The rise of contingent labor and the growing popularity of gig work is both a global phenomenon and a necessary feature of modern workforce management. Contingent labor offers employers a structured and flexible opportunity to augment their workforce, add talent needed in the short term and manage seasonal economic cycles. However, there are issues with the way organizations have used contingent labor, and it is impacting the very contingent labor supply chain that these client organizations rely upon. We see, for the first time in a decade, a lower average score for quality of service in the MSP Baker’s Dozen for 2026, being announced at the HRO Today Forum and in our May issue. And this time, I am going to defend the providers. It is the clients’ fault not theirs.
The use of contingent labor is designed for uncertain times. However, the definition of “uncertain” has run ahead of the reality. Organizations are using the word “uncertain” to describe everything. In theory, the explosion of the sun and the destruction of Earth is possible every day, but I doubt most of us worry about getting out of this area of the galaxy. The term “uncertain” is now applied to geopolitical risk, regulatory risks, and technology risk, which is the fear that you fail to automate a job that maybe could be automated and your board is piqued.
The issue is not uncertainty. The issue is we have lost all tolerance for risk. The actual economy here in North America is pretty good. Consumer spending has been durable. Inflation has moderated; interest rates have been stable and unemployment rates have been as expected by economists. Aside from the recent conflict in Iran, which was unlikely to explode oil markets regardless of eye-grabbing sensationalist news headlines, even energy prices have been moderate. So, why are companies so afraid to hire permanent employees? Let’s assume the animal spirits of the market are right. Do not hire permanently and just augment your staff with contingent labor. Oh wait, we are not doing that either. We are just afraid to do anything, anywhere, ever, all at once.
The GDP growth in the U.S. has been relatively positive. Employees have joined in the risk-averse behavior by the declining level of attrition known as “job hugging.” The decline in revenue for the permanent recruiting industry and the contingent labor industry are having real long-term negative impacts. This is due in part to the fact that these firms, particularly the contingent labor providers, operate on margin or markup and, in the midst of diminished volumes, zealous and often misinformed procurement teams are bullying them to reduce margins. So, what is left for these executives? Downsizing service staff levels is their best option, and then we enter into a short-term doom loop. They need to cut resources, now the service is not great, so we should cut further.
Here is what I do know for an absolute certainty. The labor markets will overheat again, probably in the next few years. This always happens after a slow down. When that happens all of the clients that are beating on the providers about costs will be desperately seeking solutions and external support. We need to think about the word partnership and what it actually means. It means shared successes and shared pain in both good times and lean times. These service providers can do things you cannot do yourselves even if you license the same technology.
Contingent labor and recruiting services providers will be needed again and probably soon. Let’s make sure they are healthy and viable when you need them because the next hot cycle may be just like the sun exploding, but the cataclysm will damage HR leadership and leave the balance of the Earth unscathed.
Elliot H. Clark
CEO