Your post gets to the core of the matter. What makes for a stable and motivated work force?

My experience has been that my freelancers and contractors worked harder and were more committed to the business than some of my full time employees. Why? Simply, they didn’t want to lose a great client who gave them regular business, treated them well, paid them on time, listened to their opinions and invovled them in decision making, invited them to parties and yet let them live their life how they wanted.

The employees – not all I grant you but a sufficient minority to create massive problems – sat back and said, I’ve got 4 year of service – pay me my redundancy and they hired professionals to press their claims. They had very little incentive to help rescue the business.

In the end, the business went down. And the effect of the employment status (you owe me money attitude) vs the freelance ‘I don’t want to lose this client – what do we have to do’ has left a very strong impression on me.

Don’t get me wrong – some employees were very loyal and hardworking – but it was impossible to make the changes we needed without nearly all employees agreeing – which gave huge power to a minority.

I also believe that those same employees would have behaved differently IF they had been freelancers.

And that is the crux of it. The incentives were wrong and therefore we got the wrong behaviour.

To this, I could add a slow decent from what was a highly entrepreneurial business into a more fixed and rigid business as we took on more salaried staff. Personally, as an entrepreneur, this took the fun away for me and it very hard to turn the business back into an entrepreneurial business when our major market disappeared over night.

Regards
Neil

Thanks, that’s a very thought provoking article and, perhaps surprisingly you might think, as an employment lawyer I do have some sympathy with what you’re suggesting.

However, as Annabel has said above “workers” can include freelancers and great care needs to be taken with drawing up the contracts that such people work under because they can turn out to be employees after all. Where I think your analysis gets difficult is in the issue of continuity/stability. The freelancer might walk out on you when the going gets tough, or they’ll throw a tantrum over some little issue. You’ll have very little remedy. yes, an employee could do that too (and they do) but I think the fact of employment usually has an effect of making a person feel more permanent. I accept that you can motivate freelancers by offering bonuses/commission etc, but you can do that for employees as well. Who do you propose to incentivize and how? It is clearly beneficial to incentivise your sales force or your fee-earners but how do you motivate your freelance/agency worker receptionist?

Also, how will your business look to customers if there is a constant turnover of staff (I accept that that probably depends upon the business you’re in) especially in customer facing roles?

Overall, the tendency in UK employment law is for the workforce to get more flexible and mobile – witness the rise of agency workers (and the implementation of the Agency Workers Directive in 2011 to adapt to that fact).

To answer your question on umbrella companies, the situation is highly complicated (of course!) but, broadly speaking, you’re right, but it’s not without its risks.

I hope that helps.

Kind regards

Michael Scutt

I’m interested in why you think having employed staff gives stability?

Regards
Neil

It would be every business owners dream not too have too deal with employment law, but sometimes there is no choice, and there is incentives to employing staff. One being, stability. Yes, some people and roles need stability to function properly and responsibly.

I agree with the notion that you you can either start off with staff and then outsource or the other way round were you start off with freelancers and then take on staff.

Am I right in thinking that this does not apply if contractors are hired when they either have a limited company or use an umbrella company?

Also, the key benefit, from the entrepreneurs point of view is the shift in attitude and motivation not just the change in legal structure.

Regards
Neil

After 30 years specialising in this area – it is easier to get a grip, get on top of it, do it right and make sure you have the rights you need as an employer than it is as a buyer of freelance labour.

Most employers don’t know what they are doing and many advisors offer only ‘compliance advice’ rather than tactical advantage advice.

The laws are over complicated but you can still get what you thought you paid for if you set things up right and keep focused on the real goal – which is making more money than your staff/stock/overheads cost you!

http://www.pwc.com/gx/en/managing-tomorrows-people/future-of-work/orange-company.jhtml
(sorry – put the wrong link here earlier…)

http://www.mercurylegal.co.uk/stress_at_work_stress_test.html

The scary thing about this is that one of their tests for whether your claim might succeed is

“7. Taking into account the size of your employer and the resources available were there steps that your employer could take to avert the risk of injury (eg other employees to take on additional work)? ”

Therefore, as you grow you will become vulnerable to claims if you employ people.

If on the other hand you hire contractors or freelancers then the assumption in is that the person you take on is grown up and able to renegotiate the terms of work if that is what is required.

The assumption in regards to the employee is that he is a potential victim of a nasty business who is exploiting him (regardless of the fact that the business is paying him, and gives him the option to leave).

The issue here is not what is right or wrong – but what kind of relationship you want with your teams?

If you want grown up intelligent partner type relationships – you must choose the freelance and contractor route.

If you want a bunch of potential victims who are up to speed on their rights (but perhaps not quite so keen on responsibilities) then take on employees.