Millions of unemployed job seekers are desperately looking for jobs that have been wiped out by the coronavirus. This grim picture will continue well into 2021 and beyond. (OECD, 2020)
Before the pandemic, we have seen the rise of the gig economy and short-term contracting of services. Many employers were already moving towards this contracting model or contract for services. They have moved away from the employment model or contract of service to reduce and manage their cost and to extract as more value from their workforce.
The phrase ‘contract of service’ is generally used to refer to the contract between employer and employee. In contrast, the term ‘contract for services’ is generally used to characterise a relationship between an employer with an independent contractor.
The rise of the gig economy and contracting
The gig economy is made up of three main components:
- Independent contract workers paid by the gig (i.e., a task or a project) as opposed to those workers who receive a salary or hourly wage.
- Consumers who need a specific service. For example, a ride to their next destination, or a particular item delivered.
- Organisations that connect the worker to the consumer in a direct manner, including app-based technology platforms.
Here is what we know about the growth of independent contracting by individuals:
- More than a third of all US workers — around 57 million people in total — are now employed as independent workers.
- Nearly a third of certain gig workers (1099-MISC contractors) at companies are over age 55.
- Global business leaders forecast a 66:34 split between permanent and temporary workers by 2023 with 97% of business leaders will be adopting a more flexible approach to recruitment in the years to come. The main benefits of contract workers enjoyed by employers: more control over staffing costs (36%), support for long-term absences, such as parental leave, secondments or sick leave (34%), and better management of workload fluctuations (32%).
- The number of self-employed individuals (many of whom are independent workers in the gig economy) in the US soared by over 19% from 2005 to 2015.
- 83% of executives reported an increase in the usage of contract labour to meet business objectives.
- Up to 30% of the Fortune 100 workforce works on a contract basis. That number is expected to increase to 50% by the year 2020.
Employees are only productive a third of the time
Employees are only productive for an average of 12.5 hours each week, according to a report from RescueTime. That’s being productive 31.5% of the time in a 40-hour work-week. Payroll costs associated with lost productivity can add up quickly for any business.
Keeping employees on the payroll who are only productive 31.5% of the time does not make economic sense, especially during a recession and pandemic.
We can argue that this percentage is rather low, but the key point to note is that employees are not 100% productive all the time. There is a large portion of unproductive time that employers are paying for that has no value to them.
The only way to reduce their payroll cost and to increase their workforce productivity is to adopt a hybrid employment-contracting model. They can hire more on-demand independent contract workers and reduce the number of employees over the medium to long term.
The trend of hiring more on-demand independent contract workers over regular employees will only grow exponentially. This has been triggered by the onslaught of the coronavirus.
Contract workers are more productive
Nearly one in two business leaders surveyed (48%) believe that contract workers are more productive than full-time employees.
Nearly three in four (71%) believe that contract workers are more specialised than full-time employees. Half of this group also noted that the cost-effective nature of contract workers make them more valuable than full-time employees.
The reality is that business leaders value the drive, motivation, speed, and efficiency of independent contract workers. Employers will only need to pay for the work done, not for unproductive time. While there is a premium paid to contract workers, the value created could outweigh the total cost.
The key reason why businesses are looking at hiring independent contract workers is that they can create more value for them.
If employees want to remain in employment or be employable in the future, they have to change their mindset and approach to work that focuses on value creation and giving.
Employees are in running a business of one
All employees should be in ‘business’ for themselves. They are a business owner.
By approaching employment from the business perspective, employees can cultivate the right mindset for the future of work. There is no longer an entitlement mindset of getting paid for unproductive work. It is about how much value employees can create for their employer, or how much money they can make or save for their employer.
Whether employees like it or not, the employment scene will change post-pandemic. The Great Reset for the workplace has begun even before the arrival of coronavirus. The pandemic has only accelerated the speed of this reset where employees will have no choice but to evolve themselves into contract workers, as businesses of one.
Just like many of us have shifted to working from home when many people were sceptical about working from home pre-coronavirus, employers may just be hiring more fixed-term independent contract workers rather than ongoing unproductive employees.
The Great Reset for both employers and employees
The pandemic crisis has caused severe political, economic and social disruptions. Many businesses have reined in hiring and investment as the fallout from the pandemic outbreak dampens sales and have created a cloud of uncertainty over the economy.
The Great Reset has also changed in the following:
- More workers are working from home.
- People are cooking or baking at home more rather than going out to eat.
- Credit card debts are being reduced as people are paying them off in record numbers during the lockdown.
- Home fitness has taken off.
- People are taking up hobbies.
- Worklife balance is taken seriously.
- Families are spending more time together.
- Mental health has taken a front seat.
- New ways of working have emerged.
- Consumers are changing their preferences and taste for products and goods.
The pandemic has also made millions of workers to be unemployed, unfortunately.
The unintended consequence of the coronavirus on families, personal lives and mental health have been huge. With many countries already in recession, the full recovery of labour markets will take many years beyond 2020.
The emergence of a global recession and pandemic have caused the Great Reset for both employers and employees.
With any crisis, there are opportunities. It is all about perspectives. Having faith to seize the opportunities presented will go a long way in keeping relevant and in line with public expectations.
It is an employers market
For employers, this is an opportunity to evaluate their workforce and the required skills to survive and thrive, now and beyond.
It is also an opportunity to reduce and keep payroll cost down especially if they have already reduced their workforce numbers due to coronavirus.
It is now an employers market. With more job seekers in the job market, employers have a vast pool of experienced and qualified workers to hire from. They can demand what skills they need, at what price, and at what hiring conditions.
Unfortunately for many job seekers, organisations across different sectors and industries will most likely hire independent contract or short-term staff rather than permanent employees especially during these times of uncertainty.
Contract staff offer flexibility and in specific short-term periods in the following ways:
- Organisations may need different but diversified skillsets to support different business functions and departments, especially for crisis-specific work and peaks. Finance departments may need additional support with one-off forecasting. Marketing may need additional support with increased compliance requirements.
- Businesses can get reasonably priced specialised skill sets that are experienced and efficient from the get-go. When supply outweighs demand, prices for contract workers may likely drop.
- Organisations will only need to pay for skills and services for a set amount of time and for specific pieces of productive work. They will forgo many of the expenses that could be accrued from a permanent hire such as annual pay, holiday and sick pay, pension contributions, etc. Hiring independent contractors can be a cost-effective way of supporting the business and keeping costs down during a recession.
- Contract or interim staff can provide support for clearing backlog work for a set amount of time until things get back to normal.
It is an opportune time for employees to better themselves
The pandemic has been a wake-up call for many employees and workers. We have seen that no jobs are secure.
It is easy for complacency to set in when things are going well. This has been especially so before coronavirus. Economies were in full employment and it was a job-seekers market.
Perhaps it is time for employees to reset themselves in terms of their attitude and approach to working or to the skills and experience they possess. For some people, it could be time to change careers or industries.
Whatever it is, the pandemic could be a trigger for self-evaluation and action-taking. It could be a great opportunity to change for the better.
It’s now all about value creation
Employers have limited (or reducing) resources during this recessionary period to get things done because of week consumer demand for most goods and services. Even when businesses restart or reopen, many economies are experiencing a recession.
The double whammy is just the perfect storm that not many organisations and workers are prepared for. Many have not seen these coming.
We know that business leaders are looking for people who have the drive, motivation, speed and efficiency. They generally come in the form of on-demand independent contract workers who only charge for work done or the outputs they produce.
Employers are looking for people who can create value for them, to help them make or safe money. They are looking for productive workers who are priced accordingly.
Employees can take the opportunity to reset themselves and approach work like an independent contract worker (not necessarily be a contract worker). They will have to provide or create value for their employers if they want to be or remain employable.
They do so by upskilling or reskilling themselves to be more relevant to the business, cultivating more professional humility, saving or making money for their employer, or even enhancing their professional presence and branding.
For job seekers and workers, they should be competing on value, not on price. Avoid being a generic commodity that has vast substitutes. Value creation is the key to their success.
So, are you creating tangible value for your employer?
For many workers, it is no better time to take stock and re-orientate. Personal reflection is good for the soul and future.