Long reads

Who needs staff? The decline of full-time employment

26 Apr 2017 By Robert Jeffery

Whether you call it the gig economy or just a contingent workforce, full-time employment is declining in favour of freelancers and contractors. HR needs to understand what the trend means for the way we engage, motivate and account for the workforce

By some measures, Kazim Ladimeji might be one of the most experienced HR professionals currently at work in the UK. He has acted as a consultant to hundreds of businesses and authored thousands of articles on topics ranging from automation to autonomy. Yet it has been almost a decade since the Gloucestershire-based HR and career consultant felt the need to hold down a full-time job.

Instead, Ladimeji’s days are split between short-term remote assignments with a range of businesses and ‘prospecting’ for work on gig economy websites, where he bids to carry out projects on behalf of anyone, anywhere. It is, he says, a rewarding career choice: “It’s very flexible to your individual needs, and the sheer variety of work is something you value. You work with projects taking place on an international scale, and meet lots of interesting, entrepreneurial people you might not have access to in a face-to-face office environment.”

Ladimeji was an early adopter of gig economy platforms, and most regularly uses Upwork – the largest such service in the world, which last year handled more than $1bn worth of assignments, connecting individuals with services to offer with companies that want to buy them. It has provided him a steady income and met his desire to “not be restricted by a typical employer-employee relationship”, but even so he finds the work he sources online is giving way to repeat jobs he picks up through personal networks or previous clients.

Ladimeji’s graduation from ‘gigger’ to contingent worker is instructive, as it demonstrates the increasingly fluid boundaries between different forms of non-traditional employment, and the under-reported shifts taking place in the labour market. The gig economy sits at the apex of a subtle societal move away from full-time employment. On its own, however, it has probably provided more column inches than it has meaningful revenue.

The gig economy is broadly defined as online platforms that act as marketplaces for services offered by freelance or self-employed individuals. Where it has reached the popular consciousness, it’s mostly for negative reasons – think Uber drivers demanding rights their platform ‘employer’ has denied them. But in fiduciary terms, the gig economy is minute. CIPD research To gig or not to gig? Stories from the modern economy found that only 4 per cent of the UK’s working age population were engaged even sporadically with a gig economy platform over the past 12 months, and even those who were participating fully were invariably unaware of the term itself.

What matters more is the increase in self-employment, which has doubled over the last four decades to reach 16 per cent of the UK labour market and continues to rise. Most businesses’ growth in recent years has probably been dependent on a battalion of freelancers, contractors and other hired hands, only a fraction of whom have used a gig economy platform. Full-time employment, over the same period, has remained roughly static even as unemployment has fallen. In short, the future is impermanent.

Upwork says that, in the US, one in three workers is now freelance – a figure it claims could hit 50 per cent by 2020. A Deloitte study of multinationals found that around a third of their workforces are contingent, and 51 per cent of business leaders believe that figure will increase within the next five years. The University of Oxford’s Online Labour Index, formed to track employment trends in the gig economy, says the UK is the second largest user of gig workers; the total of all freelancers in the country has been put at just under two million by CRSE, but this may be a conservative estimate. It has been predicted that the UK could reach 50 per cent by the end of the next decade.

“What the gig economy in particular is doing is changing the nature of self-employment,” says Ian Brinkley, the CIPD’s acting chief economist. The sole trader freelancer is becoming more common than the small business owner, and more people are now in the ‘grey area’ between employment and self-employment. The good news, he adds, is that the CIPD survey suggests most are doing so through choice: just 14 per cent of gig economy workers say they are self-employed because they are unable to find traditional employment.

Many of the individuals involved, such as freelance journalists and construction workers, have been primarily contingent for decades. Others, such as hairdressers and bar staff (who can be hired for anything from a night to a month via agencies or platforms), are new to the phenomenon – as, of course, are HR professionals like Ladimeji. What they have in common is a degree of freedom to dictate their hours, location and (generally) rates of reward, which distinguishes them from those on zero-hours contracts nominally tied to a single employer. For the HR teams that employ contingent workers, the question is how to engage, motivate and retain them. And, in many cases, whether you even know who they are.

“These people are just as much signifiers of your employer brand as your full-time employees are,” says Mervyn Dinnen, a blogger and consultant who has written extensively on the issue. “That means accountability is important: who is responsible for what they produce, or for where their tax is being paid? HR needs to take ownership of the issue.”

Often, freelance professionals are just a name on an invoice on the finance system but, in the UK, HMRC has been putting businesses under pressure to understand how and where freelancers work and whether they should be on the payroll. The cost of hiring and replacing so many individuals is also a drain on recruitment teams – not to mention the danger of losing their loyalty and knowledge to competitors. But done right, says Dinnen, there is an opportunity for HR to become curators of skills not just among freelancers, but across the entire organisation.

One response, noted in the US, has been the rise of the ‘chief freelance relationship officer’. And although his official job title is group head of resourcing, this is essentially the role played by Martin Tweddle at Cape, a UK-headquartered multinational that manages projects and supplies services in the energy industry.

Cape has a global workforce of 16,000, of whom 12,000 are contingent. Retaining these highly skilled offshore engineers and technicians is crucial, says Tweddle, otherwise you are locked in a constant cycle of sourcing: “The key is mitigating their departure in the first place – rather than get people in, induct them, give them 12 weeks’ work and then let them leave, we want to redeploy them wherever we can.”

This is something Cape has down to a fine art; 58 per cent of its current contingent hires in the UK have worked for the company in the past three years. It uses fixed-term contracts that can be easily extended, and puts almost all contractors through PAYE, but the real reason people come back, says Tweddle – beyond being seen as a good, safe employer – is that they feel engaged.

For this, Cape calls on social media, where it posts to 23,000 people on LinkedIn and 5,000 on Facebook, an “amazing place for conversations about what contracts are coming up and what their availability is”. The business, says Tweddle, has become adept at finding a tone “between a corporate, professional presence and a more casual experience… we want to encourage a two-way discussion because just posting a jobs list isn’t that engaging”.

An internal technology platform shares information with managers about which individuals are available, and allows them to give feedback on hires via a managed mechanism governed by aggregate ratings rather than subjective opinions. It gives the business quality as well as quantity, says Tweddle: “I know that tomorrow we’ll probably take a call asking for 50-60 people to start on Monday morning, so we need huge lists of freelancers. But our operational credo is ‘excellence delivered’ so we only recruit and deploy the best of the best. It’s easy to call an agency and have 20 people delivered to you like you’d have 20 boxes of hard hats delivered. But our network is locked down – no one else can get to our people.”

Jonny Dunning, founder of the weliketowork platform for freelancers, says HR professionals faced with a growing freelance community should begin by standardising onboarding and contract processes, before deciding on a method of communication – a publicly facing, branded platform or channel that talks to and involves contingent professionals in the business and invites them to be part of its ‘bench’ of talented individuals. Equally importantly, says Dunning, full-time employees must “get the message that contingent workers are part of the extended workforce”.

For an alternative view of how a contingent workforce might be managed, try consultancy giant PwC. Helen Hopkin, its head of resource management, sees her role as “finding the right people at the right time”, but this is about getting the right people into the right jobs through workforce planning rather than recruitment.

In essence, PwC has created an internal gig economy of its own people rather than subject itself to the vagaries of the external market. It wants almost everyone to see themselves as a contingent worker with portable skills. In the US, it has created a system called Talent Exchange, which lets carefully approved freelancers bid for its work. In the UK, it has Talent Link, a database of 20,000 employees’ skills, including internal contingent talent pools – these take in both junior staff on short-term contracts (90 per cent of whom go on to full-time positions) and a network of individuals who are contracted for a minimum number of days per year to work mostly on external audit or compliance projects.

When managers have positions to fill, they can turn to these resources, including qualified and part-qualified accountants. “It gives us huge flexibility,” says Hopkin. Her 170-strong resourcing team includes HR, finance and procurement professionals, which hints at a conflict over whether the management of contingent workers should lie with HR or in other disciplines. For Tweddle, the solution is a hybrid: Cape, he says, relies on procurement to guard against false self-employment and to source limited companies, while HR specialises in deployment and engagement.

But if you’d rather outsource the management of outsourced workers, there are plenty of people who will help. Gig models are encroaching not just on full-time employment but on traditional employment agencies too, as a range of hybrid platforms spring up to reflect the new realities of working life.

One of them is Trobs, which connects self-employed construction workers with housebuilders and other firms with short-term needs. “People want a bit more independence than agencies can provide,” says founder Martin Jones, who believes the review-and-rating model of gig economy platforms brings a new two-way dynamic to recruitment. “And if I hired someone from an agency and wanted to give them a full-time job, there would be a substantial fee to pay, which puts employers off.”

The Backscratchers, meanwhile, connects creative firms in PR or marketing with niche digital skills. “The big issue with the new skillsets that are emerging is that people need to engage with talent they don’t know that much about,” says founder Jody Orsborn. HR professionals who advertise for specialists are overwhelmed by applicants and don’t know how to sort them, she believes.

But what motivates individuals to opt out of the security of a full-time role (assuming they have the choice)? For Isaac Getz, professor of leadership and innovation at ESCP Europe, it’s often an attempt to “satisfy our quest for meaning… We are still in a paternalistic age where people exchange protection for job security and obedience when they get a contract,” he says.

“There is an act of subordination there, but it isn’t psychologically natural to us as humans – we don’t organise our social life, for example, by taking orders. And it doesn’t correspond to our fundamental human needs.”

Getz says eBay was a game-changer in this regard because it showed it was possible for almost anyone to earn a living without being involved with an employer. The idea became contagious, and today if organisations want to retain their best talent from the clutches of freelancing, they need to think differently: that could mean allowing staff to be entrepreneurial without accountability, as 3M has done, making working from home more acceptable, hiring gig economy-style co-working spaces for staff or even copying a business such as McDonald’s, which uses a franchise model to devolve responsibility to a local level.

Businesses will need to act on the issues because, whether it is down to freelancers seeking the unrestrained joy of the contingent life or firms’ need to reduce overheads, this is a trend that will continue. Deloitte has forecast that within a decade a large business will exist with only the CEO working full time; everyone else will be pulled from a ‘human cloud’ of talent as and when required. This may be hyperbole, and it raises huge questions of accountability (not to mention the psychological contract), but even sceptics admit it is not so far-fetched.

To some, such ideas mark a return to the market economy prophesised by Adam Smith in the 18th century, or Karl Marx’s dream of empowered labourers taking control of the means of production. But not every contingent worker has autonomy, or even sufficient income: the CIPD’s survey found that most gig economy participants were supplementing a full-time income elsewhere and 63 per cent felt they should be guaranteed a basic level of employment rights.

False self-employment is not restricted to businesses asking contractors to go ‘off the books’; the court cases involving couriers and Uber drivers (see opposite) demonstrate the danger of a disempowered ‘underclass’ emerging, who have had flexibility foisted on them.

Even those gigging in ‘professional’ sectors are not necessarily in some sort of utopia, says Dinnen, with many made redundant from full-time roles or unable even to get started: “We glamorise freelancing as a way of life, but it’s not always that glamorous. A lot of it is framed as a choice, whereas for a lot of young people in the gig economy, if you showed them a permanent job in a company they’d like to work for, they’d jump at the opportunity.”

Tweddle adds: “The drive into the gig economy and the rising prevalence of Uber means a huge shift in how contingent workers are viewed and treated. There is a distinction to be made between genuine self-employment and disguised employment for tax purposes, and as HR professionals we have to get to grips with that.”

The government’s ongoing review into employment practice may recommend a new status for ‘workers’ that may force greater responsibilities onto employers. At the moment, says Brinkley, there is a dichotomy between tax status and employment status that must be resolved: “A lot of employers might think that if something is cleared with the taxman it’s automatically going to fly with a tribunal, and that’s not the case.” He urges the government to set up an agency to improve enforcement in this area, and give the self-employed somewhere to go when they need advice or want to raise grievances, which the CIPD survey identified as an area of concern.

The other emerging actor in this story is the taxman. Philip Hammond’s proposed (and aborted) rise in national insurance contributions aimed to reduce the £4bn annual tax gap caused by the rise in self-employment. The government will look to recoup that cash in other ways, and forcing freelancers onto PAYE is the obvious solution: IR35 legislation in the public sector has effectively done just this and has caused predictable chaos, with the NHS in particular experiencing an exodus of IT contractors.

From an ethical perspective, it is good news for Tweddle: “IR35 is, at heart, about minimising tax avoidance – I pay tax and I don’t see why there should be these special circumstances.

“Compare it to the apprenticeship levy, which is a phenomenally positive move. Disguised employees obviate the need for apprentices – employers could limit their levy by using more limited company contractors, and that’s wrong and counter-productive in the long term.”

Dunning regards the government’s stance on freelancers as “quite protectionist” but does not expect it to derail the contingent workforce. He points out that 350,000 women go on maternity leave each year, many of whom would welcome occasional work. “With Brexit coming up, if you’re not enabling access to those outside the professional workforce – such as second jobbers or parents – you’re being short-sighted.”

And if you want to see just how rewarding the freelance life can be, look no further than George Osborne, who recently took on a sixth concurrent job (he now has five) as editor of the Evening Standard. If it’s good enough for Britain’s elite, who are the rest of us to argue?

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