Workforce Equity: The Contract Worker

The COVID-19 pandemic has disrupted every part of our society in extreme ways that we may not fully understand for years to come. Some of those disruptions continue to impact the workforce in ways that we may be dealing with for decades. As corporate America continues to navigate through a pandemic, we have witnessed the "Great Resignation," widening income inequality and continued gender gaps. Many businesses are challenged in hiring and retaining workers. Yet, there is a perception that tech employees are immune to this type of hiring. Even though profits for Google, Apple, Tesla, and Facebook have continued to rise into the trillions, as we continue to battle COVID, the individuals employed by these corporations have not fared as well as the profits these companies have made.

There is a dichotomy in the types of workers in the tech world. These two types of workers are temp employees, also known as contract workers, and full-time employees, also known as permanent workers. In the tech world, the employment of temporary workers seems to grow at a faster pace than permanent employees. According to the New York Times, in 2019, at roughly 121,000 temporary employees to 102,000 full-time employees, contract workers outnumbered permanent staff at Google. These temps are usually employed by outside agencies. They tend to make less money, have no paid vacation time, and have different benefits. According to a former contract employee for Google, contract workers have accounted for about a third of the workforce more than 10 years ago and that share has continued to grow.

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Those workers who tend to experience levels of stability and prosperity tend to be permanent employees. Contract or temporary workers are experiencing challenging times. While both types of employees work side-by-side performing critical roles for the company, their experiences are widely different and less equitable than their permanent co-workers. This process of two different types of employees has also been viewed as a two-tier system with different outcomes for different types of employees. Contract employees tend to be less likely to benefit from traditional pathways into the industry and more often than not are members of underrepresented racial and gender groups than permanent employees. The use of contracting agencies to address staffing needs has increased across all industries, but has become most evident for Silicon Valley companies, “to gain massive market share and valuation as quickly as possible.”

The practice of shifting the permanent labor force to temporary labor needs has been in place in the American workforce since World War II. According to the U.S. Bureau of Labor Statistics, employers have increasingly relied on temporary workers, typically supplied by temporary help agencies, to provide greater flexibility in meeting their staffing needs. During the most recent recessions (1990-91, 2001, and 2007-09), temps have enhanced labor flexibility for firms. However, during the Great Recession, temp jobs grew by approximately 75 percent, or 1.3 million jobs across the United States by the end of 2018. According to the American Staffing Association, despite the impacts of the COVID-19 pandemic, temporary agencies ended 2020 having increased revenues by 175 percent over the past two decades.

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The experience of contract or temporary employees was recently highlighted in a survey conducted by The Tech Equity Collaborative. The survey, known as the Contract Worker Disparity Project, makes a close examination of the conditions that create worker inequities. Their research identified that a dual or two-tiered system management structure prevents the opportunity for promotion; there is very little self-advocacy for employees who fear retaliation; unequal pay; and an overrepresentation of specific gender groups and racial groups. Contract workers have a limited reporting structure, as their day-to-day work is supervised by a manager at the tech company while their benefits and pay are provided by the temp agency that hired them. The two management structures make their day-to-day work harder and make it difficult to advocate for themselves or to report inequities. As parent companies can cancel contracts at any time, temporary workers tend not to speak up against workplace injustices. In addition, they do not want to be viewed as difficult or have to face retaliation. Often contract workers are doing the same job as their permanent employee counterparts but are being paid less for the same work. According to the TechEquity survey, 75 percent of software developer contract workers are in the 25th percentile or lower for average earnings across the industry. The overrepresentation of contract workers along racial and gender lines has created a level of occupational segregation. Industries with large numbers of contract workers also tend to have the most diverse levels of employee representation. According to TechEqutiy, in every dataset they examined, one obvious fact was that contract workers in tech are disproportionately populated by people from underrepresented racial, ethnic, and gender groups.

Recommended Solutions

In the fight for workforce equity, data becomes invaluable, according to the National Fund for Workforce Solutions. In order for organizations, workers, and employees to successfully collaborate with their communities, the workforce must be equitable. The use of data can help us ensure that the future of the workforce is more equitable. The ability to address the deeply entrenched inequities in workforce systems is only as good as the data available to identify the evidence. The National Fund has partnered with Policylink and the University of Southern California (USC) Equity Research Institute’s National Equity Atlas to create a Workforce Equity Dashboard. The dashboard disaggregates data that helps to measure and track the state of equity in communities. The equity index ranks the 150 largest metro regions on a holistic score of inclusion and prosperity. Some researchers are recommending the Workforce Equity Dashboard as a tool to help reduce the inequities among contract and non-contract employees in the workplace.

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As the country is on the road to economic recovery, the contract workforce is prime to remain in an era of increasing inequality. We need to ensure that workers re-entering the workforce are not being exploited but are on the path to secure careers. Companies should not be looking to absolve themselves of legal responsibilities to the workers they rely on and should be working to ensure overall healthy working environments free of discrimination and harassment. Companies need to look at ways to close the racial and gender gaps between contract and non-contract employees. In order for contracting to be equitable, businesses need to streamline a more ethical process designed in support of workers and implemented through best practices. There are a few key areas that both the National Fund and TechEquity recommend:

• Companies need to provide contract workers with sustaining pay and employment opportunities. Companies should work with vendors to ensure they provide a living wage for workers and comparable benefits to those that are provided for direct employees.
• Companies should provide clear written guidelines on the renewal and evaluation process for a contract and what the employee must do to commence the renewal of the contract.
• Companies should prohibit contracts that limit contract workers from obtaining permanent employment.
• Companies should ensure employees receive adequate paid time off and parental leave and they should use a pro-rated model for temporary employees to participate.
• Companies should compensate workers for equal pay for equal work. This is a federal requirement under the Equal Pay Act. Contract workers disproportionately are Indigenous, Black, brown, women, and nonbinary. They are often paid less with lower benefits than the permanent employees, and they should be paid with equal pay for equal work.
• Companies should develop protocols to report workplace safety violations. Companies should develop an independent complaint process led by contract workers.
• Companies should require all vendors to provide detailed information to all workers that include pay rate, benefit options, employee contribution, paid time off, complaint procedures, HR protocols, agency fees, and location of assignment.
• Companies need to provide a breakdown of agency fees for service, wage rates, recruiting methods, mentorship opportunities, and retention rates.
• Companies need to create opportunities for contract workers to access internal jobs. They should establish pathways to direct employment.

The Contract Worker Disparity Project originated from TechEquity and Silicon Valley Rising in their examination of the harms that low-wage workers experience at tech companies. Shining light on the shadow workforce in tech companies is vital in the struggle for equity. Workers and the companies that employ them must work together to eliminate barriers to permanent employment, and implement transparency in wages, safety protocols, equitable pay rates, and benefit options. Finding solutions for contract workers is the first step to democratizing the workforce and increasing equity.