Self-employment and independent contracting. The new norm.
Being self-employed today requires more than it did last generation. It now involves extending oneself in the modern workplace and shaking up the traditional employee-employer relationship. Applying a human resource perspective, let’s look at how your organisation can adapt and embrace this evolution. It is generally accepted that smoothly navigating the complexities of workplace change is important for Australian businesses. This is especially so when considering the rise of the ‘gig’ economy and the trend towards a contracting workforce and flexible workplace arrangements.
There is a continuous move towards self-employment. Globally, technological change and a shift away from the high regard for the traditional employee-employer relationship is leading to new business models that are being seen as more advantageous to traditional employment structures. The commercial and competitive outcomes of new digital technologies are obvious for leading businesses. However, less obvious is the breakdown in structural barriers to commerce and business which previously preserved the sanctity of traditional workplace relations. This breakdown has been caused by the rapid introduction of technology-based markets and applications that connect companies and consumers directly with freelance and contract workers efficiently and cost effectively. The efficiencies and benefits of large-firm infrastructure has, in recent years, become a yoke for medium and large enterprise attempting to adapt to rapidly changing nature of providing services and goods.
Examples of new technology assisting freelancers and contract workers include Freelancer.com and Airtasker, which have skyrocketed the progress of the work-on-demand economy. Consumer view this new technology as the ‘mainstay’ of their consumer activities. For example, it is not unusual to hear something referred to as “the Uber of” something, when referring to a new market entrant that is introducing disrupting technology. Crowd Sourced Fundraising, is another disruptive mechanism founded upon new technology (that connects consumer investors with young or small business entities which may not otherwise meet the lending criteria of traditional financiers).
In 2017, the Australian Government introduced the Corporations Amendment (Crowd-sourced Funding) Act 2017 permitting and regulating the raising of crowd-sourced funding, which was previously prohibited by the Corporations Act 2001. Whilst this was initially limited to public companies (companies which had at least three directors and are required to meet higher audit and disclosure requirements), the right to secure crowd-source funding was extended to proprietary (private) companies in 2018. Learn more about this capital raising avenue from Business Queensland – Crowdfunding finance (click on link).
The formal introduction and regulation of crowd-sourced funding has had a big impact on small ‘freelancer’ agencies being able to grow and engage with a variety of service providers in a new ways. The Board of Taxation has stated that the profile of Australian workers is evolving, with a greater number of ‘white-collar’ workers adopting forms of contracting and self-employment in many sectors such as management consultancy and financial services. This has been seen in the personal and domestic care services industry as well.
Currently, contingent employees – or freelancers – account for about 8.5% of the Australian workforce. This comprises about 1 million workers, and is expected to continue growing over time. Drivers behind this growth include benefits which are built into the core of the sharing and on-demand work economies, such as flexible working hours and the ability to work from various locations that fit in with family or other commitments.
In 2015, a survey of 1,300 contractor/freelancer workers found that 75% of participants listed flexibility as the main reason for choosing this type of work. This ranked higher than an increase in income. Self-employment is seen as providing greater security through control over one’s own destiny and risk mitigation of work through a broader client base.
What are some of the sticky points independent contracting and self-employment?
Workplace culture becomes diluted as a result of greater dispersion of the workforce. This can have implications for establishing cohesion between staff and restrict the development of company culture. Consequently, employee engagement may be lower than in traditional workplaces.
Safety and wellbeing programs can be more difficult to enforce and nurture. This is more easily implemented and the scope of the programs are not so broad when employees are present during set work hours in the same location. As work times, locations and conditions grow in combinations, workplace health and safety considerations increase drastically, which can add costs to an organisation’s operating budget.
Legal and human resource oversight can be difficult. There are legal implications for hiring a ‘contractor’ compared with employing a ‘full-time employee’? Sham contracting has come under scrutiny in the last couple of years as the government has identified a growing trend of employers engaging individuals as ‘contractors’ but treating them as employees. This has resulted in individuals being exploited. That is, having the obligations and pay of an employee without the lack of employment protection and certainty that employees enjoy.
More information can be found on Fair Work Ombudsman – Independent contractors and employees (click on link).
Another issue faced by organisations and freelancers alike is one of quality control. With less onsite supervision and induction time, it is becoming harder to achieve consistency between individual contractors. Uber, AirBnB and other sharing economy businesses use consumer ratings as a feedback mechanism for helping consumers set expectations about the service quality they will receive. It also serves as motivation for contractors to deliver the highest quality of service that they can provide. However, the onus still remains on the business (whether a self-employed individual or large company) to ensure the contractor has been trained well in the first instance.
KEY TAKEAWAYS
IMT Accountants & Advisors is a leading Brisbane accounting firm that provides advice on small business setup, for individuals looking to move towards a freelancer/independent contractor arrangement. We also provide advice to established businesses looking to take on new employees or independent contractors to ensure that it is done correctly in the first instances. For further details about these services, please contact the expert team at IMT Accountants & Advisors on 0400 755 855 or 0421 000 541. Click to see our full list of services.