9th February 2024
I wrote the (long) article below in 2016 as the government started to talk about introducing IR35 changes in the public sector – the same changes that are now causing such controversy in the private sector.
So in that sense it’s still relevant – but I think it’s worth reading again now mostly because I’m absolutely convinced that how companies treat their employees and contractors through this period of instability caused by Covid-19 is going to be absolutely defining for how they are seen as a business.
I’ve seen a few posts suggesting that the best question for a candidate to ask at interview in 2021 will be “What did you due during the pandemic?” and that seems right to me. Companies that show loyalty and respect and care and flexibility will be hugely attractive employers. Companies that don’t – won’t.
Work is changing so fast that it’s hard to keep up but it looks likely that we’ll be working in a wide variety of locations, with different team dynamics and a totally new understanding of what it means to be part of a company. Just being there every day is unlikely even to be a reality, never mind the defining characteristic of the bond between company and person.
It’s a fascinating time to be involved in work. Read on…
There are now over 4.5 million self employed people in the UK. The number grew by 182,000 year on year from early 2015 to early 2016. It’s almost 15% of the total UK workforce. I don’t know about you, but I think that’s huge.
This has been a trend for a few years but it’s become high profile in 2016 because the government have started to become really concerned – mostly because it hits their tax take. So as 2016 comes to an end, it seems a good time to ask – what’s going on? What does this rise tell us about work in the UK (if anything)? Is this the “gig economy”? Should we care?
Ordinarily I try and keep my blog posts pretty short but this one is long. For those of us engaged in the employment market place this is a big topic and I think it’s worth some thought – I should be clear that everything here is just my opinion though. I’d welcome yours in the comments below.
It seems pretty obvious to me that there are a number of different things going on here. If you read both the Guardian and the Telegraph (always good for a laugh), you’ll see that they have two diametrically opposed views; the Guardian thinks that the rise in self employment is because of oppressive companies exploiting vulnerable workers; the Telegraph that this is the rise of highly skilled workers using their talents to their own advantage. I think they’re both right. Because….
what’s happening here is two different things at the same time
Let’s start at the low skilled end of the market. Zero hours contracts have become the bogey man of this debate, and it’s pretty clear that all sorts of companies are using a variety of arrangements to force low skilled workers into situations where they have little or no guarantee of income. Self evidently that’s to the benefit of the company, and the detriment of the worker. Deliveroo riders, Uber drivers, Amazon warehouse employees – the list is l-o-n-g and the variations on the exploitative theme are depressing.
But at the other end of the market you have the highly skilled contractor. In my part of the world there is an incredible skills shortage, particularly in the AWS/DevOps space. Trying to find permanent employees in that sector is seriously challenging; virtually everyone with any significant experience is contracting. And why not? They can earn hundreds of pounds a day, they can get as much work as they can be bothered to do, and they can pick and choose the most interesting projects.
But I want to argue that the root cause of both situations is the same. To my mind, this is the chickens coming home to roost after 30+ years of companies abandoning long term loyalty for short term gain. It’s the commoditisation of the worker.
Every round of redundancies is another nail in the coffin of the worker/employer bond
The situations we see with low paid workers being forced into precarious contractual situations because they are on the losing side of a heavily weighted power balance is just the logical end point of the way work has been going for years. If you don’t think that your company would do the same to you if they thought they could get away with it, you’re either overly optimistic or you own the company.
The problem for companies is that the relentless cycle of offshoring, outsourcing, redundancies and restructuring destroys any semblance of loyalty between employer and employee. You see it in every company when the time comes to make redundancies. Inevitably the company tries to make lower performers redundant. Inevitably a good number of highly valued employees leave of their own accord during the process. Why? Not because they feel at risk – quite the opposite. They know their value – seeing people being treated like a commodity, they decide to go to a higher bidder.
The problem is that to generate loyalty companies have to be loyal to everyone. I don’t mean tolerating underperformance, but I do mean offering people training and career development and long (long) term opportunity. Some companies do this brilliantly – one company I came across recently in the IT space has dozens of people with really valuable skills who have been in post for 10-15 years. How do you do that? Not by outpaying the market but by behaving in a way that engenders loyalty. But you have to do it all the time, and to everyone. If you treat me well but treat my workmate like cattle, I’m not going to feel the love. In fact I’ll be off for another £5K.
And to a certain extent, that needn’t be a problem. I do think the nature of work is changing permanently. Partly because a lot of people like working for themselves (I know I do). It gives them flexibility and opportunity and once you’ve had a taste of that why would you go back? But also because..
you can’t put the genie back in the bottle
It might be possible to sort out the problem of low paid workers being exploited. But those highly skilled, highly paid people who have become freelance consultants aren’t going back. That ship has sailed.
At this point, enter the government. They have a problem with all this – they think it’s costing them. At the bottom end of the market, they have a responsibility to protect the vulnerable and in doing so (through working tax credits) they are effectively subsidising the payrolls of large companies. At the top end of the market, they want to categorise contractors as employees so they can collect employers’ NI.
Funnily enough they seem a lot more concerned about protecting their tax take from the top end than about protecting the people at the bottom. But how to do this? So far all their efforts have entailed incredibly woolly and ineffective legislation that a child could drive a bus through. But this year they’ve shown their teeth. By starting to force the liability for unpaid tax up through the chain to agencies, they will get traction. Agencies won’t want that liability and people will start to be assessed back into the system as employees (whether fairly or not). So 2017 is going to be a very interesting year as we start to see how that plays out – initially in the public sector, but surely inevitably in the private sector too eventually.
At the same time, the worst excesses of zero hours contracts have been high on the agenda, the living wage is being raised (which might actually be counterproductive but I’m not going into the politics) and things like the apprenticeship levy have started to put long term opportunity back on the agenda.
So whilst it will take a long time, I suspect we have reached a turning point at which the unfettered market starts to be addressed; we can expect more intervention from the state at both ends of the market.
Well – no. Obviously not. It’s hard to see any way in which the shift towards highly paid and highly skilled people picking and choosing opportunities and projects will go away. But I think slowly but surely the motivation will change.
Self employment will become more about opportunity and lifestyle and less about tax benefits
The government is going to make contracting less financially attractive. (They’re going to have to do it in a way which doesn’t also make entrepreneurial business unattractive, and that is going to be a nightmare, but hey – I’m not a civil servant. That’s not my problem). But that doesn’t mean it won’t still be attractive on its own merits.
The joy of the new technology is that work as a whole is changing. Go into the City on a Friday – what do you see? Not many people. Huge numbers of them are working from home. In the IT sector, where more often than not location is irrelevant, home working, remote working, contracting, and the “gig economy” are having an enormous impact. A permanent career is for many people just the process of getting the skills to contract. So employers are having to offer more flexibility to hang onto people and the cycle continues.
For the lucky few with the right skills, the new economy is an uncomplicated blessing
At the bottom end of the market I think we can also expect more regulation. But is a situation where companies are increasingly having to buy in key skills on a project basis, whilst offering expensive employment guarantees to lower skilled people really sustainable? It’ll depend from business to business but I think we can expect a new set of challenges and arrangements to emerge.
What, then, can we expect in 2017?
At this point I’m going to focus on the IT market – because it’s where I’ve always worked.
The incredible, accelerating, pace of change in that sector means that skills in certain areas are suddenly in huge demand, far more than can possibly be met. So people with the ability to stay ahead of the market and deliver significant project value will always be able to work as contractors.
At the same time it suits companies to engage people temporarily for particular projects or pieces of work. So contracting is here to stay – albeit I think the government’s tax take will inevitably increase.
On the other hand long term contracting in areas where skills are easier to find may start to decline – both because contracting will be less attractive under those circumstances (they will make it very difficult to demonstrate that you fall outside IR35) and because companies finding themselves having to cover NI contributions and the like in daily rates are more likely to push back towards permanent hires.
I don’t think there is a return to people working for companies for 40+ years any time soon – those days are gone. At this point I can’t really see a return to long term loyalty on either side of the equation. But government intervention will have a significant impact on the market in 2017 / 2018 – and it will be fascinating to see what happens next.