Precarious employment: The rise of the flexible worker

23 December 2015 -

Improving the UK’s productivity is the government’s top economic priority, but does aiming for a hyper-efficient economy inevitably lead to an era of insecure employment?

Matthew Rock

Sir Charles Dunstone tells a great story about how his company reacted to the credit crunch in 2009. “We got really nervous,” recalls the Carphone Warehouse founder, “so we got rid of one-third of all non-customer-facing jobs: that’s 500 people. We did it because we thought we’d save money. We did. But actually the most amazing thing was that the business worked much better without those 500 people.”

The anecdote always gets knowing nods from business audiences because it touches on something deeply felt by managers and leaders: that employing more people does not make you more efficient, and that employing fewer people might, paradoxically, be productivity-enhancing.

Today, this secret code of management is being exaggerated and accelerated by relentless leaps forward in technology. Whole swathes of work are being replaced by digital tools and algorithms. Where once an organisation had a department, today you’ll find cloud-based service providers fulfilling the need, whether it’s for call-handling, sales, credit risk assessment, customer service, IT support...

Robots are increasingly common in the UK’s manufacturing sector. Workers everywhere are looking anxiously over their shoulder.

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Looser employment regulations are compounding the effect by enabling organisations to recruit and plug gaps on an as-required basis. Go to any modern company, and you’ll meet a mix of part-timers, full-timers, second-jobbers, interns, wannabe entrepreneurs and short-term contractors. Many will be working remotely; others will be fleeting figures who ply their trade on a mobile basis.

The company that most vividly symbolises these changing patterns of work is the online taxi-booking service Uber.

The company’s platform essentially enables any private individual with a car to become a taxi driver. Because customers stipulate where they want picking up from, the nearest Uber driver always gets the fare. It’s the ultimate customer-driven, app-centric organisation; an awesomely efficient service that’s allowed tens of thousands of people around the world to earn a living by driving.

Uber has also unleashed a tide of legal complaint and controversy because it challenges the very nature of the employer-to-employee contract. In the UK and US, some drivers have taken legal action against the company, insisting that they are, in effect, Uber employees and should be eligible for ‘employee’ benefits such as holiday pay, maternity and paternity leave, pensions and so on.

In Europe, Uber is itself going to court, arguing that it’s not actually a transportation company, but rather a technology business, and should therefore be subject to new, less onerous regulations.

“Outdated rules, such as return-to-garage regulations or minimum price and duration rules, are being used across the European Union to squash competition,” Uber’s Mark MacGann told The Wall Street Journal in July. “We’re not arguing that we’re exempt from any regulations whatsoever. We’re saying regulations in some of these countries were designed decades ago... We think regulations need to be fit for purpose in [the] digital age.”

Mark those words: “fit for purpose in the digital age”.

Uber is significant because, if it succeeds in arguing that a tech company entering a traditional industry should not have to adhere to that market’s established rules, this would open the door for other ‘marketplace’-style companies to enter existing markets with renewed confidence.

Fortified by a far lower regulatory cost base, they would have a huge competitive advantage and carte blanche to forge a new contract with employees/workers.

These new disrupters would, like Uber, doubtless be hyper-productive, but they would almost certainly shepherd in a new kind of ‘on-demand employment’ – relatively well paid on a piecemeal basis, though insecure and short-term contract-based; and, of course, driven predominantly by the employer’s own data-driven business strategy.

There’s nothing new in seasonal, contract labour – agriculture has operated like this since the dawn of time – but the difference today is that technology can make this kind of on-demand work the norm in every sphere of business, every walk of life.

Immediately after the General Election, George Osborne made it clear that finding an extra gear for the economy would be a priority for his second term as chancellor; Bank of England governor Mark Carney identified poor productivity as the reason why the Bank downgraded its growth outlook.

So if improving productivity – the level of economic output per hour worked – is top priority for us as a country, must we also accept insecure employment as a consequence?

Is precarious the new normal? And if it is, what will be the impact of that looser employer-employee bond for anybody in a leadership role?

What’s going on with work?

It’s a cliché that the world of work has changed fundamentally, but the truth is more nuanced than the dinner-party analysis.

Successive governments have indeed liberalised employment regulations, making the UK labour market among the most flexible in the developed world. Patterns of work have changed, too: the number of Britons who work part-time has been swelled by more women joining the workforce and older workers choosing not to retire.

Self-employment has been rising for years, and today some 4.47 million British people work for themselves.

The average length of time people stay in a job in the UK is among the lowest in the Organisation for Economic Co-operation and Development (OECD) – a sign that moving jobs is normal, and that long-term employment is probably on the wane.

For many, ‘zero-hours contracts’ represent the dark side of this shift to flexibility.

According to Office for National Statistics (ONS) data for April to June 2015, 744,000 people in the UK are employed on a contract that does not guarantee a minimum level of paid work – that’s 2.4% of all workers. Similarly, 1.3 million part-timers regard themselves as ‘under-employed’ and would like more work. Alongside ever-greater flexibility, this seems to represent UK-wide job volatility and dissatisfaction.

But there is another perspective.

Over recent years, the fastest-growing segment of the UK workforce has been full-time employees (albeit it’s hard to discern the level of employee benefits and pension entitlements that they are receiving). The UK’s employment rate in the three months to June 2015 was a record-breaking 73.4%.

During the recession, there wasn’t just a flight to full-time work, but British workers then stayed in those jobs for longer. (A corollary piece of data is the decline in the UK’s rate of ‘Total Early-Stage Entrepreneurial Activity’ after the financial crisis and throughout the downturn.) In other words, the average British worker did not, contrary to popular myth, defy recession and discover her inner entrepreneur; quite the opposite, she did whatever she could to find a full-time job and stuck with it.

Ian Brinkley, chief economist at the Work Foundation, dismisses the “rhetoric of the deregulated labour market”. He insists that the idea that the structure of employment has changed is “totally wrong. Permanent employment is the bedrock of the UK workforce”.

So which picture is more accurate? Actually, it’s both, and the reason for the confusion is that this isn’t a binary, permanent = good, flexible = bad scenario. There are complex forces at play:

1. Your twenties are a time of insecurity

Job volatility among younger workers is much higher than among other age groups, the ONS has discovered (see table, above). This suggests that the 18-24 age bracket is having to get used to a world where frequent, rapid job changes are the norm.

For many, this constant feeling of insecurity will be difficult, but, as celebrated author and chronicler of workplace change Charles Handy told Professional Manager, “People sometimes say, ‘I don’t like the kind of world that you write about.’ And I say, ‘Well no, I’m not sure I do either.’ It’s pretty insecure, and it’s fine for those who can cope and it’s not fine for the ones who can’t. But I’m afraid this is the way the world is going and you have to learn to live with it.”

Reassuringly, job turnover decreases as people get older, so the future may be about an insecure twenties followed by a more secure working life.

2. The rise of the flexible class

There’s a slice of the workforce – highly qualified, technically gifted ‘A-players’ – who will increasingly choose – and want to dictate – their terms of employment. “The more skilled you are, the more likely you are to work flexibly,” says Brinkley. Managers and technical staff tend to snap up the option to work on a flexible basis, he observes.

Conrad Ford runs Funding Options, an online platform matching small companies with finance. He started the company in 2011, and has grown it to a 20-person firm. It’s a linchpin player in the alternative finance market. You would imagine that Funding Options would be an ultra-flexible employer, but the reality is more subtle.

Ford works to a 40-40-20 rule: 40% of the team (mainly those in customer-facing roles) are full-time employees with deep experience in the business; 40% are interns working towards a full-time position on a try-before-you-buy basis; and 20% – “this is the most interesting category,” says Ford – are high-calibre, heavyweight individuals who choose to work on a consultancy, project-based or part-time basis, whether for family reasons or because they prefer to juggle roles.

His job as a manager is to balance the portfolio of employee types, and to ensure that the non-permanent team members add as much value and skills as the full-timers.

3. The advantage of full-timers

It surprised many that full-time employment held up so well in the recession, and it may do so for years to come. “It’ll be too risky for companies to dispense with full-time employees completely,” says Ford. For him and for many other bosses, full-timers bring a special depth of market and customer understanding, attention to detail and quality.

Last word to Andy Hunter, co-founder of online jobs marketplace Adzuna. With one million UK jobs listed on his site, he has access to minute-by-minute insight into how the job market is changing. He is also an entrepreneur running a fast-growing, 35-person digital business with a mix of employee types. Does he believe that instability is inevitable?

“The nature of work is certainly changing and becoming more unstable,” says Hunter. Recent Adzuna data showed interest in contract-based work up by an unprecedented 77%. Some sectors, such as hospitality and retail, are moving inexorably towards a mainly contract-based, flexible model.

Equally, Hunter also acknowledges that most employees, above all else, desire job security – so there may always be a place for the full-time position. But in the future, the full-time permanent contract may increasingly be something that is earned, offered only on a tactical basis, depending on the employee’s skills, tenure and stage of life.

It’s security, but not as we know it...