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The Growth of the Contingent Workforce (part 1)

This blog is part 1 of a 2 part series.

There continues to be a movement into the contract employment model from traditional permanent placement. While the overall non-farm payroll environment was reported this week with revised unemployment numbers down to 4.5% paired with slowing hiring numbers down to 98,000 in March, the American Staffing Association (ASA) Staffing Index which tracks weekly changes in temporary or contract employment has steadily risen in 2017, with March showing a 2.27% increase year-over-year.

In the article “The End of Employees”, Lauren Weber of the Wall Street Journal describes the reasons and outcomes of using external workers across all industries; “Contractors help businesses keep their full-time, in-house staffing lean and flexible enough to adapt to new ideas or changes in demand.“ In the technology sector specifically this is a constant with rapid change and dynamic shifts in skill requirements; “The contractor model is so prevalent that Google parent Alphabet Inc., ranked by Fortune magazine as the best place to work for seven of the past 10 years, has roughly equal numbers of outsourced workers and full-time employees, according to people familiar with the matter”. While a smaller percentage over direct-hire employees, the growth trend in contracted labor over the last six years has been continuously higher shifting slowly from direct employment – since 2010 and consistent to the economic recovery (Figure 2). According to the staffing industry 44 million people performed contingent work in the US last year, representing 29% of the entire US workforce and accounting for $792 billion in annual spend.

Several underlying macro employment trends are very real – continued reductions in unemployment, overall movement from permanent to contract employment, the qualified resource pool for permanent and contract work is tightening and compensation will start to increase – “U.S. hiring slowed in March but broader trends suggest slack in the labor market is disappearing…and workers with prospects of better paydays”(April 7, 2017, Wall Street Journal).

The good news is there will be strong opportunity in 2017 for skilled IT talent to realize their ambitions and continue to gain deeper experiences. This is most visible in certain areas of the IT market with very strong growth trends such as in Cybersecurity, Cloud, AI, Analytics and Customer Experience. According to Gartner Group customer experience across all industries will have increasingly higher competitive value “This customer experience management market research forecasts the industry to grow … a Compound Annual Growth Rate (CAGR) of 17.3% from 2014 to 2019.” These industries have technology skill needs in sales, support, design, engineering, development, data analytics and in the performance of the services required to realize the technology market solutions’ full go-to-market potential. However, these industries are mindful of the financial impact of having to increasingly staff owner versus contracted employees and will continue to balance flexibility, speed and long term employee needs.

Bruce Harpham of CIO Magazine in his article The state of the IT contractor job market in 2017, notes that within the hot areas of technology increasingly the demands are being fulfilled on a contract basis due to higher pay, demand and desire by employees to move from fixed positions to a more flexible working model; “Trends toward higher pay and demand for specialized skills continue apace, creating opportunities for contractors across the industry.” Recent statistics show that 95% of businesses view the GIG (contingent) workforce as a key element to developing and running a successful business.

Therefore, 2017 will be a great year for both the contractor and the traditional full time direct employee. There will be IT opportunities not only in the changing technology landscape, but growing industry vertical needs for IT, such as in healthcare and manufacturing. The contractor has a role in a blended market that has plenty of need for permanent employees. There is a place for each driven by the objectives of the hiring strategies and business objectives, as well as, the ability to digest what is a worker who is passing through for a specific skill, experience or capacity for a set period of time.

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