A downside of being a reasonably competent public speaker with a moderately interesting CV is that I am sometimes booked for events carelessly. A particular issue recently is misalignment between my 2017 report for the Government on modern employment and frequent requests to speak at conferences on good work. The focus of the former was overwhelmingly on the most disadvantaged, whereas the issues that tend to sell tickets at conferences concern how to recruit and retain what is called ‘talent’. Still, needs must, so I have found myself thinking more about higher end employment and starting to question some of the assumptions often made.
One aspect of these conferences is the tendency of some speakers (often those with books to sell) to offer exaggerated predictions about the future. Amongst these is the assertion that the rise of the freelancer and the decline of employment in organisations is an inevitable trend that will make the traditional job a thing of the past. While this was always based on shaky evidence we might actually see the reverse trend.
While the idea of good work is relevant across the spectrum of employment forms, people’s priorities, expectations and, most importantly perhaps, the power they have differs. This may be particularly true when it comes to casual workers and the self-employed. Think of a Deliveroo driver on the one hand and a freelance management consultant on the other. A Resolution Foundation report on self-employment described this dichotomy of motivations and experiences in terms of a contrast between ‘the precarious’ and ‘the privileged’. While many at the bottom end of the labour market accept self-employment because they have little choice even though it means they lack protections and entitlements, at the higher end the choice is based on positive features such as tax advantages, greater flexibility and autonomy.
The Resolution report found that nearly 60% of the growth in self-employment since 2009 has been in high skilled, higher paid sectors with the fastest growing areas including advertising and banking. In recent years, in sectors from engineering to law and professional services, many companies have deliberately sought to increase their use of consultants and reduce their reliance on employed staff, indeed some have pretty much forced employees to go down that route.
An important motivation is that firms have to pay less tax for the labour of consultants. This is mainly because the firm avoids employers’ national insurance but also because of other aspects of the tax system favour sole traders. Where the benefits of the lower tax paid on self-employed labour end up (high firm profits, higher consultant income or lower end prices) is a matter of conjecture.
It has however been clear for some time that the Treasury is worried about the fiscal impact of the growth in high end self-employment. Officials were sympathetic with the argument I made in my review; that ultimately we should seek to tax all labour at a similar rate regardless of the form of employment, but they have clearly decided to move towards this destination slowly and sideways. It was confirmed last week that the Treasury is still planning to explore welcome changes to IR35 rules which would shift the liability for ensuring that a contractor is genuinely self-employed - and not in effect a disguised worker - from the individual to the shoulders of the employer. There is a lively argument about the impact this change is having in the public sector, but if it is applied to the private sector it is widely assumed that this will make the use of contractors less attractive. A reduction in the VAT threshold for small businesses (a possibility included in another consultation announced last week by the Chancellor) is also a way of reducing the tax advantages for professionals of going it alone.
But even if tax changes make consultancy models less financially attractive won’t firms’ desire for greater flexibility and the individual’s desire for more autonomy mean the growth trend continues? Possibly. But talking both to consultants and people running businesses that place them, I have been struck by how often what seems to drive people is less the upside of self-employment and more the strains of being in a poorly managed organisation. While consultants will often say they miss the social and support system that come with employment (‘I am sick of being the only person at my office Xmas party’ as one consultant put it to me), they have often been frustrated as employees by a lack of opportunities to progress or develop, by poor management and by dysfunctional systems and processes.
For both organisations and individuals the growth of consulting has been a kind of escape valve. But as the use of that valve becomes less financially attractive to both organisations and individuals, firms may have to think harder about how they can retain and motivate employees, especially those least enamoured of corporate life. That may mean more firms thinking more seriously about the things that may matter most to this group; characteristics of good work like autonomy, meaning and work-life balance.
All in all, I suspect the future of work at the higher end of the labour market will be less about the death of employment and more about how organisations have to change radically to fully engage and motivate tomorrow’s professionals.