Categorizing the extended workforce

Growth of the non-employee workforce

Organizations increasingly rely on an extended workforce of non-employee talent to complement their full-time, permanent employees. From approximately 20% of the average workforce in 2010, non-employee workers grew to represent 49% of the total workforce globally in 2023, and this trend continues. As employers experience a widespread and growing skills shortage, the use of this external workforce is expected to rise. To meet their business goals, companies must optimize their labor investments and tap all available sources for the skills they need. To use non-employee talent effectively, it is important to understand all the categories of workers the extended workforce comprises

Categorizing the extended workforce

Twenty years ago, the primary concern for extended workforce program owners was to minimize the cost of external labor. Today, extended workforce programs are much more strategic. Their primary focus is to deliver the talent their organizations need to achieve their strategic goals.

To realize their objectives, businesses must choose the right categories of external talent for every task assignment or project to be accomplished. This usually includes contracting with staffing suppliers to provide contingent workers on a time-and-materials basis at a fixed hourly rate. Most organizations also engage project-based consultants or service providers on a statement of work (SOW) basis. These SOW contracts generally involve fixed project pricing in which payment is issued when milestones are met or deliverables have been received and accepted.

It is vital for organizations to have full visibility into their extended workforce to determine the best talent category and pricing for each project or assignment. In addition, they need to understand the different categories of talent available and how to engage this talent to achieve each objective.

A note about terminology

There is no universal consensus on the terms to describe the various segments of the extended workforce. In fact, the extended workforce itself is often called the “contingent workforce,” “external workforce,” or “non-employee workforce.” Contingent workers — also known as “talent” or “labor” — are also variously defined in different countries, industries, or circumstances.

In this document, we use the most common definitions of the workforce categories described in the latest edition of The Lexicon: The Global Language of the Workforce Solutions Ecosystem, published by Staffing Industry Analysts (SIA). In some cases, we have simplified these definitions. For complete information and additional context, we encourage readers to consult SIA’s Lexicon.

Category dividers: scope of assignment and payment terms

To categorize the extended workforce, the best place to start is to understand two fundamental dividers:

1. Scope of assignment
2. Payment terms

Scope has several dimensions, including the length of the assignment, tasks to be performed, the level of supervision required, and individual or group responsibility. Payment terms define whether contingent talent is paid based on the number of hours worked or on the successful completion of agreed-upon goals or deliverables.

Temporary staffing

If the assignment is short, the tasks to be performed are simple and/or repetitious, the level of supervision required is high (or specialized to a particular assignment, location, or industry), and the labor is performed by an individual, this category is typically classified as Temporary Staffing with sub-classifications including:

• Commercial staffing
• Office/clerical staffing
• Industrial staffing

Within these sub-classifications, there are even more sub-sub-classifications.

One example is high-volume, shift-based staffing. An offshoot of industrial staffing, this category is especially difficult to manage because its workers must be recruited and its positions filled with very little lead time (typically 24 hours or less). Schedules are extremely variable, and all factors — qualifications, experience, location, rate, and availability — must be highly automated to prevent no-shows and double bookings.

Professional staffing

If the staffing assignment involves more technical, specialized, or managerial functions, including IT/technical, engineering, accounting and finance, legal, sales and marketing, or similarly complex services, it is generally classified as professional staffing.

In the types of staffing listed above, workers are generally called contractors. They are engaged as individuals, either directly as independent contractors (ICs) or as agency contractors via a staffing agency. These workers are typically paid on a time and materials (T&M) basis, with their costs calculated at hourly rates.

Consulting and professional services

Statement-of-work (SOW)-based contracts can also be priced on a time and materials basis, but it is more common for them to involve a fixed price based on projected outcomes, regardless of the number of workers involved. Payments are typically made based on milestones met and deliverables provided.

Consulting and professional service projects generally involve contracts whose SOWs specify milestones and deliverables. Individuals who perform the services specified in the SOW are known as consultants when they work for consulting or professional services firms and service workers when they work for companies providing more general business, maintenance, or other non-core services.

Confusion with other categories may result from the fact that both professional and general service workers are sometimes called contractors because they are employees of service companies working under SOW contracts.

Outsourced services

Outsourcing, whether domestic or offshore, typically involves long-term arrangements with a clear definition of services to be provided. These services can range from non-core business activities such as call centers, security, and facilities management to business-critical processes, including help desks, IT, and accounting/finance.

In most cases, outsourcing contracts are much longer than consulting or professional service contracts, and their SOWs are not driven by milestones and deliverables but by the ongoing provision of services.

Contingent staffing and services procurement

To source and engage the various talent categories, contingent workforce management software offers two sourcing and management tracks, generally referred to as “contingent staffing” and “services procurement.” Contingent staffing is used to engage, manage, and pay individual contractors, whether provided by staffing agencies,  from private talent pools, or sourced by other methods.

Services Procurement is used to source consultants, professional service contractors, or other service companies, to write and negotiate SOWs, and to manage the lifecycle of an SOW-based project, from initiation to completion, including interim and final payments.

To help hiring managers and contingent workforce program owners determine whether to choose the Contingent Staffing track or the Services Procurement track to source the talent they need, some software solutions, like Beeline Extended Workforce Platform, offer artificial intelligence (AI)-based prompts and wizards to guide users to the correct sourcing workflow.

Keeping things simple as the workforce grows complex

Sourcing, engaging, and managing contingent talent has become increasingly complex, driven by chronic skills shortages,  increased regulatory requirements, and organizations' growing demand to demonstrate return on investment (ROI) for all spending.

Software solutions have evolved to meet these requirements and automate contingent workforce management. Beeline Extended Workforce Platform is a comprehensive solution with a vast repository of extended workforce data, advanced connectivity, and decades of experience supporting hundreds of contingent workforce programs around the globe.