August 21st, 2017 | Sterling

The “Gig” Economy and Contingent Workforce in Canada

The Canadian economy has changed dramatically over the last 50 years from relatively stable employment in the public or private sector to an increased reliance on temporary or contracted labour. While the manufacturing world has shrunk, the on-demand or contingent workforce (or gig economy) has grown. Freelancers are relying on websites and apps like Handy, LinkedIn, Uber and TaskRabbit to connect them with paying jobs. Today’s contingent workforce includes highly skilled specialists and consultants that can be found in nearly every industry. Large corporations are continually hiring more flexible, contingent workers to fill their staff. The contingent workforce is growing at a phenomenal rate in Canada and is showing no signs of slowing down.

What is a Gig Economy?

According to the Cambridge Dictionary, “a gig economy is a way of working that is based on people having temporary jobs or doing separate pieces of work, each paid separately, rather than working for an employer.” According to Randstad’s recently released Workforce 2025, a study looking at the future of the workforce in Canada, 30% of the workforce is currently made up of non-traditional workers and they forecast the contingent workforce to grow to over 35% by 2025. All age groups are taking part in the contingent workforce, but there seems to be an emphasis on the younger generation. In fact, the Royal Bank of Canada looked at Canadian millennials and their effect on the economy. Their report found that “Technological growth has coincided with an increase in self-employment within the professional, scientific and technical sector, where human capital tends to be the primary input. A rise in contract employment, which accounted for a record 12.8% of all youth employment in 2015, is another example.”

What Is The Contingent Workforce?

The contingent workforce are non-permanent employees, such as contractors, freelancers, agency workers and consultants. The meteoric rise of this group of workers is down to a few factors, such as changing economic and market conditions, skills shortages and a shift in general working patterns. Freelancers and contractors often enjoy higher job satisfaction as they have the flexibility and choice as to when, where and how they work, while employers can flex their workforce to meet immediate needs or demands, and tap into a rich pool of talent, skills and experience, without the burden of keeping them on the payroll.

However, behind the advantages of hiring contingent workers lie a few challenges, namely the hiring and screening process. According to the US Sterling Talent Solutions Background Screening Trends and Best Practices Report 2017, just 30% of survey responders screened their contingent workforce, compared to the 89% that perform checks on full-time, salaried employees. 42% of those that screen contingent workers require a background check based on specific screening criteria. The data shows that perhaps because the workers are contingent, companies are not viewing them in the same light as they would a full-time employee-as they are changing the types of checks they run and if they will even run a check in the first place.

Staffing Agencies and Background Screening

One of the major sources of contracting temporary contingent workers is via job recruitment and staffing agencies. Staffing companies have “a touch” upon every industry from industrial to the technology sector to hiring for one-off trade shows or special events. The integrity of the candidates placed with a staffing company can make or break an organization’s reputation and branding. Client companies look to a staffing company to provide them with the best-skilled workers to meet their productivity goals.

The staffing industry is extremely fast paced. Open jobs must be filled quickly with the most qualified candidates. Each of the companies that the staffing agency works with could have different background screening requirements for their workforce and a myriad of background screening needs. Performing background screening checks helps to protect staffing companies from possible bad hires, which can cause undesirable situations at an employer. If a staffing agency fails to do due diligence in their hiring processes and puts a worker who is unfit for employment or causes a threat to the employer, then the staffing agency may be liable for breach of contract claims. Therefore, staffing companies and the employers themselves must develop a comprehensive background screening policy that explicitly states the types of screening that will be performed for the positions they are hiring for.

The Risks of Not Performing Background Screening on Contingent Workers

Freelancers and contractors often have the same access to company resources, sensitive information, and customers as their full-time co-workers, so gaps in the screening process could pose risks to employers. It may only take one person to damage an organization’s reputation or put existing staff at risk, which is why it is important to ensure that your extended workforce has the necessary checks performed on them. Some of the risks involved in not screening contingent workers include employee fraud, theft, data security breaches or hiring migrant workers who have no legal right to work in Canada.

With ever increasing numbers of contingent workers entering the labour market, it’s vital that effective, robust policies are in place to screen them. Employers must also make sure that HR teams and managers are aware of the risks of not following correct procedures. It is a good idea to carry out the same exact background checks on contingent workers as would be run on full-time employees. If there is any doubt about the screening process, then companies should consider using a third-party screening provider to ensure that all legal obligations are being met. By using the same screening provider and the same process for all workers, you can be sure that the hiring process is fair and equal for everyone, and that you thoroughly understand an individual’s background before recruiting them.

As a large portion of the contingent workforce could be from countries outside of Canada, it is important to have global background screening program in place. Find out more about best practices for international background checks and more in Background Screening for Global Workforce.

Discover Best Practices for International Hiring

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.