How a Flexible Global Talent Strategy Is Key to Business Reinvention

Achieving sustainable business growth demands the right approach, strategic planning, and the necessary skills.

It also requires the right people.

However, finding the right talent to achieve short- and long-term business goals is a top challenge for most businesses. According to Deloitte’s 2024 Global Workforce Trends report, 71% of CEOs cited talent shortages as their top external challenge to meeting their business objectives.

That’s why more companies, from SMBs to multinational corporations, rely increasingly on contingent workers to help them bridge the skills gap, enter new markets, and foster successful growth. In the EU, these workers comprise a substantial part of the labor force: 28.3 million in 2022. Staffing Industry Analysts reported that the U.S. had 51.5 million contingent workers in 2021, making up 35% of the workforce and contributing $1.3 trillion of revenue. The State of Independence in America survey revealed that businesses’ spending on contingent talent increased by 23% in the same period. By 2023, that number had grown to 72.1 million Americans, nearly 45% of the workforce, according to MBO Partners.

What is a contingent worker?

A contingent worker, also called an independent contractor, flexible talent, freelancer, or gig worker, is a person employed by a company in a role determined by a set period or for a project with a predetermined or project-based end date. They differ from a company’s permanent workforce, who work for an indefinite period of time with no predetermined end date on projects central to the business.

The terms “contingent worker” and “global contractor” are frequently used interchangeably. Still, their meanings can vary depending on the situation, the nation they reside in, and if the company that employs them has an entity set up in their location.

Examples of contingent workers

Nearly every industry employs contingent workers, from technology to health services, marketing, and retail. Examples of contingent workers include:

Contractors and freelancers
Consultants and gig workers
Temporary workers employed by a third party, such as a staffing agency

Generally, contingent workers are linked to more flexible and indefinite employment arrangements, whereas contract workers usually operate under specific, set time frames outlined by a contractual agreement. Key distinctions often involve whether a formal contract regulates the role, the length of employment, tax implications, and payment.

Companies worldwide increasingly rely on contingent workers and contractors to achieve their business objectives. The Contingent Labor Imperative study reveals that flexible labor comprises up to 28% of a typical company’s workforce. The same study estimates that by 2027, contingent labor will comprise 38% of a company’s workforce.

So, what’s driving the contingent and contractor workforce explosion?

Business reinvention.

Business reinvention starts with global talent

Seventy percent of CEOs think business transformation is essential for successfully navigating rapid market changes and securing their company’s future. Events like the global pandemic, climate change, globalization, the rise of generative AI, and changing regulations have pushed executives and companies to pivot fast under market pressures.

Since 2019, business leaders have faced an extraordinary pace of change—183% over four years and 33% in the last year, according to the Accenture 2024 Pulse of Change Index. The survey shows that 88% of C-suite leaders expect even faster change ahead. This uncertainty is causing concern, with 45% of CEOs worried their businesses might not remain viable in the next decade, as noted in the 27th Annual PwC Global CEO Survey.

You need a flexible talent strategy that extends your workforce across borders to adapt to market shifts, constantly innovate, and switch business models. Hiring international contingent workers offers excellent opportunities to net top talent but involves complex country-specific regulations. Understanding how to legally and compliantly pay and manage international contractors is essential. The recent adoption of the Platform Work Directive by the EU underscores this as it sets the standards for protecting employee citizens and worker rights in the EU’s rising platform and gig economy.

Assessing your contractor and contingent worker risk

Misclassifying contractors and contingent workers can impact your business’s long-term success due to the risk of significant fines and penalties in the country where the misclassification occurred. When companies incorrectly classify employees as contingent workers or contractors, they risk financial and reputational consequences for noncompliance. Before launching any contingent worker initiative, you must address your company’s risk tolerance.

Most companies use local agencies or establish their own entities to hire contractors. But it’s not easy. Any HR professional will tell you that contingent and contractor worker compliance is a rapidly changing regulatory landscape. Many companies choose global employment providers to handle local laws, ensure compliant payment of international talent, avoid paying steep costs to establish new entities, and comply with local laws and regulations.

Examples of contingent and contractor staffing models

Contingent staffing models include:

A managed service provider is a business hired by a company to manage and maintain various tasks and functions on the company’s behalf. Two examples of services a managed service provider may offer include technical support fixes and subscription services.

A staffing agency connects companies needing to fill open positions with job seekers, helping to find the right talent to achieve the company’s business goals. Also called search firms, recruiting firms, or employment agencies, they can minimize the risk of hiring the wrong candidates by assessing workforce skills, experience, and cultural fit.

An agent of record (AOR) uses a third-party broker of record to serve as the contracting party with the contingent worker. The agent is liable for compliant classification and compliance of their international contracts, including payments and local tax regulations, and manages an insurance policy.

An employer of record (EOR) lets companies quickly enter new markets and hire top talent globally without needing to set up a local entity. The EOR handles all HR tasks, including onboarding, payroll, taxes, compliance, benefits, and unemployment claims, as required by the country where the contractor works. An EOR can also have additional solutions, like contractor management, without needing to be the AOR. This way, the EOR manages and pays the employee while the customer company owns the contractor’s employment agreement.

Each of these models has its benefits and drawbacks. When assessing which are best for your company’s needs and risk tolerance, you need to consider a few points:

What does the job require?
Is it hourly or per project on an initiative that is not core to the business?
Who will own the employment contracts? This opens the contract holder to risk and liability.
Are they the right arrangement given the types of jobs and the actual work needed? For example, the contractor route would be best if the role is temporary and not core to their business.

The ins and outs of global contingent worker management

Hiring top talent abroad is complex, and the laws are constantly changing. Contractor classification, tax requirements, and payment systems differ by country. Ignoring these variations can quickly lead to complications, fines, and other penalties. In fact, 46% of organizations surveyed by Deloitte in March 2024 said regulatory challenges regarding cross-border remote work are at the forefront of their minds.

Many employers make the costly mistake of misclassifying contractors. Misclassification happens when a worker is labeled a contractor but treated like an employee under the law.

In May 2023, Nike faced potential tax fines exceeding $530 million for allegedly misclassifying thousands of workers as contractors instead of employees. Similarly, HR startup Deel was under scrutiny in July 2023 after a California senator called for an investigation into their hiring practices. According to the senator, hundreds of employees may have been incorrectly classified as independent contractors, risking significant fines and legal issues if misclassification is confirmed.

That’s why savvy executives opt for quicker, lower-risk solutions. They use human capital management platforms like Velocity Global’s contractor management and EOR services to manage hiring, payments, and benefits without setting up a local entity. This strategy helps companies and their CHROs reduce costs, achieve financial goals, and access the talent necessary for growth and innovation.

Transitioning contingent workers and contractors to employees

Engaging global contingent workers and contractors is a key step in global expansion. Whether using them to access new talent, enter new markets, or address skill gaps, you’re laying the groundwork for future growth.

But, at some point, the contract will end, or you may convert the person into a permanent employee if you want their position to be ongoing. Alternatively, if the contract is extended, the worker might be considered permanent by default.

Four essential steps to choose the best contingent staffing model

Here are some key factors to consider when deciding which contingent and contractor staffing model is right for your business:

Determine your risk tolerance.
What does the job require? Does it pay hourly or per project for an initiative that is not central to the business, or is the role core to the business?
Ensure you classify your talent correctly, whether they’re an employee or contractor.
Choose the best staffing models for your business goals.

Easily manage or convert contingent workers with Velocity Global

Since 2014, Velocity Global has helped over 1,000 companies employ full-time talent in more than 185 countries with our Contractor Management and EOR solutions. Whatever your business objectives, we have the expertise and capabilities to onboard, manage employment contracts, benefits, and payroll, or transition your talent smoothly while providing ongoing expertise and support so you can effortlessly grow your global workforce.

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