As firms look to restructure and reorganise and future-proof under the new normal, business leaders are embracing the hybrid model of flexible working. But as well as greater agility in terms of work location and methods, we are also seeing a greater flexibility in that workforce composition itself – essentially, the further rise of temporary and contract work. So, does this mean that contract and temporary work is the new normal vs permanent work?
As we approach Christmas and the end of a tumultuous year, we take stock of the changes in the employment landscape and assess what will likely stick, come the New Year.
Defining Temp, Contract vs Permanent employment
We all know what permanent employment means, but what is temporary work vs contract work? Is there even a difference?
As the name implies, are designed to be short-term. The requirement can be for a little as a fraction of a day, or for as long as several months (typically six) and can be extended multiple times as needed. The idea (traditionally) has been to provide a resource to fulfil a function until it is no longer required - such as when a firm is putting on an event, or to fill a position until a permanent headcount has been officially signed-off.
Temporary work is usually through a temporary worker agency and suits people who want to gain experience in certain industries and build skills in those areas, or as an easy tie-over between jobs. They can lead to a permanent position if the person proves themselves to be capable in the role and the headcount is finally approved, usually through a much faster hiring process called a ‘working interview’. Payment is usually based on an hourly rate – you get paid for the total hours you work. The payments can also be flexible – with some roles paying a weekly income. However, the hourly rates tend to be lower than contract workers’ rates and most often the role ends as per the agreement terms and the temporary worker must move on to a new posting. Therefore, temporary workers have far less stable employment than permanent workers and usually very few benefits – non eligibility for sick leave or annual leave. Temporary work is usually seen as a stop gap, of when the workers need total flexibility in working arrangements as the main priority. Work is usually limited to a single project, or a specific time period.
Contract roles are usually offered for longer term work, typically three, six or twelve months ‘fixed term’. The duties of the worker under the contract are usually more clearly defined and the employee is usually paid directly through the employer company. Contracts are another way to fill an employment gap or to gain new skills, but are usually offered to people with more experience in a certain type of role than might be the case with a temporary worker. Contractors paid directly through the employer accrue sick and annual leave and usually attract the same benefits as permanent employment (depending on local market laws). Contractors are paid a pro-rated monthly salary that doesn’t include overtime. Therefore, contract work is a more long-term solution to employment that still provides a good degree of flexibility. But, workers need to sign up to a contract employment agency. Otherwise, they must hunt down work themselves or face gaps in their income. Work under this regime is usually focussed on a particular project (for short contracts) or can be across several projects (if a longer contract is agreed). This work is relatively stable as there is a clearly define contract duration and both sides must give notice if they wish to terminate it early. It also provides very good project experience for your CV.
When contractors register a business as a sole trader and invoice the employer (or ‘client’) for their services, often on a rolling or ‘retained’ contract for services, they essentially become a business. This type of work is paid on an hourly basis but does not attract benefits as this becomes a services-supplier arrangement. This type of contracting usually suits someone who is already a specialist in a particular area – copywriting, communications consultancy, design services etc. Because of the specialism, the contractor can usually charge higher rates, is usually paid by the amount of time worked, or against key project deliverables, and works across several projects, or on a specific activity or function on a rolling basis. This is usually the best paid of the flexible work options but does require the sole trader to register their business and find their own work, and is thus likely to be volatile in terms of cash flow.
Enter the pandemic
Back in pre-pandemic 2019, it was true that firms in Asia with flexible working arrangements were in a minority. While these ideas had made an impact in Western countries and provisions were in place in many companies, flexible working was still not widely practiced. In Asia, an even more entrenched presenteeism culture meant that adoption was even slower.
With this year’s global pandemic, several factors have seen a huge, sudden increase in the number of temporary and contract workers:
Many people lost their jobs and turned to temporary work to secure an income
With a variety of home commitments such as childcare, workers looked for more flexible options
With many people put on furlough schemes, some of them started to look for temporary supplementary income with a side job
Many relatively new businesses in the e-hailing and food delivery markets had already adopted a temporary/contract workforce arrangement
These businesses saw a huge growth in demand as everyone was forced to stay and home and use mail order services
Teams started working virtually, some for the first time. This led to a realisation that top talent and skills could be sourced from a wider geographic area for certain jobs, at short notice
Due to technology advances and new platforms, contract workers were more easily accessed than ever before
With so many people working as contractors, the old prejudices against them, such as being non-committal, less motivated and riskier people to give responsibility to faded away
Fast forward to the end of 2020 and now over 80% of the workforce in Singapore, for example, has been working from home for most of the year, with a similar story among office workers in Malaysia.
The Singapore government and some companies have also worked together to further enable worker mobility. For example, affected employees in the tourism industry were offered alternative work options under a joint government-industry initiative. And it is likely that job match-making projects such as these will need to continue after economies have emerged from the pandemic as there will likely be significant employment gaps when some industries reopen and start to revitalise and expand again.
The benefits of contractors
There are many benefits to hiring contract staff for employees:
Cost effective – highly skilled individuals can be employed on a project almost immediately – instead of taking months to find the right person
Flexibility in termination – the contractor doesn’t work out, the firm can simply serve notice and the contract is ended without the ordeal of disciplinary reviews and the painful administration that goes along with ending permanent employment
Likewise, should the contactor decide to leave, they will serve notice allowing the firm to engage another contractor, possibly even participating in a handover
Highly skilled, temporary staff can often bring innovation into a firm with them. It is possible they will have gained strong experience and a deep understanding through assignments at various organisations which they can pass on to the employer’s team or department
‘Super-temps’ is the term for highly skilled professionals and executives who’ve had strong careers working in large multinationals and then choose to offer their skills as contractors. A prime example of this are strategy and transformation experts, who bring their IP from their time working in large corporates into other firms to drive their business. According to the Harvard Business Review, these executives are trusted to perform “mission-critical work that in the past would have been done by permanent employees or established outside firms”.
A sea change in employment practices?
While some businesses have adopted a permanent-management plus contract-workforce model (such as Grab, Food Panda etc.), it is most likely that many businesses will instead adopt a core team of permanent staff and use contractors as additional skills/experience hires on an ad-hoc basis going forwards. Many firms already do this, but it is likely the practice will become more widespread into 2021.
While the benefits of the flexible contractor workforce are clear, there is still a need to maintain something of a company culture that is inculcated in the workforce via a mostly permanent senior management tier and a core permanent workforce scaffold, allowing contractors and temporary workers to bolt-on it, bolter teams and business units.
With that said, as we move into the rest of this decade, it would be advisable for job seekers to understand how to market themselves both as contractors and permanent employees as needed, to open up as many opportunities as possible and to give themselves as much flexibility as they might need – something to ponder over the Christmas period.
From all of us here at Ellwood Consulting, we wish you a Merry Christmas and a Happy New Year, and we hope that 2021 bring us all good fortune and new perspectives.