What Is an On-demand Workforce? Small Business Guide
This article is part of a larger series on Hiring.
An on-demand workforce is a group of people that can be hired as and when needed—sometimes even beginning work the same day—and may include temporary employees, day laborers, or freelance workers. This can be a solution if you’re just getting started, need administrative support, or require technical expertise to help you get a project across the finish line. However, take note that these workers are NOT classified as your direct employees.
On-demand staffing often works best and most effectively in industries with short-notice shifts, such as construction, hospitality, cleaning, and healthcare. The concept is surging in popularity amid ongoing recruitment challenges and skills shortages, as well as the desire by both employers and workers to have as much flexibility as possible.
Let’s dive deeper into what sets an on-demand workforce apart from traditional employees, how you can find them, and why on-demand staffing might benefit your small business.
On-demand Workers vs Traditional Employees
On-demand staffing isn’t the answer for every situation. It really works best for urgent needs, short-term project work, or small gaps. Compared to a traditional employee, you’ll save time and money with on-demand workers, but give up some control.
Time to Hire
Varies, but same-day is possible; less than a week for a temp worker
Depends on position, but can be months; 42 days is the average
Covered by on-demand or temporary staffing agency; flat rate for freelancers
Payroll, taxes, benefits, insurance, etc.
Cost to Company
Flat rate paid to on-demand agency; high hourly rates paid to temp agency; case-by-case for freelancers
Most expensive, salary dependent on role and state minimum wage laws
Control over Worker
Often limited or none (especially for freelancers); some control if directed by on-demand or temp agency
Complete control over daily tasks and when and how the employee works
Freelancers or independent contractors are the most common on-demand workers, but, as mentioned above, an on-demand workforce for your small business may include other types of workers (temps, consultants, day laborers, etc.).
Be careful you don’t treat your independent contractors like full-time employees. You can’t tell independent contractors when, where, or how to work—and if you do, you risk fines and penalties for misclassifying workers. Check out our guide on 1099 vs W-2 Workers for more information.
Where to Find On-demand Workers
On-demand staffing can reduce the time and effort required to make the right hire by giving you quick access to workers who fit your needs. While you can look for on-demand workers yourself, small businesses often lack the resources to find and recruit talent. It may simply take more time and effort than it’s worth, so it can be better for small businesses to consider a staffing agency or freelance website instead. Such methods also make ensuring compliance with employment and classification laws even easier.
Did You Know?:
Although we highlighted a few common industries that use on-demand workers earlier, companies in any industry may benefit from this approach. If you run a small business and need an administrative assistant or a delivery driver for a day or week, you could use an on-demand staffing agency to fill your need quickly.
Click through the tabs below to see your options:
These companies can offer you access to workers that can help you fill a gap or get necessary work done in a short time. They’ll also be the employer of record (EOR) for the on-demand worker you choose, so they’ll carry the burden of overhead costs and work to ensure the worker is correctly classified. Here are some agencies you can consider:
- On Demand Staffing
How It Works
When you partner with an on-demand or temporary staffing agency, you discuss your company details with your account manager. Together, you will determine your staffing needs and create a job post for the most urgent one. The staffing agency will provide you with a list of candidates matching your needs and ready to work, possibly as soon as the same day. Many on-demand and temporary staffing agencies will have workers ready with extremely short notice (On Demand Staffing, for example, boasts more than 35,000 workers on standby and ready to work across the US).
Workers also create profiles, which you may be able to search. When an on-demand worker reaches out to you, you can review their profile to see if they match your needs and instantly accept or decline. If you choose to accept them, you know exactly what you’re getting and how much it will cost, letting you budget accordingly. Because the worker is not an employee of your business, you simply pay the staffing agency a flat hourly fee.
The agency generally takes care of all paperwork, background checks, and safety training, as well as payroll taxes, workers’ comp, and unemployment insurance.
- Platforms like Upwork or any of the leading websites to hire freelancers have millions of workers available on short notice for short-term work. However, finding an on-demand worker yourself can take more time and requires you to navigate employment classification on your own. Seek guidance from an employment lawyer to make sure you are not crossing a line and potentially putting your business at risk.
- If you decide to go it on your own, the great news is that there are millions of workers available, many of whom may just fit your exact needs. About 36% of the US workforce earns money as a freelancer or independent contractor—that’s a big pool to pull from, so you’re likely to find what you need.
How It Works
Freelance websites are designed to simply facilitate relationships between employers and independent professionals looking for short-term or project work. The bigger sites have extremely large pools of workers—more than 60 million globally for Freelancer.com, for example. Some charge a monthly fee, while others are free to use but charge a transaction fee when you actually begin paying a freelancer.
You can post your position or project and let freelancers make their pitch, or you can proactively search for a professional who fits your needs. Typically, the websites have tools to help you find the right freelancer, such as filtering by skills, location, certifications, ratings and reviews, or even pay rates.
For additional fees, freelance websites will often recruit and select candidates for you and help you manage and pay your freelancers.
As mentioned earlier, on-demand workers are not your direct employees. They are self-employed or employees of the staffing agency. It’s very easy to cross the line between contractor and employee, so make sure you speak with an employment attorney to help you stay compliant.
Misclassification of a worker can lead to costly fines and penalties. You could be on the hook for back pay, overtime, and payroll taxes for both the worker and your company, along with other government fines. This is why when you’re looking for an on-demand worker, it’s often best to use an on-demand or temp staffing agency. It can reduce some of the risk by providing you with a worker for a limited time while maintaining compliance with employment laws.
If the work you need done is project-based, you’re more likely to be able to find a freelancer to help while also staying compliant with employee classification laws. Some examples of this include hiring an accountant to clean up your books, a marketing strategist to help create a new advertising campaign, or a data analyst to provide insights into industry trends and provide recommendations on how to adapt.
Benefits of On-demand Work
Unemployment has dropped dramatically in the last couple of years, making it more difficult for small businesses to find highly skilled full-time workers. Turning to an on-demand workforce may be the right option for your company to help you find qualified workers while potentially saving time and money.
According to Upwork, 78% of companies currently use on-demand workers in some fashion. Many of these workers are freelancers who operate as independent contractors. This partnership allows your company the ability to save on overhead and hiring costs, while still getting qualified workers for the work you need done.
On-demand staffing also helps companies increase their efficiency, reduce overhead costs, and access skilled professionals when they need them, making it a great way for companies to supplement work. It enables small businesses to quickly find the right personnel for a given position, task, or project, with no long-term commitments, helping businesses weather uncertain times by controlling costs and being adaptable.
Businesses can take advantage of short-term opportunities while keeping staffing costs low and reducing the administrative burden on their HR and finance departments, giving rise to this type of worker arrangement. It also gives small businesses the ability to draw from a larger pool of potential workers than they would have otherwise had access to.
The rise in on-demand work also benefits workers. On-demand staffing can give them greater flexibility and independence in their work. Rather than having to commit to a full-time job with a single employer, workers can take on short-term work that suits their lifestyle. This setup enables them the ability to create a diverse portfolio of work and may lead to multiple streams of income. Many on-demand staffing agencies also provide training and support to workers, giving them the resources they need to improve their skills.
Because small businesses often have difficulties hiring and retaining talent, especially for mundane work, on-demand staffing can be a great option. Having an on-demand workforce benefits your company and the workers, as you have quick and easy access to skilled workers who can help you fill in a gap, and they get to choose how much work they take on.