Although the summer is undoubtedly the silly season in much of the media, this quiet period does allow some genuinely new and interesting topics to take root in the business pages. And this season’s hot topic appears to be that of the ‘gig’ economy.
So what is this new and strange-sounding animal?
The gig economy is the label that has been applied to a potential new working world, where people work for themselves, trading their services on a full or part time basis. The name therefore reflects the world of musicians and comedians, who are always on the lookout for the next ‘gig’ to maintain their income stream.
The Work Foundation found the following quote from the US which explains this further: “Gone is the era of the lifetime career, let alone the lifelong job and the economic security that come with it, having been replaced by a new economy intent on recasting full-time employees into contractors, vendors, and temporary workers.”
This all sounds very dramatic, but as The Work Foundation article argues rather well, there is not yet much evidence to support such a change in the UK despite all the talk of zero-hours contracts in the run up to the election. Yet one element may have been overlooked in their analysis – the recent introduction of pension freedoms in this country.
Since April this year it has been possible for most workers over age 55 to access some or all of their pension savings and do what they please with such funds. This new flexibility – which importantly does not require the saver to actually retire – may provide the opportunity for many experienced and knowledgeable employees to fund a change in their own working practices.
Such individuals may choose to leave the routine of the 9 to 5 – with its associated rigid management structures – and instead join the gig economy. In this new role they could offer their services to competitors. They would also have the option of trading their skills back on a temporary basis to the very employer they have left, but in a more flexible (and more lucrative) structure for the individual.
The conundrum for employers is that often such employees are not easily replaceable. They have inherent knowledge of their job role, know their industries inside out, hold key client relationships, and are dependable. Pretty much the definition of a key employee in fact. It follows that losing sole-control of such a worker(s) could be highly damaging to the employer’s bottom line.
It is currently unclear how many will take advantage of this flexibility to join the gig economy. That said, there are some anecdotal examples of this occurring, and we are only a few months into the new pensions world. Further changes in the pension space may only be a year or two away, with another government proposal currently considering whether restrictions to pension savings should be removed altogether in exchange for a new tax-relief system. This could result in more mid-career employees considering these same options.
So employers need to be aware of this new dynamic. But is there anything they can do to change it?
The obvious answer is ensuring that the key employees don’t want to leave. This will mean a major improvement in motivation and engagement for many UK employers. Part of that will be built around offering employee benefits that the individual both needs and values – particularly those which may not be readily available to him/her as a solo contractor in the gig economy.
An example of this was well-voiced by the excellent journalist Will Hutton in an article yesterday. Referring to the town built for its employees by the Cadbury family he said: “Cadbury cherished and invested in their workers, expecting commitment and loyalty back, which they got.”
Of course it would be commercially unrealistic for employers to go to such lengths today. Yet ensuring that employees feel valued and receive the best of breed benefits available must be the minimum requirement for those employers who seek to head-off a potential talent-drain to the gig economy.