One out of every eight employers utilizes temporary or contract employees. It is estimated that between 17 million and 41 million people work as consultants, freelancers, contract workers, temporary employees, seasonal or on-call workers, and interns. About 15 million of those are considered “full-time independents,” working more than 15 hours a week.
Almost half of U.S. adults — 47.8 percent — report either currently working or having worked as an independent worker at some time during their career. Over the next five years, this number is projected to increase to 53 percent of the workforce either currently working as an independent worker or who will have worked as an independent.
Independent work — in particular, contract work — is attractive to individuals who are looking to return to the workforce while or after caring for children or aging parents and those who are looking to transition from full-time employment into semi-retirement. It’s also increasingly an option for those who are starting their careers.
This is supported by the statistics: Millennials — born between 1980 and 2000 — made up 38 percent of the full-time independent workforce in 2019, according to MBO Partners’ “State of Independence” report. Baby boomers, born between 1946 and 1964, encompass 33 percent.
Temporary and contract workers are an important part of the workforce. Contract workers offer companies flexibility in staffing and help fill in gaps (especially in growing companies), to address seasonal needs, or when permanent employees are on leave, sabbatical, or vacation.
Contract and temporary opportunities are particularly attractive to jobseekers during recessions and economic downturns. For the jobseeker, the interview-to-hire process is often shorter, meaning you can be back to work more quickly. Even companies that have enacted a hiring freeze may still be taking on temporary or contract employees because this money often comes from a different budget than traditional salaries.
Eighty percent of full-time independent workers are independent by choice. More than half say they will not go back to a traditional job. In addition, 53 percent of full-time independent workers report they feel “more secure” working independently. This is perhaps a reflection that even traditional employment has no guarantees of stability.
And a growing number of contract positions are for remote work, removing geographic proximity from the requirements for working these types of positions.
What Is Contract Work?
Temporary positions — or contract work opportunities — are an alternative to full-time, permanent work. Contract and temporary work can also be a side hustle to supplement your income. In 2019, 15 million people had a side hustle, an increase of more than 40 percent since 2016.
Contract workers may be self-employed or may be contracted through an agency. Self-employed workers are responsible for their own taxes, insurance, and benefits, while agencies often employ contract workers as W-2 employees (handling the billing, paperwork, and taxes for the contract employee).
There is sometimes a perception that contract work is only for low-paying, lower-skill jobs. This isn’t true. There are contract opportunities available for almost any field and industry and for a wide variety of positions — up to, and including C-suite roles. Contract work opportunities are common in creative service professions as well as the information technology, financial services, and healthcare industries.
Among full-time independent workers, the average income is $68,300, according to MBO Partners. This is higher than the median family household income in the United States ($59,039). About 20 percent of full-time independent workers earn more than $100,000 a year. In 2019, 40 percent of independent workers had a 4-year college degree or higher, including 17 percent who hold advanced degrees.
Jobs may be listed as “contract” or “temporary” — but they’re not the same. Contract positions are for a specified time period. Temporary positions, on the other hand, may not have a defined time period. Temporary workers may be directly employed by an employer or may be employees of a temporary agency. Contract workers, unless hired through an agency or consulting firm, are independent contractors. This means you are responsible for your own taxes, insurance, and benefits. In essence, you are self-employed and the company you’re working for is your client.
One important distinction between permanent and contractor or temporary positions has to do with the Internal Revenue Service. IRS regulations dictate that the employer cannot have as much control over how a contract worker does his or her job as it would with a permanent employee. While the requirements of the position don’t change if it’s permanent or temporary, the employer can’t define how the work is done by a contract worker.
Because it’s easier to find a job when you have a job, accepting a contract position makes you more attractive to prospective employers. In addition, contract work opportunities can often lead to a full-time, permanent position, especially if the opportunity is advertised as a “temp-to-hire” position. This type of arrangement allows a company to see if the individual has the skills, education, and personality the position requires before committing to a permanent position.
Advantages and Disadvantages of Contract Work
As with any type of position, there are advantages and disadvantages to contract work opportunities.
Some advantages:
- Contract work allows a jobseeker to gain experience in a new field or industry without committing to full-time employment.
- Compensation may be at a higher hourly rate than what would be paid to an employee, to compensate for a lack of job security and benefits.
- In most cases, contract workers are eligible for unemployment benefits when a contract ends, providing a bridge to benefits for individuals who may have been fired from a previous role.
- Contract work may turn into a full-time, permanent job offer in the future.
Some disadvantages:
- Contract work often offers no employment benefits (although limited benefits are sometimes available, especially if working through an agency or Employer of Record).
- Contract opportunities are perceived to be less stable than permanent jobs.
- Because of the risk of being accused of “misclassifying” contractors as employees by the IRS, contract workers may not be invited to participate in employee functions.
