direction, or control.

Dependent Workers

Gig workers are categorized as ‘dependent’ contractors since they are self-employed on their official tax forms but perform services for another company. They typically do the work themselves rather than delegating it to another person, and their contract is typically with a different party, such as a staffing agency, rather than the end-user client. 

Although they are entitled to statutory worker rights under employment law, their tax liabilities are the same as those of self-employed. 

Also Read: Advantages and Disadvantages of Hiring Contingent Workers

Temp and Agency Staff

In essence, PAYE (pay-as-you-earn) temporary workers have a contract with an agency but work for a 'hirer' — a person or business that employs people temporarily. After 12 weeks, they are entitled to the same employment rights as those of the hiring company under Agency Employee Regulations. However, the agency is in charge of paying them and managing their legal employment rights.

For tax reasons, there is no distinction between agency workers and employees, and the employer is responsible for paying NICs (National Insurance Contributions) on the employee's behalf.

Services Providers (SoW)

Since the implementation of IR35 regulations in the private sector, particularly in the UK, Statement of Work (SoW) engagements have gained popularity. In this situation, a business hires a third-party professional services provider such as consulting, tax, clinical, or legal to carry out a specific scope of work, often for a fixed cost and duration.

Those providing the services outlined in a SoW may work for a services firm directly or indirectly through their LLC. These contracts are typically billed at a fixed price deliverable or for achieving predetermined milestones established before the project begins. The job's location and payment terms and conditions may also be specified beforehand.

Who is a Contractor? How are Contractors Different from Independent Contractors?

Many people use the term contractor analogously to an independent contractor. However, they are not entirely synonymous with each other.

A contractor with a written contract with your company agrees to work in exchange for a specified payment. Their interaction with your business is only permitted under the conditions outlined in the contract. They may be employed permanently to work on different projects or briefly as temporary employees. In either case, they are on your payroll for the contract duration.

Here are the exact differences between a contractor and an independent contractor.

What are Core Employees?

Core employees are people employed full-time to work for your business. Their hours are routinely arranged by the organization and funded by the budget. The company's payroll covers core employees.

As per the definition, core employees are indispensable to the company's daily operations. Core employees' positions are generally secure as the company needs a specific number of individuals to carry out routine duties. As a result of the workforce's increased stability, managers can better estimate how operations develop and how much they will cost.

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Contingent Worker vs Contractor

The terms contingent worker vs contractor refers to people who work for businesses temporarily, either on a set project or for a preset period. The main distinction between them is how they interact with the companies that employ them. Despite their similarities, these professionals differ in several other ways, such as

Contingent Worker: Contingent workers assume varying classifications, either as employees or independent contractors, and thus fall under the purview of labor laws and associated safeguards. While engaged by an employer, they tend to operate under a degree of direction and supervision, often possessing limited autonomy in making decisions. Remuneration for contingent workers is commonly structured hourly or project-specific, and their taxes are typically withheld by the employer, reflecting the distinct nature of their employment arrangement.

‍Contractor: Contractors are typically categorized as independent entities, each with its own set of legal designations and corresponding responsibilities. Distinguished by their elevated control and autonomy over work and management, contractors possess a notable degree of freedom. They assume the responsibility of managing their tax obligations. They are commonly compensated based on pre-established contractual agreements, reflecting their self-directed professional engagement.

The Difference Between Contingent Workers, Contractors, and Core Employees

Hiring today has become a bit overwhelming as there are different kinds of employees. You must comprehend how each employee differs from the others in order to hire distinct personnel effectively. You can then select the appropriate kind for the work at hand.

Let's talk about these distinctions now.

Contingent Workers: Contingent workers typically engage in temporary and short-term roles, often characterized by their limited duration. Given the temporary nature of their employment, these workers may have fewer labor rights and protections than traditional employees. Additionally, contingent workers often have restricted access to the comprehensive employee benefits commonly offered to full-time or core employees.

Contractors: Contractors are commonly enlisted to fulfill specific projects or tasks within a defined scope of work. They typically operate with autonomy, assuming responsibility for ensuring their legal adherence and compliance with relevant regulations. Unlike traditional employees, contractors are accountable for managing their benefits and tax obligations, reflecting the independent nature of their professional engagement.

‍Core Employees: Core employees constitute the bedrock of an organization's workforce, engaging in stable and long-term employment arrangements that extend beyond specific projects or timeframes. These employees enjoy a comprehensive set of labor protections, encompassing rights such as minimum wage, overtime pay, and protection against discrimination. Moreover, core employees are entitled to a spectrum of benefits the employer provides, including retirement plans, health insurance, and other perks that contribute to their overall well-being.

How Skuad Can Help

While there are many benefits to hiring contingent workers, contractors, and core employees, there could also be expensive fines and penalties in case of misclassification. Especially while working with different kinds of globally distributed employees, you must be clear about their roles, responsibilities, and compensation.

With Skuad as your Employer of Record (EOR) partner, your company's global expansion potential becomes boundless. Skuad’s platform aids in quickly hiring and onboarding employees and contractors, handling payments, and maintaining legal compliance with employment and tax laws.

Let us handle the hassle of figuring out your global payroll and the burden of adhering to labor compliance so you can focus on what really matters: your business. Find out more about how Skuad can assist you. Book a demo today! 

FAQs

1. What is another name for a contingent worker?

Other names for contingent workers include consultants, freelancers, independent professionals, temporary contract workers, or temps.

2. What is a CWR employee?

Contingent workers (CWR) are individuals who are hired by a business on a temporary basis to carry out a particular task or function but who are not considered employees of the company and who do not receive remuneration.

3. What is the opposite of a contingent worker?

The opposite of a contingent worker is a core employee. The most obvious distinction between a core employee and a contingent worker relates to their time. A contingent worker hired on a contract basis will work for your company just temporarily and for a specific task, such as to cover a skill gap in your staff or supply project-specific abilities. 

Core employees are engaged permanently and are provided with contracts outlining their legal rights.

4. What are two examples of contingent work?

Two examples of contingent work are:

• Temporary agency employees are brought in to address seasonal demand
• Highly qualified experts to work on particular tasks