A buyer’s guide to contingent workforce solutions

Most companies have figured out how to source contingent workers, through staffing agencies, direct relationships, or a mix of both. What's harder is everything else: knowing what you're actually spending, whether your agencies are performing, whether invoices reflect contracted rates, whether your program in one city looks anything like the one in a neighboring zip code.

This guide is designed to help you think through your current approach, identify where it's working and what it's costing you, and understand what a more structured solution looks like. Whether you're just beginning to formalize your contingent program or managing multiple agencies across dozens of locations, the path forward starts with asking the right questions.

More than 30% of the U.S. labor market is contingent today, projected to reach 50% by 2020.

STAFFING INDUSTRY ANALYSTS (SIA)

Understanding today’s contingent labor landscape

Organizations have become increasingly dependent on flexible labor to fill staffing gaps, respond to demand fluctuations, and maintain operational continuity. But while contingent labor programs have expanded, the processes and systems used to manage them often remain fragmented, inconsistent, and difficult to scale.

What do we mean by contingent labor?

Before getting into strategy, it helps to define the population we're talking about. Contingent workers, also called temporary, flexible, or extended workforce, are people who work for your organization outside of a traditional full-time or part-time employment relationship. They might work on a contract basis, cover seasonal demand, or fill gaps during periods of high variability.

Why they’re needed often differs depending on your industry. In manufacturing or logistics, they may be covering a surge. In healthcare, they may be per-diem staff filling coverage gaps. In hospitality, retail, or events, they may be seasonal hires brought on for peak periods. The label changes. But the management challenge doesn't.

The reality behind contingent workforce operations

At a high level, most organizations have developed an approach to contingent labor. There are preferred vendors, established relationships, and processes that have taken shape over time. But when you look more closely at how work actually gets done, those processes are often less structured than they appear.

In many cases, contingent labor is managed locally rather than centrally. Different teams, locations, or business units develop their own ways of engaging vendors and filling roles. Over time, this can create a patchwork that varies widely across the organization. Managers often adapt by building informal workarounds: emails, texts, direct calls to vendor contacts, spreadsheets tracking what the system can't.

According to 2026 frontline research from Dayforce, 74% of surveyed workers rely on manual workarounds at least sometimes, and 56% said their manager knows about it but doesn't have a better solution in place.³ Work isn't being managed so much as improvised.

The impact often shows up in a few consistent places: cost control, vendor performance, and decision-making. Without centralized visibility, it's harder to enforce rates, compare suppliers, or understand how contingent labor is actually contributing to business outcomes.

Finance teams may see spend in arrears. Procurement might not be able to tell whether contracted rates are being honored. HR is often managing compliance risk across multiple vendors with no standardized process. And in our frontline research, 65% of surveyed executives and managers said shift-level disruptions are having at least a moderate impact on their company's financial or operational performance.⁴

Contingent labor isn't lacking structure because organizations don't value it. It often lacks structure because it's grown faster than the systems designed to support it.

74% of surveyed workers rely on manual workarounds at least sometimes.

56% say their manager knows but doesn't have a better way.

DAYFORCE

Why some organizations are more affected

These challenges exist across all types of organizations, but they often become most visible where staffing decisions happen fast and the margin for error is small.

In shift-based or high-volume settings, an unfilled role isn't an abstraction. It affects service levels immediately, puts pressure on the people who showed up, and can directly impact revenue. Research shows that 67% of surveyed executives say their organization is highly effective at aligning labor to business demand, while only 43% of surveyed frontline managers agree.⁵ Risk can quietly accumulate in that gap between what leadership believes is happening and what's actually happening on the ground.

For organizations managing professional or project-based contingent labor, the same underlying issues may surface differently. Rather than immediate operational disruptions, the impact tends to appear over longer time horizons: inconsistent vendor performance across departments, difficulty tracking total contingent spend, and challenges enforcing agreed-upon rates. These don't always disrupt operations in real time, which makes them harder to detect. But they can accumulate and eventually show up in budgets and audit findings.

In both cases, the root issue is often the same. Contingent labor is managed outside of a single system, making it nearly impossible to apply consistent standards or maintain full visibility across the program.

67% of surveyed executives say their org is effective at aligning labor to demand.

ONLY 43% of surveyed frontline managers agree.

DAYFORCE

5 critical steps to help find the right solution for contingent labor challenges

Adding more vendor relationships, layering on oversight, or relying on additional manual processes can provide short-term relief. What they don't do is address the underlying problem. Over time, these approaches often add complexity rather than reduce it.

At a certain point, the challenge is no longer about accessing contingent talent. It's about managing how that talent fits into the broader workforce. That's where the conversation shifts from coordination to structured management and strategy.

Coordination depends on individuals, relationships, and local knowledge. It can work well at a smaller scale, but it often doesn't hold as programs grow. Structured management helps introduce consistency: a framework for how vendors are engaged, how shifts are distributed, how time and billing are captured, and how performance is measured. It helps organizations apply the same standards across locations while maintaining clear visibility into what the full program is doing.

The following steps will help you build and execute your contingent workforce strategy:

1. Investigate: What are your organizational needs? What challenges does your team face managing different types of workers?
2. Identify: Who are your key stakeholders? How are they affected by these challenges?
3. Analyze: What approaches can you take to managing contingent workers? Which one is right for your organization?
4. Plan: How do you build an effective contingent workforce strategy?
5. Activate: How do you choose the right solution for your needs?

1. Investigate

Before developing any strategy, it pays to understand what you're actually working with. That means going beyond a rough estimate of how many contingent workers you use and getting specific about where, how, and at what cost.

Understanding the current state of your workforce

Do you know what percentage of your workforce is full-time, contingent, or seasonal? Most organizations have a general sense but lack the data to back it up. Start there: how you currently source each type of worker, which channels you use, how effective they are, and what they actually cost. From that baseline, you can start to see where contingent workers could help you reduce reliance on full-time overtime, cover seasonal variability more efficiently, or fill skill gaps faster than a traditional hire would allow.

Assessing the true cost of overtime

When full-time employees absorb gaps that contingent workers could fill, the cost often shows up in overtime. During peak seasons, that number can be significant. Understanding these numbers gives you a concrete baseline for measuring the value of a more structured contingent program, and it often surfaces faster than people expect.

Analyzing the business impact of unfilled shifts and roles

Even when workers have every intention of showing up, life intervenes. The question is what happens when it does. For shift-based organizations, understaffing in retail alone has been shown to cause a 6% drop in sales and nearly a 5.75% reduction in profitability.⁶ For organizations managing project-based or professional contingent roles, the impact is different but no less real: delayed deliverables, increased pressure on permanent staff, and higher costs when a role goes unfilled longer than planned.

Understanding what your agency relationships are actually costing you

Most organizations know roughly what they pay agencies. Fewer know whether those agencies are billing at contracted rates, whether invoices are being reconciled accurately, or whether the same worker is appearing on multiple invoices across locations. Before you can evaluate a solution, you need to know where the leakage is. For many organizations, that number is larger than expected.

Quantifying the overhead of managing multiple staffing partners

It’s not uncommon for organizations to work with five or more staffing agencies, each with their own systems, billing formats, and timekeeping processes. But the administrative burden can compound fast: coordinating requests, chasing timesheets, reconciling invoices, and trying to compare performance across partners with no common data. Knowing how much time that work consumes is important, both as a reality check on the true cost of the current approach and as a baseline for measuring what a more centralized solution is worth.

Getting a clear picture across the whole program

When extended workforce data lives outside your core systems, the people responsible for making workforce decisions are often working with incomplete information. Finance may be reconciling spend after the fact. HR may not have visibility into how contingent coverage compares to employee coverage by location. Operations may be making headcount decisions based on estimates rather than facts. A centralized approach helps connect that data so decisions don't have to be made in the dark.

2. Identify

A contingent workforce strategy only works if the right people are aligned behind it from the start. That means identifying who in your organization manages, sources, approves, or is affected by contingent labor, and making sure each group understands what's at stake for them specifically. Roles and responsibilities need to be defined upfront. Without that alignment, even a well-chosen solution will often struggle to get traction.

HR Leaders

HR is often closest to the day-to-day complexity of managing contingent workers, but furthest from the tools to do it well. Coordinating with finance for budget approval, managing compliance across multiple vendors, and trying to maintain some consistency in worker experience across a fragmented program all fall to HR teams that are already stretched. A structured approach to contingent management can help reduce that administrative load and give HR the visibility to make better decisions about when and where contingent workers are actually needed.

Procurement and contingent workforce program owners

For organizations where contingent labor represents meaningful spend, procurement is often a key decision-maker or budget approver. What procurement needs is rate enforcement, vendor governance, and consolidated invoicing.

Without a centralized system, they're typically the last to know about billing discrepancies or underperforming agencies, and they're often managing vendor contracts that don't reflect what's being paid at the location level. A structured vendor management approach can give procurement better control to run the program the way it was designed.

Operational and finance leaders

Finance teams usually see contingent spend in arrears. By the time an invoice is reviewed and approved, the work is done, the overage has already been absorbed, and the budget is overdrawn. Operational leaders face a related problem: without consistent data across locations, it's nearly impossible to make informed decisions about staffing levels, vendor prioritization, or where costs are running high. Real-time visibility into contingent spending by agency, location, and role helps both teams move from reactive to planned.

Location leads and managers

Managers on the ground often manage multiple vendor relationships simultaneously, yet still struggle to fill open roles, and frequently pay more than they should for ad hoc coverage. They spend time they don't have chasing confirmations, reconciling timesheets, and bridging gaps between what the system shows and what's happening. With a centralized platform, location managers can see open and filled coverage in one place, route requests to the right vendors automatically, and stay within budget with less manual tracking.

3. Analyze

The right approach to managing contingent labor depends on how complex your program is, how many vendor relationships you're managing, and how much visibility you need. Here's a look at the three main options.

Direct hires

Direct employment builds culture, creates consistency, and produces lower turnover over time. For roles that are core to your operation year-round, it's still the right answer.

The limitations show up at the edges. Hiring ahead of seasonal demand is expensive and often carries real risk. Over-hiring can lead to future layoffs. Relying on full-time staff to absorb variability through overtime often has its own costs, financial and in terms of burnout. Direct hiring is a foundation, not a complete workforce strategy on its own.

• Pros: Builds culture and institutional knowledge, consistent coverage for stable roles, lower turnover
• Cons: Limited flexibility for variable demand, cost-intensive to hire ahead of peaks, longer hiring cycles, overtime dependency when gaps appear

Staffing agencies

For many organizations, this is where contingent workforce management starts and ends, and for good reason. Agencies handle recruiting, onboarding, compliance management, and payroll for temporary workers. If you have straightforward needs and a small number of reliable partners, this model works well.

The friction often builds as your program grows. Three agencies may become five. Each may have its own portal, its own timesheet process, its own invoice format. Managers may be coordinating across all of them manually, and nobody at the corporate level may have a clear view of what any of it costs. Rates negotiated in a contract may quietly stop being what's actually billed. Performance differences between agencies may become invisible until something goes wrong. But agencies aren’t the problem. Managing several of them without a centralized system is where things often start to break down.

• Pros: Supports variable and seasonal demand, agencies handle their own compliance management and recruiting, no software implementation required
• Cons: Visibility often breaks down across multiple vendors, overhead compounds as partner count grows, manual invoicing can create reconciliation gaps, contracted rates may be difficult to enforce at scale, no single view of performance, spend, or coverage

Vendor Management Software (VMS)

A Vendor Management System (VMS) is software that sits between your organization and your staffing agencies, giving you a single place to help you manage all of them. Instead of coordinating with each agency separately and tracking everything across different systems, a VMS helps centralize shift posting, agency coordination, time capture, rate enforcement, and invoicing in one platform.

The category has historically been associated with large enterprise procurement programs. What's newer is VMS purpose-built for frontline, shift-based work, where the operational demands are different. Posting a shift at 6 am that needs to be filled by noon is a different problem than managing a long-term contract worker on a six-month SOW project. The right tool reflects that difference.

A VMS typically returns value quickly. As an example, organizations using the Dayforce Flex Work VMS have seen an average of 10% savings on contingent labor spend⁷, largely through rate enforcement and reducing invoice leakage that was previously going undetected.

• Pros: Single view of vendor activity, spend, and performance, contracted rates enforced more automatically, invoicing consolidated across agencies, can scale as your program grows, connects to your existing workforce data
• Cons: Requires implementation and internal alignment, often returns the most value at higher volumes of contingent spend and vendor complexity

4. Plan

Once you've mapped your current state and evaluated your options, the next step is building a strategy that treats contingent labor as a planned part of your workforce, not a reactive one. The goal is to reduce the scramble that comes with ad hoc hiring and replace it with a program that's more consistent, visible, and sustainable.

Understand your workforce by type and cost

Start by breaking out your workforce into its actual components: full-time, part-time, contingent, and seasonal. For each, understand the cost, the sourcing channel, and the roles it covers. This can help give you a clearer picture of where contingent workers are already working in your organization and where you're paying full-time overtime to fill gaps that contingent coverage could absorb more efficiently.

Map where your agencies are performing and where they aren't

Not all agency relationships deliver equally. Some fill roles faster, deliver better quality workers, and bill accurately. Others don't. Without data, it's hard to know which is which. A structured vendor management approach can help give you the performance visibility to prioritize the agencies that deliver and reduce reliance on those that don't.

Dayforce research revealed high-adaptability surveyed organizations are 26% more likely to treat contingent workers as a planned part of their staffing strategy rather than backup coverage.⁸

Build a vendor governance model before you need one

Rate cards, contract terms, billing standards, and performance expectations should be defined and documented, not improvised per engagement. Organizations that establish these upfront have far less reconciliation work downstream and far fewer billing disputes. This is also where compliance is supported: helping organizations manage classification decisions, maintain records, and promote consistent processes across their workforce.

Plan for variability rather than reacting to it

The most expensive contingent labor decisions are often the ones made under pressure. When you know your seasonal peaks, your high-variability periods, and the roles most likely to need contingent coverage, you can engage your agency partners earlier, set expectations in advance, and help reduce the premium costs that often come with last-minute requests.

A VMS can help make planning more visible and executable: it can help you see where gaps are forming before they become emergencies.

Connect contingent data to the rest of your workforce picture

Contingent labor decisions made in isolation tend to optimize the wrong things. When contingent spend, coverage, and performance data connect to the same systems where you manage your employees, you can make more informed total workforce decisions rather than siloed ones. That means understanding the real cost trade-off between contingent coverage and employee overtime, seeing where your staffing mix is working and where it isn't, and building a workforce strategy that accounts for all the labor your organization relies on.

5. Activate

Once you've done the groundwork, it's time to evaluate your options. Here's what to look for.

Centralized vendor management

The solution you choose should give you a single place to manage your staffing partners: onboarding, shift distribution, performance tracking, and communication. If you're still coordinating each agency relationship separately, you haven't solved the problem.

Contract rate enforcement and consolidated invoicing

This is where most contingent programs leak money. The right solution helps you enforce contracted rates more automatically and consolidate billing across all vendors, so reconciliation happens upfront.

Real-time visibility into spend, coverage, and performance

Leaders at every level, HR, finance, operations, and procurement, should be able to see what's happening across their contingent program without waiting on a report. Look for a solution that gives you spend by agency, fill rates by location, and performance metrics you can act on.

Vendor score carding and performance management

Not all agencies are equal. The ability to track which vendors are filling shifts reliably, billing accurately, and delivering quality workers gives you the data to make better sourcing decisions over time.

Compliance support

Any solution you evaluate should take compliance seriously and help handle the administrative work: worker classification, documentation, and process consistency across your vendor relationships.

Integration with your existing workforce systems

Contingent data should live alongside your employee data, not in a separate system. If your VMS doesn't connect to the platform where you manage scheduling, payroll, and reporting, you're still often making decisions with an incomplete picture.

Scalability

Your program will grow. The solution you choose should handle more vendors, more locations, and more complexity without requiring a full reimplementation every time your needs change.

About Dayforce Flex Work

Dayforce Flex Work is a Vendor Management System (VMS) designed to help organizations bring more structure, visibility, and consistency to contingent workforce management. It helps centralize staffing agencies, scheduling, invoicing, and spend into one place so organizations can better manage how contingent labor is requested, fulfilled, tracked, and governed across the business.

Dayforce customers can now manage agency workers with the same level of intention and discipline as their permanent employees. This helps reduce operational blind spots, improve coordination across teams and vendors, and create a more complete view of workforce activity and labor costs.

Visit the dayforce.com/flexwork to learn more about how organizations are bringing more structure and visibility to contingent workforce management.

Sources

1. “2023 Executive Survey: The power of mobilizing the boundless workforce,” Dayforce, 2023
2. “The Global Contingent Workforce 2025”, Staffing Industry Analysts (SIA), 2025
3. “Adaptability Meets Reality Frontline Research”, Dayforce, 2026
4. “Adaptability Meets Reality Frontline Research”, Dayforce, 2026
5. “Adaptability Meets Reality Frontline Research”, Dayforce, 2026
6. Vidya Mani, Saravanan Kesavan, and Jayashankar M. Swaminathan, “Estimating the impact of understaffing on sales and profitability in retail stores,” Pennsylvania State University, 2015
7. “SSA Group Customer Results”, Dayforce Flex Work, 2026
8. “Frontline Adaptability Benchmark”, Hanover Research & Dayforce, 2026