Lower cost or just lower value? Modeling the organizational costs and benefits of contingent work

Author(s): Fisher, S. L. & Connelly, C. E.

Date: 2017

Resource: Academy of Management Discoveries, 3(2), 165-186

Although many managers assume that the use of contingent workers helps organizations lower their costs, it is unclear if these anticipated savings actually materialize once these workers’ productivity and indirect costs are taken into account. The purpose of this paper is to identify the conditions under which contingent workers may (or may not) be a cost-effective solution for organizations. We develop a theoretical framework of the financial costs and benefits of three different contingent work arrangements, taking into account direct and indirect costs as well as the value of both task performance and organizational citizenship behaviors. This framework suggests that costs associated with lower performance and higher turnover substantially reduce the overall value of temporary agency workers. We then use a simulation approach with six scenarios representing different organizational strategies to examine how organizational circumstances may further affect the likelihood that the use of contingent workers actually represents a significant cost savings. Our results suggest that although temporary workers were less cost-effective (and independent contractors were more cost-effective) in each scenario, the cost-effectiveness of each worker type also varies depending on the strategy, with the “Temp-to-Perm” approach being most cost-effective overall.

Go to journal page View all resources

Related Research Areas: Temporary and Gig Workers