What Is an On-demand Workforce? Small Business Guide
Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll.
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.
On-demand Workforce | Traditional Employees | |
|---|---|---|
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 |
Overhead | 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:
Legal Considerations
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.
Bottom Line
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.
