The Extinct Employee: Are Contractors Poised for Takeover?

Business.com / Human Resources / Last Modified: February 22, 2017

More businesses are turning to temp agencies to fine-tune cyclical needs and reduce overhead.

Uber likes to call itself a technology company (as opposed to a taxi or limo service), yet the technology that made its fortunes is intertwined with its reliance on temporary contract workers. 

In the U.S. alone, that’s a pool of over 162,000 drivers, according to The Washington Post, who can work when and where they want to and without direct supervision and evaluations besides user ratings.

This is in comparison to about only 2,000 staffers considered direct employees of the company.

Related Article: Think Different: 3 Reasons To Hire Employees Outside The Field

Which leads Biz 3.0 to ask the question of whether conventional employees—workers paid directly by the employer through an implied or written contract and who are usually entitled to certain benefits in addition to salary—are becoming extinct.

But to paraphrase Mark Twain, the death of the employee is highly exaggerated. In fact, it’s not even on life support. For one thing, there are a number of legal cases against not only Uber but a range of companies that rely primarily on a contracted temporary workforce, that may force them to treat their workforce as “employees.”

Indeed, as The Wall Street Journal reports, if lawsuits threatening to reclassify contractors as employees prove successful, it could drive up labor costs as much as 40 percent. Even before these cases are settled, some startups are reconsidering whether the temp workforce model is worth the hassle and expense of defending if it’s going to wind up eventually costing the same as a direct-hire workforce.

How Many Workers Are Contractors?

But that’s not going to put an end to temporary workers, either. According to the U.S. Department of Commerce, the number of temp workers reached an all-time high of 2.9 million in May 2015. Still, the temporary employees only accounted for 2.4 percent of all private sector jobs. On the one hand, that’s a lot of people. On the other hand, it’s a relatively small percentage of the total number of jobs.

The reality is that though regular employment is no longer the “job for life for guarantee” it was in the post-World War II American economy, it hasn’t disappeared, general perceptions and the lack of job security in a shaky economy notwithstanding. On the other hand, there’s a reason companies rely more on contract workers. Both have their uses, for employers and employees.

The temp worker classification dates back to 1946 when it was way for housewives to perform primarily clerical duties as a way to earn extra money and not commit to the hours required for full-time employment. As sociologist Erin Hatton explains, the concept spread to manual labor and manufacturing, primarily as a way to sidestep union rules, and by the 1960s placed contract employees in a variety of professional positions.

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The Temporary Advantages for Employers

Temporary workers provide companies with flexibility. This is particularly true in manufacturing or other seasonal industries where a company can ramp up to meet rising demand, then easily shed workers when demand declines—since temporary workers are not “real” employees, the expense of termination and legal exposure are both much less.

However, the same principle applies to other professional positions, ranging from graphic artists to computer programmers to project managers. Contract workers provide capabilities for special projects of defined duration, and allow companies to quickly and easily expand their labor force during economic peaks, and just as easily and quickly shrink the workforce during downturns. This flexibility is particularly important to startups. A contract workforce has lower administrative costs and can be quickly scaled as business needs evolve.

The Temporary Advantages for Workers

For certain workers, such as computer systems engineer Kelly Sibla in an NBC News report, temporary work is the “new norm.” This new norm may be situational—companies are still hesitant to overcommit to the cost and expense of hiring new employees, and in certain job categories, and temp work is all there is. As

As Greg Zanio, CEO of a contract worker placement firm, points out, “If companies can get work done without creating a full-time position they are more inclined to do that today, just to stay more flexible and agile and keep their fixed cost structure to a minimum.” And while it’s true that contract work is by definition temporary, in many cases “real jobs” aren’t that much more secure as companies continually resort to downsizing in response to economic and business difficulties.

Many contract workers are freelancers by choice. Contract work offers variety, exposure to multiple industries and job challenges, in some cases higher salaries than employees (albeit perhaps without benefits) and flexibility to “pick and choose” opportunities. Moreover, contract workers avoid office politics and “dead-end” career paths. Ali Brown describes her “career” choice: “A temp job is better than a full-time job.”

The Temporary Disadvantages for Everyone

Of course, the temporary workforce has its downsides. For workers, it’s the uncertainty of not knowing how long your job is going to last or, when it ends, how fast you can find the next job. Temp workers, particularly those in

Temp workers, particularly those in low-wage warehouse and manufacturing roles, are statistically more prone to accidents and injuries on the job than regular employees. Job insecurity also makes it easier to exploit workers and force them to work under unreasonable conditions and expectations.

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Contract workers aren’t going to be as loyal to their employers as “real” workers. Their status as temporaries makes it difficult to foster a sense of teamwork beyond just doing what is necessary to get the paycheck. This may be a little less true for Millennial workers for whom contract work is more the norm than regular employment, particularly so for those working with startups.

However, as we’ve seen with Uber and numerous other startups, overreliance on contractors as your primary labor source can lead to legal troubles and worker discontent, not to mention bad publicity.

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