Five Trends Changing our Business – The Shift Toward More Independent and Contingent Workforces (Trend #2)


The article below is considered part two of a five-part series white paper on trends changing the nature of work, our workforce, and our economy. You can view part one here or download the full white paper below to get all trends at once. The second trend up in our five-part series is The Shift Toward More Independent and Contingent Workforces


The Preface

We are now amidst what many call the Fourth Industrial Revolution (or Industry 4.0). The first industrial revolution involved the automation of work through water and especially steam power in the 18th century. The second, in the 19th century, involved using electricity, cost-effective steel, and principles of mass production. The third, starting in the 1960s, involved advances in computers, information technology, and the Internet (sometimes called the Information or Digital Revolution). The fourth expands on the third by adopting artificial intelligence, robotics, 3D printing, cognitive technologies, machine learning, and other intelligent systems fueled by advanced computing. These advances are so transformative that they change the nature of work, labor markets, our economy, and how we compete globally.

With the 3rd (digital) revolution, we changed our economy from one based primarily on manufacturing to one based on services. Telecommunications, media, high tech, financial services, healthcare, and professional services now dominate our economy and make up most of our GDP and the Dow Jones. Even manufacturing has seen the rapid introduction of computer technology in the factories, devices, and vehicles we produce. At the same time, giant Asian economies’ (e.g., India and China) industrialized and their markets opened, while Europe formed the European Union (EU) to compete as one continental power. According to a Brooking institute study (2018), the United States (U.S.) is no longer the world’s manufacturing leader. We may never again be able to out-produce India or China with populations each four times larger than our own. In recent decades, we competed with the world based on innovation. As the world catches up with greater size, we have reinvented new industries altogether. But some wonder how we will keep that up.

Now we are competing on a global scale for the Fourth Industrial Revolution. Who will invent and dominate the fledging new industries of tomorrow? Who will the world come to for clean, renewable energy? Whose medical science and devices will the world turn to when the next pandemic hits? Who will the world’s factories, machines, and vehicles build intelligent tools and technologies into their products? Which of today’s industries will become obsolete, and who will replace them?

There were reasons why the United States competed so well in the previous three contests. Our national resources, unique labor market, economic policies that reward entrepreneurialism and investment in innovation, and an education system that produces exceptional scientists and engineers. Our ability to adapt and reinvent ourselves to the times has been critical. The way we reorganize work, and ourselves, to meet the challenges of each new generation—our openness to change and our ability to learn continuously.

Five Trends Changing the Nature of Work

The world is changing again – and it is simultaneously driving several trends changing the nature of work, our workforce, and our economy. These five trends are:

  1. The increasing (exponential) speed of industry convergence
  2.  The shift toward more independent and contingent workforces
  3. The exit of baby boomers and entrance of Gen Z into the labor market
  4. The shift toward human-centered work design is driven by Industry 4.0 automation, and
  5. A push toward remote and flexible work coming from globalization (and global pandemics)

Taken together, these trends speak to a working environment quite different from any time in our past, and one which only some companies are preparing themselves for today.

2. The shift toward more independent and contingent workforces

According to the Internal Revenue Service (IRS), independent workers are self-employed and include sole proprietors, freelancers, independent contractors, part-time business operators, and gig economy workers that are paid via Form 1099. Contingent workers are employees of a contract or staffing agency that provide their workers to another company on a temporary or limited basis. Employers use such contractors instead of W-2 full-time employees for various reasons, including short-term project work, a speaking or teaching engagement, staff augmentation to replace a worker who is temporarily out on leave or disability, seasonal work needs, or backfill to replace a sudden separation or sickness. A 2020 Gartner study reports that “32% of employers use contingent workers to reduce costs, while 12% use them to fill labor shortages.”   A 2018 Ernst & Young (EY) study provided more insight “mid-market companies are using freelancers to expand their capabilities and fuel their growth…For big companies, the No. 1 driver (at 62%) is to control labor costs. For mid-market companies, the No. 1 driver (at 58%) is to fuel growth — to complete projects requiring specific expertise or capability beyond the existing workforce.”

Companies also engage vendors (consultant firms, etc.) for specific tasks/projects if they do not have those skills in-house, such as graphic artists, audiovisual (A/V) media specialists, technology consultants, auditors/accountants, technology implementors, marketing/ad agencies, etc. Some of these can be vendors, but some can be independent contractors. Gig Economy workers are a particular case of independent workers who perform tasks, often posted on the internet or via App. The most famous may be Uber drivers but can include a wide variety of ‘side work’ tasks such as Task Rabbit, accounting tasks, repair person tasks (Angie’s List), programmers, consultants, fitness trainers, babysitters, etc. Gig economy work can also include independent sellers (e.g., eBay, Etsy), Air BnB renters, YouTube channels, or day traders. Some corporations use gig workers for ‘crowd-sourcing.’

A 2016 McKinsey study segments independent workers in this way. “There are four key segments of independent workers: 30 percent are “free agents,” who actively choose independent work and derive their primary income from it. Approximately 40 percent are “casual earners,” who use independent work for supplemental income and do so by choice. “Reluctants,” who make their primary living from independent work but prefer traditional jobs, make up 14 percent. The “financially strapped,” who do extra independent work out of necessity, account for 16 percent.”

While most authorities agree that the number of independent and contingent workers is on the rise, exact estimates of the numbers are sometimes difficult to come by due to a lack of consistent definitions and methodologies. For example, in 2015, the U.S. Government Accountability Office (GAO) produced a 96-page report to estimate the size of the gig economy by looking at statistics from the Bureau of Labor Statistics, the Census Bureau, and the Internal Revenue Service. “Depending on how those agencies define a contingent worker, they arrived at figures ranging from 5 percent to 40 percent of the workforce.” A thorough review of the most notable studies available at the time (McGuires 2018) concluded that “approximately 11 percent of the working adult population in the U.S. are working primarily as full-time independent contractors in the gig economy.” This correlates to between 15 and 17 million workers. The author notably states his exclusion of part-time workers, ‘moonlighters,’ and ‘side hustles.’ This roughly corresponds to a 2019 IRS/Department of Treasury report estimating the number of independent contractors to be around 14 million (about 8% of the working adult population).

Whatever the exact definition, the use of these alternate workforces is on the rise. A 2021 MIT study concludes, “Our recent global executive survey affirms that the vast majority — about 87% — of respondents include some external workers when considering their workforce composition…. A third of our survey respondents (33%) expect to increase their dependence on external workers in the next 18 to 24 months.”

A 2020 report authored by tax software giant Intuit claims, “Traditional employment will no longer be the norm, replaced by contingent workers such as freelancers and part-time workers. The long-term trend of hiring contingent workers will continue to accelerate with more than 80% of large corporations planning to substantially increase their use of a flexible workforce.”

What does this mean for talent organizations?

A workforce ‘ecosystem’ comprised significantly of contract labor raises various novel issues for human resources (HR) administration. However, this situation is not unique to all industries, and lessons can be learned from technology, transportation, utility, and healthcare firms – among others. Learning functions, in particular, face some unique challenges and opportunities.

Talent Marketplaces
A talent marketplace is a technology platform that connects employees with potential work opportunities within the organization. A place where employees can register their skills (e.g., tracking finances, analyzing budgets, etc.) in a central database. They do this to pursue task assignments they enjoy or want to develop. “An ideal talent marketplace considers the entire individual, including their skills and competencies, but also moves beyond traditional considerations to look at interests, work styles, and learning preferences.” Managers who start a project requiring this skill can consult the database (the talent marketplace) to match required tasks with people who have registered that skill—no need to have the whole person reassigned to your team, just that one task.

L&D Meets Work Ecosystems
Typically, contractors require much of the same onboarding as new employees, with the knowledge that the return on that learning investment will leave the company shortly.

Consider the following typical contractor onboarding needs:

  • Procedural contracting matters (time tracking and expense policies, invoicing/payroll, risk management and security policies, classification rules compliance, etc.)
  • Onboarding with the company’s business, organization, and products
  • Technology support (often remote) for the company’s various systems

Adding to the complexity are certain logistical challenges that contracting exacerbates:

  • Accelerated need and lack of resources to ramp up contractors to required performance levels
  • Diminished access to company resources due to security concerns
  • Assessing and addressing as is skills to establish a foundational skillset
  • Establishing records of training compliance for industry regulators

Strategies some firms leverage to respond to such challenges:

  • Leveraging an LMS to help with documentation of required training and certifications
  • Establishing a unique curriculum and learning portal targeted at contract workers
  • Development of internal talent markets which can leverage pre-approved contractor resources
  • Cost-sharing arrangements with contract agencies to establish firm or sector-based certifications (e.g., certified-to-serve curriculums)
  • Leveraging LXPs to leverage available content to close learning gaps.

Some firms have gone as far as to create separate teams whose sole responsibility is managing the talent needs of their independent workforce.

Download The Full White Paper

Please register below to continue reading.  If you have any questions or need assistance with your download, please reach out to us at