Permanent employment: the elephant in the room

The gap in valuing freelancers and contractors needs to close if businesses are to truly embrace agility, says HumanSmart founder Vicky Grinnell-Wright.


Even amongst the most innovative organisations, including those leading from the front on radical reinvention of office space and agile working for all, there is an elephant in the room. That elephant is traditional ‘permanent employment’ and the prevailing predisposition towards ‘employment’ and ‘employees’ over contractors or freelancers.

A friend of mine, having contracted at an organisation for a year, has been asked to take a ‘permanent post’ in 2015. The expectation was that the friend would see this offer as a sign of their employer’s endorsement for their work and a cause for personal celebration at this success i.e. moving up in status from contractor to employee. However, my friend is not sure that this is cause for celebration after all. The idea of a permanent contract is in itself interesting in an organisation that has a history of fairly regular restructure and where ‘permanence’ is at best, only semi-permanent. So, if a permanent job is not a permanent job, what is it and what is the appeal to the employer and to the employee?

Permanent contract myths

There are a number of myths around permanent contracts. The first is that they offer greater security of role and income. Certainly it is true to say that the UK mortgage lending market has a frustratingly deep-seated preference for employment, however temporary or shaky. But why? In our recent Hospital Club session on the future of work, a quick show of hands revealed that around 70% of people there had experienced one severance or redundancy and around 35% had experienced this more than once.

One could argue that the employee who has worked in the same organisation for 15+ years, is in fact less secure in onward income generation than a contractor who has managed to secure ongoing revenue from personal business development over a sustained period of time.

The second myth is that employment offers the employer greater stability and/or is a better commercial decision for the business, relative to higher day rates paid to more flexible resources. Speaking to another friend, the recent recipient of a sizeable severance cheque, he revealed that the annual corporate severance pay budget is £3.5m. This feels like a considerable budget item for any organization.

So why is it so large? Excluding the few cases where talent is being exited on performance grounds, or paid off when a colleague or manager makes an ill-advised maneuver leading to constructive dismissal or discrimination claims, this is a big budget frequently used to reluctantly ‘get rid’ of proven high calibre talent. Our research suggests that this is largely down to hiring the required talent for a specific client need or project and then finding the business needs change, or the limited opportunities to offer highly skilled people expected, offered or indeed promised career progression.

Use of freelancers

However, the alternative is contracting or freelancing and both of these words are loaded with prejudices. To some organisations these people are a warmly-welcomed, talented, committed and agile resource with specific skills and specific deliverables, that do not require ongoing investment beyond a project need. However, to many more these are the ‘overpaid’ grudge purchase made when backs are very much against a wall, or full time employee recruitment drives have failed to deliver the goods.

Clients often lament that contractors are ‘not part of the team’ or that they ‘lack commitment to the business’ and that they therefore ‘need’ to hire a permanent resource to secure the loyalty of the asset. And yet, in the vast majority of organisations, next to nothing is done to foster the loyalty of the contractors, they are frequently left out of key meetings, key communications, they are not provided with desk space or appropriate IT interfaces to work in the agile way that a lack of desk would necessitate. They are somehow considered outsiders often ‘on the make’.

I have contracted for many years and I have also been an employee for two of the last ten. Nothing about my period of employment felt genuinely more secure. Nothing in the way I committed to my work was different from the way I do now with my contract clients. I led and managed a team, often in an agile fashion and I worked with multiple stakeholders in multiple territories, as I do now. I was paid (when we account for lack of employers NI and tax advantages of a limited company) a similar rate, and I received no distinct advantages or disadvantages of security when an ‘employee’. My client references would testify that I offer no less commitment to the businesses with whom I enjoy a ‘contract’ rather than ‘employment’ relationship.

The gap in valuing and including contractors as part of a core talent pool is an unhelpful one of perception. It’s time to revisit the status quo and the social norms of how we bring our talents to organisations and how we create legal and social contracts that foster mutual interest. If employed teams are becoming more ‘agile’, less office-based and more frequently measured on results than on presence in a fixed location, then the distinction between contractors and employees will blur and the ‘them and us’ will be eroded. Leaders and managers will need to learn new skills in how to work with dispersed teams and either everyone will be ‘on the outside’ or the new way of working will narrow the distinctions between they types of contract under which an individual engages with an organisation.

What does 2015 hold?

A results-based workplace will necessarily give way to agility; physical, cultural, technological and contractual agility. No one size fits all when it comes to honouring all lifestyles and all life stages through an organisation committed to true diversity in the workplace. People will be hired not on the somewhat arbitrary parameters of postcode, availability to be in a fixed location 9-5, five days a week, forever, but on their skills to do the job in hand for the current period of need. No more, no less. Loyalty then would be fostered by using some imagination: by recruiting talent with shared values and a demonstrable ability to commit to the hard and softer measures the business required and by blurring the division between employee (supplied with benefits) and contractor (responsible for self).

Small changes, for example using a co-working proposition such as that offered by Neardesk, could build big bridges, with all people, irrespective of contracting status, given access to a number of buildings in which they can work, meet, and socialize, with coffee provided on a swipe card on the house. Technology for employees is moving to personal devices anyway and the tax man is going to have to get with the programme as he or she revisits the IR35 tax laws to better enable agile working which meets the needs of organisations for flexible and dispersed teams. Lawyers will need to get on board and move contracts from mitigation to enablement.

The rise of the ‘Talentor’

This new breed of workers will need new-style recruiters and hiring managers. This breed for hire we are naming the ‘Talentors’. They contract their talent into organisations not as ‘outsiders’, but as part of and builders of the agile community that flexes with business needs. They have and bring a sense of commitment and belonging and their contracts are not a simple exchange of time for cash amounts. Now all we need is some Talentor recruiters, Talentor hiring managers and some smart organisations who can lead from the front.

HumanSmart is a consultancy that helps businesses adapt to the changing world of work.

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