Does every contingent workforce discussion need to veer into a secret code-breaking operation?
The world of the contingent workforce is jam-packed with acronyms, industry slang, and jargon that can make even the savviest HRBP’s head spin.
Between MSPs, VMSs, EORs, and ICs, it’s easy to feel like you need a decoder ring just to keep up. What does it all mean?
Many HR and contingent workforce glossaries exist across the internet. We wanted this one to be different and, dare we say, maybe even a little fun? This glossary is here to help you navigate the ever-growing dictionary of workforce terms without falling into an imposter crisis.
Whether you're a seasoned procurement guru or just trying to figure out what the heck an SOW is (spoiler: it’s not a lady pig), we’ve got you covered.
We’ll define these terms (without adding more confusion) and put them into real-world context. This will allow you to explain EOR and VMS to anyone—from your parents to your 5-year-old.
So, buckle up, grab your coffee, and get ready to demystify the wonderful, wordy world of the contingent workforce!
There’s going to be a quiz at the end. Just kidding, but that could be fun?
If you've ever found yourself drowning in a sea of acronyms and buzzwords while discussing the contingent workforce, we’re glad you’re here.
What is it about managing non-traditional workers that requires its own dictionary?
The contingent workforce ecosystem is a complex mix of legal, operational, and technological elements. Standing alone, each of these specialties has a reputation for being loquacious. Together, they create a blizzard of acronyms, buzzwords, and jargon.
With multiple stakeholders—HR, procurement, finance, staffing suppliers, and legal teams—there needs to be a shared language to avoid costly misunderstandings.
For better or worse, the industry went full throttle on acronyms. Now we have MSPs, VMSs, ICs, SOWs, EORs, and PEOs all vying for attention like contestants on a game show.
Governments and regulatory bodies love a good technical term. Since worker classification rules vary across states, countries, and industries, the contingent workforce space is riddled with legalese and compliance horror stories.
And let’s not forget the role that technology plays in “simplifying” everything.
Software providers and consultants are constantly churning out new lingo to differentiate their solutions. (This feels like a great time to mention that HireArt is not about adding complexities. We like to keep things simple)
Each new innovation brings fresh acronyms to the table—often ones that sound suspiciously like the old ones but with a slightly fancier twist. The wordiness of the CW space is equal parts necessary and excessive. This glossary exists to cut through the confusion and get clarity. For that reason, we think you should bookmark it!
Basic Definition: A self-employed individual who provides services to a business under a contract but is not an employee.
More Informative Explanation: A 1099 contractor (cleverly named after the IRS form they receive) is an independent worker who sets their own schedule, uses their own tools, and is responsible for their own taxes. They don’t receive employee benefits like health insurance or paid time off. Companies hire 1099 contractors for specific projects or ongoing services but don’t control how the work is done.
Explain Like I’m 5: A 1099 contractor is like a superhero who helps businesses but doesn’t work for just one boss. They do jobs, send a bill, and take care of their own money stuff.
Use It in a Sentence: The company engaged a 1099 contractor to redesign their website instead of adding another full-time employee.
Basic Definition: A type of employment where either the employer or employee can end the relationship at any time, for any reason (except an illegal one).
More Informative Explanation: In at-will employment, companies can terminate an employee without needing a reason, and employees can quit at any time. This arrangement is common in the U.S., though there are exceptions—such as terminations based on discrimination or retaliation, which are illegal. Some employees may have contracts that override at-will status.
Explain Like I’m 5: Your job is like a playdate—either you or your friend (the boss) can leave whenever you want, as long as no one is being mean.
Use It in a Sentence: Because of at-will employment, Susan left her job without giving notice, and her boss didn’t need to replace her right away.
Basic Definition: The hourly or project-based amount a company is charged for a worker’s services.
More Informative Explanation: The bill rate is what a company is billed for a worker’s time, which is different from what the worker is paid, which is the pay rate. If a staffing agency provides a temporary worker, the client pays the bill rate, which includes the worker’s wages, taxes, and the agency’s markup.
Explain Like I’m 5: If you pay $10 for a pizza, but the person who made it only gets $7, the extra $3 goes to the pizza shop. That’s like a bill rate!
Use It in a Sentence: The staffing firm charges a bill rate of $75 per hour for the IT consultant, but the worker only earns $50 per hour.
Basic Definition: When a company hires another company to handle certain business operations, like customer service or payroll.
More Informative Explanation: BPO is when a company outsources non-core functions to a third-party provider, often to cut costs and increase efficiency. Examples include outsourcing customer support to a call center, payroll processing to an HR firm, or IT helpdesk services. BPO can be domestic or international.
Explain Like I’m 5: If you want a birthday cake in the shape of a car, you can either hire someone and tell them exactly how you’d like it decorated or you can buy a cake from the bakery.
Use It in a Sentence: The company used a BPO to outsource its customer service operations to a team in the Philippines.
Basic Definition: Co-employment is an arrangement in which two companies share rights and obligations as employers.
More Informative Explanation: The agency manages the worker’s job duties and day-to-day functions. Meanwhile, the co-employer oversees personnel-related functions, like onboarding and payroll. In a co-employment scenario, the worker is technically employed by the business and the co-employer. If not handled properly, co-employment can lead to legal risks, such as wage disputes or misclassification claims.
Explain Like I’m 5: It’s like having two parents. One gives you money, and the other tells you what chores to do to earn that money.
Use It in a Sentence: The staffing agency and the client company had to be careful about co-employment risks when assigning temporary workers.
Basic Definition: Following laws, regulations, and company policies.
More Informative Explanation: Compliance in workforce management means adhering to labor laws, tax regulations, and safety requirements. This ensures businesses avoid legal trouble, fines, and reputational damage. Key areas include worker classification, wage laws, and workplace safety.
Explain Like I’m 5: It’s like following the rules in a game—if you don’t, you get a timeout or lose points.
Use It in a Sentence: The HR team conducted a compliance audit to ensure all workers were properly classified.
Basic Definition: A worker who is not a permanent employee, such as freelancers, temps, and contractors.
More Informative Explanation: Contingent workers provide services for a company on a temporary or project basis. They do not receive traditional benefits like health insurance or paid leave and are often classified as 1099 contractors or W-2 temporary employees.
Explain Like I’m 5: A contingent worker is like a substitute teacher—they work for a little while but don’t stay forever.
Use It in a Sentence: The company hired contingent workers during the holiday season to handle the extra workload
Basic Definition: A work arrangement where an employee starts as a contractor but may be hired full-time after a trial period.
More Informative Explanation: Contract-to-hire positions allow companies to test a worker’s skills and fit before committing to full-time employment. During the contract period, the worker may be employed by a staffing agency. If all goes well, they transition to a permanent role with the client company.
Explain Like I’m 5: It’s like borrowing a toy to see if you really like it before buying it forever.
Use It in a Sentence: After a three-month contract-to-hire period, Jake was offered a full-time position with the company.
Basic Definition: When a company recruits contingent workers itself instead of using a staffing agency.
More Informative Explanation: Direct sourcing means a company builds its own talent pool of freelancers, gig workers, or contractors, often leveraging past employees, referrals, or an internal database. This can save money on staffing agency fees and give companies more control over hiring.
Explain Like I’m 5: Instead of asking your mom to pick a babysitter for you, you find one yourself!
Use It in a Sentence: The company’s new direct sourcing strategy helped them reduce reliance on staffing agencies.
Basic Definition: The additional costs a company pays beyond an employee’s wages, like taxes and benefits.
More Informative Explanation: Employer burden includes payroll taxes, unemployment insurance, workers’ compensation, health benefits, and other costs that come with hiring employees. This is why hiring full-time staff can be more expensive than using contractors.
Explain Like I’m 5: If you buy a pet, you don’t just pay for the pet. You also have to buy food, toys, and vet visits.
Use It in a Sentence: The employer burden for full-time employees can add 20-40% on top of their base salary.
Basic Definition: A third-party company that legally employs workers on behalf of another business.
More Informative Explanation: An EOR takes care of payroll, taxes, and compliance while a company manages the worker’s day-to-day tasks. This is especially useful for hiring in different countries where labor laws vary.
Explain Like I’m 5: It’s like when your friend buys a movie ticket for you, but you’re still the one going to see the movie.
Use It in a Sentence: The company used an EOR to hire international employees without setting up a foreign entity.
Basic Definition: Exempt employees are not entitled to overtime pay, while non-exempt employees are.
More Informative Explanation: Under the Fair Labor Standards Act (FLSA), exempt employees (usually salaried professionals) do not get overtime pay, while non-exempt employees (often hourly) must be paid overtime for working over 40 hours per week.
Explain Like I’m 5: If you’re non-exempt, you get more candy if you behave well. If you’re exempt, you get the same amount of candy, no matter how well you behave.
Use It in a Sentence: Sarah’s role was classified as exempt, so she didn’t receive overtime pay for staying late.
Basic Definition: A job contract that lasts for a specific period of time.
More Informative Explanation: A fixed-term contract sets an end date for employment, such as a six-month project or seasonal work. Employees under these contracts may receive benefits but are not guaranteed long-term employment.
Pro Tip: This is very common in countries without at-will employment.
Explain Like I’m 5: It’s like going on a trip—you know when it starts and when it’s over.
Use It in a Sentence: The marketing specialist was hired on a fixed-term contract to help with the product launch.
Basic Definition: A software platform that helps companies manage and track freelance workers.
More Informative Explanation: An FMS (Freelancer Management System) is a tool that allows businesses to source, onboard, pay, and track freelancers and gig workers. Unlike traditional Vendor Management Systems (VMS), which focus on staffing agencies, an FMS is built to manage direct relationships with independent contractors. This ensures compliance and efficient payment processing.
Explain Like I’m 5: It’s like a superhero team tracker—you always know who’s available, what they’re working on, and when to pay them.
Use It in a Sentence: The company implemented an FMS (Freelancer Management System) to keep track of all its independent contractors in one place.
Basic Definition: A labor market made up of short-term, freelance, and contract work instead of traditional full-time jobs.
More Informative Explanation: The gig economy includes rideshare drivers, freelance designers, contract coders, and temporary workers who take on flexible, project-based work. Workers typically use digital platforms to find gigs and have more control over their schedules.
Explain Like I’m 5: Instead of having one big job, people do lots of small jobs for different people.
Use It in a Sentence: The rise of the gig economy has changed how companies find and hire talent.
Basic Definition: The process of paying employees in multiple countries while following local tax and labor laws.
More Informative Explanation: Companies that hire workers across different countries must comply with various tax regulations, labor laws, and currency exchanges. Global payroll solutions help businesses manage these complexities, ensuring employees are paid correctly and legally.
Explain Like I’m 5: It’s like making sure kids in different schools get their lunch, even if the food served is different.
Use It in a Sentence: The company implemented a global payroll system to manage its international workforce.
Basic Definition: A self-employed person who provides services to businesses, typically through their own business entity.
More Informative Explanation: Independent contractors (often called freelancers or 1099 workers) work on a contract basis, set their own hours, and handle their own taxes. They are not entitled to employee benefits, like health insurance or paid time off. Companies hire them for specific projects without the long-term commitment of full-time employment.
Explain Like I’m 5: An independent contractor is like a superhero for hire—they work on a mission, get paid, and move on to the next adventure!
Use It in a Sentence: The company hired an independent contractor to redesign its website instead of using an in-house team.
Basic Definition: A contract that sets the overall terms for future work between two companies.
More Informative Explanation: An MSA is a framework agreement that outlines general terms, like pricing, legal responsibilities, and dispute resolution, making it easier to sign multiple contracts over time without renegotiating everything. It’s commonly used in staffing and consulting.
Explain Like I’m 5: It’s like writing down rules before starting a board game so you don’t have to stop and argue later.
Use It in a Sentence: The company signed an MSA with the staffing agency to streamline future hiring.
Basic Definition: A company that manages the hiring and administration of contingent workers for another company.
More Informative Explanation: MSPs help businesses source, manage, and track temporary and contract workers. They often use a Vendor Management System (VMS) to handle job postings, basic workflows, and invoicing.
Explain Like I’m 5: Imagine you have a toy that kept breaking or needed batteries replaced. Instead of fixing it yourself, you could have a helper who makes sure it's always working, fixes it when it breaks, and keeps it running smoothly.
Use It in a Sentence: The company hired an MSP to manage its growing team of temporary workers.
Basic Definition: The extra percentage a company pays to a staffing firm on top of a worker’s pay rate.
More Informative Explanation: If a temporary worker earns $20 per hour, but the company is billed $30 per hour, the $10 difference is the markup. This covers the staffing firm’s costs, such as payroll taxes, insurance, and profit.
Explain Like I’m 5: If you buy lemonade for $1 and sell it for $2, that extra $1 is your markup.
Use It in a Sentence: The staffing agency’s markup on contingent workers was 40% of their hourly rate.
Basic Definition: When a worker is incorrectly labeled as an independent contractor instead of an employee (or vice versa).
More Informative Explanation: Misclassification can lead to legal trouble, tax penalties, and back pay claims. Governments enforce classification rules to ensure workers receive proper wages, benefits, and protections. Companies often face lawsuits for misclassifying workers to avoid taxes and employment costs.
Pro Tip: Unless you want to get (negative) attention from the IRS, you’ll want to make sure you are correctly classifying all workers.
Explain Like I’m 5: It’s like calling a cat a dog—if you do it wrong, someone’s going to get upset.
Use It in a Sentence: The company faced fines after an audit revealed widespread worker misclassification.
Basic Definition: A contract term that stops a worker from joining a competitor after leaving a job.
More Informative Explanation: Non-compete clauses prevent employees and contractors from working for competitors or starting similar businesses within a certain time and location. They protect company secrets but can also limit job opportunities, leading to legal debates about their fairness.
Pro Tip: Non-compete clauses are entirely prohibited in a few states, and many states have enacted specific rules regulating them.
Explain Like I’m 5: It’s like promising not to tell another kid how to win at hide-and-seek after you switch teams.
Use It in a Sentence: John couldn’t take a job with a rival company because of his non-compete clause.
Basic Definition: The process of integrating a new employee or contractor into a company.
More Informative Explanation: Onboarding includes paperwork, training, setting up company accounts, and introducing new hires to company culture. A smooth onboarding experience leads to better retention and productivity.
Explain Like I’m 5: It’s like learning the rules and getting a tour before playing a new video game.
Use It in a Sentence: The HR team revamped the onboarding process to make it more engaging for new hires.
Basic Definition: When a company hires an external provider to handle certain tasks or services.
More Informative Explanation: Outsourcing is used to cut costs and improve efficiency. Businesses outsource customer service, IT support, payroll, and other functions to specialized firms, often in other countries where labor costs are lower.
Explain Like I’m 5: Instead of cleaning your own room, you pay your sibling to do it for you.
Use It in a Sentence: The company outsourced its IT support to a firm in India to reduce costs.
Basic Definition: A company that handles HR, payroll, and benefits for small and medium-sized businesses.
More Informative Explanation: A PEO acts as a co-employer, managing administrative tasks like tax filings and compliance while the client company still oversees daily work. This helps small businesses provide better benefits and stay compliant with labor laws.
Explain Like I’m 5: It’s like having a babysitter for your business. They take care of the boring stuff while you focus on the fun parts.
Use It in a Sentence: The startup partnered with a PEO to manage payroll and employee benefits.
Basic Definition: The amount a worker earns per hour, day, or project.
More Informative Explanation: A pay rate is different from a bill rate (which includes the staffing agency’s markup). It can be hourly, salary-based, or per project. Independent contractors negotiate their own rates, while employees have structured pay scales.
Explain Like I’m 5: It’s the money you get for each hour or job you do.
Use It in a Sentence: The consultant negotiated a pay rate of $50 per hour for the project.
Basic Definition: A legal test used to determine whether a worker is an employee or an independent contractor.
More Informative Explanation: The Right to Control Test looks at how much control a company has over a worker’s schedule, tools, and work methods. If a company controls these aspects, the worker is likely an employee rather than an independent contractor.
Explain Like I’m 5: If someone tells you when, where, and how to do your chores, they’re your boss.
Use It in a Sentence: The IRS used the Right to Control Test to determine if the freelancer was actually an employee.
Basic Definition: A document that defines the tasks, deliverables, and deadlines for a project.
More Informative Explanation: An SOW outlines exactly what work needs to be done, who’s responsible, and how success is measured. It helps avoid misunderstandings by setting clear expectations for contractors, vendors, or freelancers.
Explain Like I’m 5: It’s like making a list for a LEGO set—what pieces you need, how to build it, and what the finished castle should look like.
Use It in a Sentence: The company required a detailed Scope of Work (SOW) before approving the contractor’s project.
Basic Definition: A document outlining the scope, expectations, and requirements of a project.
More Informative Explanation: A Statement of Work (SOW) is a legally binding document that includes project details like deliverables, timelines, pricing, and milestones. It ensures both parties agree on expectations before starting the work.
Pro Tip: The staffing industry often uses the phrase “Statement of Work” to describe service procurements and engagements with companies that provide labor attached to a specific project or deliverable.
Explain Like I’m 5: It’s like making a deal with your friend: “You build the LEGO castle exactly the way we agreed, and I’ll give you a cookie when it’s done.”
Use It in a Sentence: Before hiring the consultant, the company drafted a Statement of Work (SOW) to define a project’s scope, deadlines, and costs.
Basic Definition: A company that recruits and places workers for temporary or permanent roles.
More Informative Explanation: Staffing agencies help businesses find workers quickly, handling everything from recruitment to payroll. They charge a markup on top of the worker’s pay rate to cover administrative costs.
Explain Like I’m 5: It’s like a matchmaker, but for jobs instead of dating. A staffing agency matched the right worker to the right job.
Use It in a Sentence: The company used a staffing agency to hire extra workers during the holiday season.
Basic Definition: A hiring strategy where businesses bring in temporary workers to supplement their existing team.
More Informative Explanation: Instead of outsourcing an entire project, staff augmentation allows companies to bring in specialized talent for short-term needs. It’s commonly used in IT, engineering, and other technical fields.
Explain Like I’m 5: It’s like adding extra players to your soccer team when your teammates are tired.
Use It in a Sentence: The IT department used staff augmentation to complete the software upgrade faster.
Basic Definition: When a company hires another company to perform part of its contract work.
More Informative Explanation: Subcontracting happens when a primary contractor outsources a portion of the job to another vendor. It’s common in construction, consulting, and government contracts.
Explain Like I’m 5: If your mom asks you to clean the house, but you get your little brother to do part of it, that’s subcontracting!
Use It in a Sentence: The main contractor subcontracted the electrical work to a local specialist.
Basic Definition: A worker hired for a short-term role, usually through a staffing agency.
More Informative Explanation: Temps work on contracts that last days, weeks, or months. They are paid by a staffing agency, which manages their employment details, while the client company oversees daily tasks.
Explain Like I’m 5: It’s like borrowing a toy—you use it for a while, but you don’t keep it forever.
Use It in a Sentence: The company hired temporary employees (temps) to handle the holiday rush.
Basic Definition: A pricing model where a company pays for actual work hours and materials used.
More Informative Explanation: T&M contracts are common in consulting and IT. Instead of a fixed project price, companies pay based on hours worked and costs incurred, giving flexibility for project changes.
Explain Like I’m 5: It’s like paying a painter for every hour they work plus the cost of the paint.
Use It in a Sentence: The software firm used a Time and Materials (T&M) contract for the complex coding project.
Basic Definition: A strategy that combines hiring full-time employees and contingent workers under one system.
More Informative Explanation: Total Talent Management (TTM) helps companies manage all workforce types—employees, contractors, freelancers, and gig workers—through a single strategy. It improves hiring flexibility and workforce planning.
Explain Like I’m 5: It’s like organizing all your toys—LEGOs, dolls, and action figures—in one big toy box instead of separate ones.
Use It in a Sentence: The company implemented a TTM (Total Talent Management) strategy to streamline workforce planning.
Basic Definition: A software platform that helps companies manage staffing vendors and contingent workers.
More Informative Explanation: A VMS automates hiring, tracking, and payments for temporary and contract workers. It centralizes recruitment data, making it easier to manage multiple staffing agencies.
Explain Like I’m 5: It’s like a giant to-do list that keeps track of who’s working, where, and for how much.
Use It in a Sentence: The company used a Vendor Management System (VMS) to streamline contingent workforce hiring.
Basic Definition: A worker who is paid through payroll, with taxes and benefits handled by their employer.
More Informative Explanation: Unlike independent contractors, W-2 employees receive regular paychecks with taxes deducted. They’re eligible for benefits like health insurance, paid time off, and retirement plans.
Explain Like I’m 5: It’s like getting your allowance, but your parents take some out for savings and chores.
Use It in a Sentence: Because she was a W-2 employee, her company withheld taxes and provided benefits.
Basic Definition: A legal term meaning that anything created by a worker belongs to the company, not the worker.
More Informative Explanation: Under a work-for-hire agreement, anything an employee or contractor creates—such as software, designs, or writing—belongs to the employer. Without this agreement, independent contractors usually own their work.
Explain Like I’m 5: If you build a LEGO castle for someone else, they get to keep it, not you.
Use It in a Sentence: The company included a work-for-hire clause to retain rights to all marketing materials.
Basic Definition: The process of labeling someone as an employee or an independent contractor based on work rules.
More Informative Explanation: Worker classification determines tax status, benefits, and labor protections. Misclassifying employees as independent contractors can lead to legal penalties.
Explain Like I’m 5: It’s like sorting animals at the zoo—you have to put the lions in one area and the monkeys in another!
Use It in a Sentence: The company conducted a worker classification review to ensure legal compliance.
Navigating the world of contingent workforce management can feel like learning a foreign language. However, you shouldn’t need a translator to take advantage of the huge benefits of utilizing a contract workforce.
Between the endless acronyms, shifting compliance rules, and evolving hiring strategies, it’s easy to get lost in translation. That’s exactly where HireArt comes in.
HireArt’s platform takes the complexity out of managing your contingent workforce by serving as one simplified solution.
Whether you’re struggling with vendor management, need an Employer of Record (EOR) to handle payroll and compliance, or want a smarter way to source and recruit top talent, HireArt has you covered. Our technology-driven approach helps businesses streamline program management, reduce costs, and ensure compliance. Get back to “synergizing” with your business—and feel free to “sunset” all that annoying jargon.
With HireArt, you get more than just a platform. HireArt acts as a partner dedicated to making your contingent workforce simpler, smarter, and fully compliant.
Ready to decode contingent workforce management? Let’s talk.
