Wendy Waters
by Wendy Waters
Mon Sep 28th 2009 at 8:34am UTC

“Free” Agency?

As previously discussed on this blog, in Canada this recession has pushed a number of people into self-employment. In the U.S., the trend has been less pronounced. Yet I suspect one part of the trend is happening, or soon will, in America – the move by many firms to hire “contract” employees who technically are not employees in that no deductions are taken from their pay and no extended medical or dental benefits are offered.

In Canada, some of the newly self-employed are launching new entrepreneurial start-up businesses that eventually may hire dozens of people or more. Entrepreneurship seems to be doing better in Canada than it has in a while.

But many “self-employed” persons are working on contracts in positions that were formerly salaried. A corporate recruiter recently explained the trend in the Globe and Mail:

Jeff Aplin, Calgary-based executive vice-president with David Aplin Recruiting, has also noticed a shift to more temporary work. Across Canada, he’s seen a surge of demand for contract consultants in accounting, engineering or IT to work a fixed term with a fixed task. “There’s definitely more appetite for a flexible work force” he says.

Because the 21st century economy will likely require the ability to adapt and change quickly, successful companies will likely want a certain percentage of their staff to be on fixed term contracts. Contractors may be a larger part of the future workforce.

Just because employers prefer it doesn’t mean those with talent to “sell” will want it. (And the unemployment rate in many skilled areas isn’t that high so, even in this down time, employees have some power here). Presumably, contractors receive some advantages, such as increased pay to compensate for the lower benefits.

So, for contractors, what are the advantages? What will employers need to offer in the future to have a healthy pool of contractors to choose from when they need them?

Do you primarily work on contract, doing work that others are paid on salary for?

Do you like the freedom? Or would you prefer a salaried position with set vacation allotments, benefits, etc.?

11 Responses to ““Free” Agency?”

  1. David Shaw Says:

    While I see that trend happening here in the states also (the increasing instance of entrepreneurial start-up), I think the biggest hindrance to its growth is the lack of affordable health care. To me, I could never go strictly contract because *if* I could afford health care coverage, I would surely be denied the type of coverage I would need.

    Let’s hope we get a public option soon. Then we could really see the era of the entrepreneur.

    David

  2. sm2 Says:

    The contractor trend has been happening across both the public and private sectors for at least the past 5-7 years.

    I work in economic development, as a contractor, and I’m seeing several rather disturbing trends. Contracting out specific program implementation has been occurring for years- organizations could not substantiate the often short-term hiring for program development/implementation. The recession has forced budgets to be slashed, severely limiting cash flow, as organizations are fighting for revenue streams in order to maintain their relevancy. Now these organizations are looking for program design/implementation to be completed internally. However, the last years of contracting have resulted in a void in internal capacity- both fiscal and human capital.

    This is my life.

  3. Harold Jarche » Freelancers unite Says:

    [...] Creative Class blog just raised some more points on [...]

  4. K Franklin Says:

    The lack of affordable health care is a tool to prevent competition by keeping people tethered to jobs they hate. Modern feudalism or even indentured servitude. No problem, pump people full of antidepressants so they can stand to keep the job with insurance that pays for the drugs. When the side effects start killing them the insurance company drops coverage, when they are unable to work they will be fired, and then they will die. #1 Rule of Employment: no one is irreplaceable. “Next?”

    Employers shifting responsibilities to contractors with no benefits want to have their cake and eat it. Entrepreneurship is feared. How would it change the employment world if all were there because they chose to be, not because they risk death from illness? No more control through politics of fear.

    Job-seekers are told to build a personal brand for their career, yet branding is one of the requirements of entrepreneurship.

    I know a contractor who was kept on a string for months with the promise of employment, and was promised but not given any jobs after refusal to sign an unreasonable non-compete stating he couldn’t work in his degree field in any capacity for 10 years after leaving the company. Ultimately he discovered they were just trying to keep him opening his own company. So he did, and is doing well, but he had a financial cushion and a degree. Not every entrepreneur does.

  5. Daniel Rose Says:

    As a “free” agent I enjoy the freedom that comes from not being tied to a particular employer but of course that comes with the stress of not knowing where or when your next contract will turn up.

    One potential pitfall that comes from Jeff Aplin’s quote about contractors coming in to work on a “fixed task” is that contractors in that situation won’t be looking at any potential innovation for their client. Salaried employees might (potentially) have the luxury of being able to engage in lateral thinking exercises in order to come up with some innovative ideas that contractors don’t have the mandate to do. (Eg. the 20% time at Google.)

    The upshot is that the flexibility that the employer enjoys from not having lots of human capital overhead is negated when that employer suddenly finds themselves in a world where their company is no longer relevant because there aren’t any employees who have developed a long term vision.

  6. Michael Wells Says:

    While he got a little overexcited about it, Daniel Pink’s “Free Agent Nation” a few years ago was a great look at the world of the sole practitioner consultant. He saw Starbucks as the conference room and Kinko’s as the back office. The desktop/laptop and the Internet eliminated the need for many support functions. Once I got a Mac and learned to type I never needed a secretary again.

    I’ve been a consultant for 20-some years and so have many of my friends. The comment many people make after a decade or so is that we’re unemployable, we couldn’t/wouldn’t take the structure and bureaucracy. I can’t imagine working for someone else, doing work I don’t enjoy, worrying about office politics but most of all just trying to keep the company going doing the same job again and again. I work project-by-project so I’m always in some new arena and learning new things, developing new programs.

    Of course, this is for those of us with short attention spans and hunter-gatherer tendencies. The majority of people will probably always work in organizations. I do see people who “consult” for a year or two, while they’re looking for work. There’s probably an increase in this with the downturn.

  7. Wendy Says:

    Wow! great discussion. So many valid issues and trends here. Starting with health care and benefits:

    Certainly, the US health care situation tethers some people to big employers. Even in Canada where basic coverage is cheap or free, the extended medical and dental coverage through an employer is still very valuable to most families.

    Perhaps being a contractor is a more appealing option for one person in a two-income family, with the other working for the benefit-providing organization. (Or for single people who can earn enough to afford independent health insurance and pay their own dental bills).

  8. Wendy Says:

    Daniel Rose made a great point about contractors not really being interested in long-term innovation for their employer.

    Perhaps this fact is one reason why certain jobs will always be done by salaried employees, and why some employers encourage or insist that employees purchase or own shares in the firm.

    I wonder if a key corporate strategy going forward, for maximizing innovation as well as competitiveness and profitability will be figuring out where you need to keep long-term employees happy, who will innovate for the company — and where you need the flexibility of contract hires. Blending the two may be the key. And a good company that treats its contractors well will rarely lack for either paid staff or contractors when they need them.

  9. sm2 Says:

    I understand Daniel’s point about long-term innovation for employers. However, there is potential innovation opportunity. Innovation comes from increased knowledge diffusion. For companies/organizations prone to sclerotic group-think mental models, contractors can be a great source of new thinking. As a contractor, I’ve recognized broad opportunities, seeded the idea with my trusted network within organizations, and then created a great deal of solid opportunity for both me and the employer.

    Once again, the key here is a dynamic network. I can listen to the ideas and problems articulated by a salaried employee (usually the one with a pulse and a modicum of impetus and vision- the internal entrepreneurs who are always opportunity-seeking), and between us devise an innovative project. If anything, that internal knowledge forces me to be more innovative, because not only am I presenting my project, I am forced to create a better project to address internal issues. Some of the most challenging situations have come from that pesky mobility issue. Sometimes my network connections leave suddenly, and a project is suddenly disrupted.

  10. K Franklin Says:

    Wendy, musicians, being creative class contractors, are often married to a person with a job and group health insurance. The old joke is “What do you call a musician without a girlfriend?” “Homeless!”

    If the joke were reversed, but it isn’t because no one laughs, it would be:
    “What do you call a musician without a boyfriend/husband?” “Whore!”

    Female musicians frequently don’t have the luxury of a spouse with health insurance. Due to gender bias they end up backing off their music careers to keep their own health-insurance day job. If they do have a spouse, often the roadblock is children.

    Of course I’m referring to the 90% that don’t live in a music industry town, and aren’t employed in academia, but are serious talented musicians.

    In the U.S. would the divorce rate decrease if we all had health insurance? Eventually, after a short meteoric rise.

  11. Deep Says:

    When it comes to free-agency, being a contracted worker, there many pluses and minuses. Because there are so many minuses to being a free agent, don’t expect to see any of the big corporations disappear soon, nor see free-agents jump at a job offer by a big company. In fact, it is quite common for people to consult with the hopes of landing a job.

    There are both internal and external reasons for this. In an American context, insurance is key. However you’re more likely to develop more contacts through a company, able to learn the latest technology through a company, and simply take advantages of the economy of scale. Also it depends on the nature of the job, those in the science fields need to know what the latest on goings are, on an almost daily basis. Access to the latest information and knowledge is best obtained through an established network.

    As for health care, I think the Democrats need to make the arguments that have been made on this blog. Show the economic benefits to an equitable health insurance system. They will be free to do what they really love. Companies will have employees that want to be there, and they will have to be better in order to attract better talent. There is an economic angle that I think will be much more effective in the health insurance debates.