Contractors Are Employees Too. Employers Need To Treat Them Like It.

In the war for talent, contingent employees are gaining ground

In a dynamic labor market where competition for talent is fierce and in-demand skills are always shifting, companies across industries are experiencing surges in their contract workforces. Many companies are reluctant to hire more full-time employees because of the associated costs, so instead they are turning to contractors. In fact, of the companies the World Economic Forum surveyed for “The Future of Jobs Report 2018,” almost two-thirds expect to outsource some business functions to external contractors by 2022. Case in point: contingent workers make up more than half of Google’s workforce at present.
 

Today’s labor economy is a workers’ market. As unemployment rates reach historic lows, candidates get their pick of positions at companies desperate for talent. Contingent workers are no exception. Like full-time, salaried employees, they are beginning to expect more from their employers in areas beyond pay. Though fair pay is certainly a factor, perks and benefits can be just as enticing, as can overall working experience and company culture. According to LinkedIn, 70% of professionals would not elect to work at a well-regarded company if it came at the cost of poor workplace culture.

Because it’s now easier than ever to share and compare notes on employers via the Internet, candidates do their research. In one study, 64 percent of candidates said that after learning about an opportunity, they would research the company before applying. In another, 69 percent of candidates indicate that they would not accept a job offer with a  company that has a bad reputation. Checking social media and company rankings and reviews on sites like Glassdoor, LinkedIn, and Indeed allow them to make fully-informed decisions about the companies they’re considering. Consistently positive testimonials can reinforce a company’s strong employer brand, but just a few comments about unfair practices or unhappy contractors can steal the show and turn a promising candidate off from a role.

As this often-overlooked segment of the workforce grows, it’s time—actually, past time—for employers to pay attention to contractors’ needs and working conditions. Facebook recently announced it would raise the minimum hourly wage for contractors in its costliest markets. Google announced it would only work with staffing firms that extend full benefits to their contractors; this policy change will affect the thousands of contingent workers that are part of today’s "shadow workforce." The tide is changing for the employer-contractor relationship; companies must rise to the occasion and ensure their policies recognize and compensate contract employees fairly.

The Effects of Unfair Contractor Policies

In many cases, contract and full-time employees work side-by-side, sometimes even as direct reports to one another. If a contractor is suffering from poor working conditions, the experiences of the full-time workers around them will also be affected—watching a co-worker be denied access to perks and resources is sure to weaken morale. When a company advocates for inclusivity and collaboration but simultaneously segregates contractors by treating them differently, it’s only reasonable to expect some backlash. Note that, in last fall’s Google walkouts, full-time and contract employees joined hands to stand together behind demands to end forced arbitration and commit to equity in pay and opportunities and this April, more than 900 employees staged a similar protest in response to the abrupt dismissal of an engineering team comprised of contingent workers.

Unhappy employees—contract or otherwise—tend to mean high turnover rates. And turnover is expensive; hiring a new employee costs employers one-third of a worker’s yearly salary and the additional indirect costs that impact the productivity of wider teams. Those expenses can have big impacts on a business’s bottom line. Companies need contractors to keep their businesses up and running, and if they don’t treat them well, it’s the companies that suffer in the long term—the contractors will be snatched up in no time.

What Can We Do About It?

To retain talent, employers must understand the employee experience; how are the employer’s actions (or lack thereof) affecting the way their employees and contractors work and interact with others?

Many companies are turning to data like engagement tools and company surveys to quantify and improve the employee experience. HR leaders are asking, on a day-to-day basis, what are the working conditions and satisfaction levels of my workforce? On a macro level, how is this affecting overall motivation and productivity? When employers stop treating their relationships with contract employees as purely transactional and start thinking of them as actual employees, it becomes much easier to ensure their happiness at work and collaborate on ways to improve the employee experience.

Current demographic trends also show that workers are increasingly drawn to companies with powerful mission statements around bettering the world. Millennials, who are the largest generation represented in the US workforce, seek meaning and purpose in their jobs. To appeal to workers who may prioritize morals and values over paychecks, companies must invest in branding that shows potential candidates why the work they would do matters. The problem is, employers tend to forget to include contract employees in that messaging. This needs to change.

Today’s workforce has experienced some of the best and worst labor economies ever. As we enjoy the current boom and continue to recover from the most recent bust, contractors have more leverage than ever and are starting to stand up and fight for equitable employment practices. Companies rely heavily on both full-time and contingent workers, and if they aren’t careful, they could lose both, too.

Author Bio

Anil Dharni is the Co-Founder and CEO of Sense. Before founding Sense, Anil received his MBA from MIT and was co-founder and COO at Funzio, which was acquired by GREE in 2012, where Anil continued his work as COO. Anil led Funzio’s seed round, raised $20 million in Series A funding, and arranged the sale to GREE. Visit www.sensehq.com Connect Anil Dharni Follow @adharni