Shifting Sands

Via a reader, this is a good blog post which deals with several topics I write about on here, i.e. the degree to which large companies outsource expertise, the bureaucratic burden of compliance, people working in the gig economy, and the role of HR. Some quotes:

Today, Human Resources costs have gone up so much that small companies are outsourcing their HR tasks to service contractors.  If you’re a small company, perhaps around the 50-employee mark, the amount of time required to ensure compliance with the many laws interferes with the other things managers need to do.  As a result, they hire HR service companies to ensure they’re meeting all the regulations.

In the case of big engineering/manufacturing companies like the one I’m retired from, they will probably only keep the people who are their technology leaders as full time employees.  There will be fewer new graduate engineers hired: big companies were typically where new grads went for their first job because they’re too expensive for a small company to make productive. Perhaps those companies will soon be a few percent long-term employees, maybe twice that percentage in promising young engineers, but the majority of the “heavy lifting”; the jobs that require experience and the engineering judgement that experience brings, will go to contract engineers.

You may have heard this referred to as “the Gig Economy”; you don’t have a full time position anywhere, but you have a handful of part time jobs that you do as needed.

Go and read the whole thing.

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11 thoughts on “Shifting Sands

  1. It’s more complex than that. It’s also about companies pulling in other companies.

    For example, I worked at a well known high street chain with a dozen people in software. Half a dozen of those manage the catalogue system, the rest just manage outsourcing. So, they don’t look after their job site. They pay a company to do it. Their internet site? Another company. Tills? Another company. Those managers just work with the companies on changes, support, contracts etc.

    A lot of this is about the thudding bureaucracy of large companies. Your run IT and need a contractor? You move fast. You want an advert up, agencies getting candidates, interviews within a few days and people starting a week later. If you have internal IT, HR will stick their oar in. They’ll add 2 weeks to the process, so contractors have interviewed and are gone. Outsourced programmers don’t waste time on diversity workshops, they can manage their own PCs etc.

    Plus, these more masculine workers can get on without the feminist/girly swot nonsense. You can have Friday evening beer and Overwatch. Swearing can go on. You want to get drunk and pay for strippers? The media won’t care because you’re xyz Inc rather than John Lewis.

  2. At Daimler, they do this, of course. When they do hire a full time employee, it’s usually a technical person. As a result, there are few people there who know how to run, lead, or organize anything. (No offense to anyone, but I think very technical people suck as leaders)

    Those who don’t end up being valuable technical people are still kept because they rarely fire people. They send them to workshops, get them certified on the latest fad, and then they become “coaches” and “facilitators. They bumble from one unfinished task to the next. The contractors come in and bail those people out and get the jobs done. The FTE gets the pay raise for it.

    All in all, they have a huge quasi-workforce that gets half the information they need and are treated as second-class citizens due to contingent worker lawsuits risks. The whole system is a wreck, and it’s not just Daimler. All the books say that you need to have cohesive teams to be successful. That ain’t happening.

  3. I worked with a firm of insulting engineers. If we won a tender we advertised for engineers whose length of employment coincided with that of the contract they were to undertake on our behalf. It took a long time for me to get through to the CEO, CFO etc that we were not in the engineering business. We were in the labour broking business.

    We had some permanent fulltime division managers. I had to convince them that their area of expertise was not electrical or civil or construction engineering. Their area of expertise was project management. If they saw an invitation to tender for computer services or catering services or aircraft maintenance services they were to bid for it, because they could always buy the expertise. I don’t think they learned the lesson because the company is still afloat but only half the size it was in my day.

    Moral: most businesses don’t know what business they are in.

  4. Its the usual inability of the State to see past its nose. Guess what happens when you increasingly regulate and tax employment? Employers do everything they can not to employ people. Then politicians complain about a ‘gig economy’ that they’ve almost single-handedly created.

    What are politicians incapable of realising if you tax and regulate X, you will inevitably end up with less X? X in this case being long term gainful employment?

  5. I’m with Jim anything that takes employment risk away from the employer is good for both the employer and the contractor. From where I sit and what I know is that the biggest impediment to contract staff doing half decent and high paying jobs for my firm and a few others at the same time is the tax man. He may not yet have got up to speed with it all and he certainly will deem you as an employee if he is making more from you that way. Allowable deductions are also reducing which makes it less attractive for contract staff as well. We can get round HR no problem and IR provided that they are paid more than our EBA rates. Casual staff (not quite gig) have a right in Australia to request the employer to put them on full time after six months, they don’t though because it’s less money for the same hours for them.

    I am interviewing now for a fairly senior group wide staff role and the applicants are all from Tier 1 organizations. I relish it when they tell me of how bad the corporate culture is in each of their respective organisations. One big and recent change that is impacting the local construction contracting organisation is the Spanish management style of the old Leighton holdings group now called Cimic. They are now treating engineers as project consumables, that doesn’t make it gig either, just different and in my books another example of the trend towards new feudalism.

  6. In Switzerland if you’re working as an independent with only one client it’s called “disguised employment” and is illegal, whether you’ve put your own GmbH in the middle or are just working as an independent. Where I worked before, our Belgian overlords tried to impose that on us cos it’s what they do in Belgium, and we had to get a local lawyer to explain it to the Belgians, who didn’t really seem to care that what they were proposing was illegal. They do it there cos a) it’s legal, b) it shifts a lot of risk away from the “employer” in respect of firing, and c) the admin + social charges passes to the “employee”.

    This is rather different from Switzerland, since firing is easy and admin overheads are low – the point seems mostly to be to make sure that people don’t reach retirement age having little or no social security or compulsory pension. If you’re working as an independent, you still have to pay SS, but there’s no compulsory pension (it’s voluntary). If you put a GmbH or AG in the middle, both SS and compulsory pension are predicated on the salary you pay yourself. If you take a significant amount of income as dividend in a chunk at the end of the year, this chunk doesn’t get SS’d and isn’t pensionable. It’s also taxed at a lower rate than normal income.

    So basically that kind of single-client-based gig economy isn’t really possible here, FWIW. Limited term contracts are of course allowed and happen, but they’re fully SS-able and pensionable 🙂

  7. So basically that kind of single-client-based gig economy isn’t really possible here, FWIW.

    That supports the theory that the gig economy is a response to governments loading costs onto the employer; there’s no need for a gig economy in Switzerland because employers are not saddled with so many costs of hiring staff.

  8. As a gig economy worker, I’m in agreement with Bardon; let’s sign a day rate agreement and keep the government as far away from it as possible.

    Something I’ve noticed as nearly always true is, if I quickly work out who the freelance staff are when I arrive at a new gig, I’ve identified the vast majority of the competent workers. Price’s Law needs a little adjustment perhaps.

  9. That supports the theory that the gig economy is a response to governments loading costs onto the employer; there’s no need for a gig economy in Switzerland because employers are not saddled with so many costs of hiring staff.

    Absolutely.

    The ongoing charges are half the SS and half the compulsory pension contribution (the latter of which can get kinda high with older workers but it’s not that bad compared to other countries), and the absolute maximum risk with a firing gone awry is 6 months of salary, but it’s normally negotiated to the 2-4 month range, with each party keeping their own costs. Not millions.

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