Is contracting the new black?

Thursday 15th October 2009
For Immediate Release

Is contracting the new black?

As we emerge from the recession, supply and demand for contractors is gaining momentum. Both employers and individuals are realising that in today’s world and economic climate, the use of a contingent workforce solves a number of issues and provides the flexibility that people want.

For many businesses, projects are beginning to thaw but the headcount freeze remains. As a result, many permanent positions are being repackaged as contract roles to keep costs and commitments to a minimum. The use of contractors in the short term can offer the best solution, helping clear the backlog of work created by restructuring and redundancies.

The supply of contractors is also growing as we see people re-entering the workforce from retirement due to significant financial losses, job seekers unable to find permanent roles and opting for a short term fix, combined with more people looking for the ideal work life balance.

With so many positives it’s easy to see why contracting is fast becoming the employment structure of choice.

According to a recent survey conducted by Auckland based Crackerjacks Ltd, a contracting solutions website, 84% of businesses surveyed are currently using professional contractors and 89% believe that hiring contractors allows businesses to achieve the flexibility needed to succeed in today’s economy.
The survey also revealed that HR Managers believe a key advantage of using professional contractors is immediate access to skills on demand.

Tony Wai, Crackerjacks managing director comments, “With optimism slowly returning to the market we are seeing more contracts appear across the professional spectrum. It seems to be common opinion amongst employers that using contractors is the way to staff-up and increase productivity without committing to on-going personnel costs.”

To meet this shift, Kirsty Erasmus, New Zealand manager of CXC Global, a contractor management company, suggests job seekers looking for permanent work should be considering contract roles to increase their job prospects.

“Although job security may seem lower, permanent roles aren’t so permanent anymore. Contracting rates are higher and hours are more flexible. It’s a good way to keep earning whilst looking for permanent work and it’s not uncommon for a 3 month contract to be extended or even result in a permanent job offer.” She says.

“However, if you’ve never contracted before, the administration involved can be a daunting prospect. Most people avoid contracting due to uncertainty on how best to structure their business, pay tax, GST and high levels of paperwork. What most Kiwi’s don’t realise is there’s a solution out there that allows them to take on contract roles, without taking on the administration or risk.”
Miss Erasmus commented that in the UK and Australia it is very common for a contractor to use an ‘umbrella’ or ‘managed services’ company.

“There is no need to set up or run their own structure, which opens up contracting to virtually anybody. This means that businesses building their contingent workforce end up with a much wider range of skill sets to choose from. “

North Shore based specialist HR consultancy – Clarian Human Resources, believe contracting is the way of the future. Company owner Ian Parkes explains, “Traditionally, professional contractors have been used for a number of purposes, such as a short-term fix for permanent vacancies, covering maternity and parental leave, bolstering capacity for project work and to provide expertise for existing staff”.

But he explains that employers who can ‘do more with less’ in their organisations will pull ahead of their competitors. A key component of this is utilising a contingent workforce, as they have the ability to quickly engage with the work at hand and deliver in short-time frames.

“While there is always a place for permanent staff, adding temporary workers to the mix gives a business an edge” says Ian.

A global research report released by Price Waterhouse Coopers, looking at “Managing tomorrow’s people” considers how businesses will operate in the future and the associated strategy for managing human resources.
In this report it provides a scenario of an “Orange world” where a tightening labour market shifts the power balance back to the individual and away from the collective – enabling individuals to develop portfolio careers, working on a short-term, contractual basis.

This scenario is also driven by the influx of Millenials, also known as Gen-Y’s born between mid 1980’s and late 1990’s. Because of their affinity with technology and emphasis on choice and anti-monopoly – the “Orange world” scenario is looking likely. This situation will mean HR will have to gear up for a new focus where people will see themselves as members of particular skills/professional networks rather than an employee of a company.

We are also seeing the re-entrance of the Baby Boomers who have lost their ‘nest eggs’ through the recent collapse of finance companies. They have the skills, experience and wealth of knowledge but want flexibility to be their ‘own boss’. Contracting undoubtedly is the answer for both parties.

With this change of focus the in employment market, an important role is being carved out for both HR and Procurement Managers. Having a people supply chain is a critical component of the business as well as having a strategy for engaging contractors.
According to CXC, only 20% of organisations have policy and practice in place to manage their contingent workforce.
“The demand for Contractor Management Outsourcing or CMO in New Zealand has been slow up until now, however interest in this solution has risen sharply in the last 2 months. Businesses here are seeing the cost reductions their Australian and UK counterparts have experienced by adopting this model.
Managing contractors is very different to managing permanent staff and there are significant savings to be made by outsourcing this non-core business activity.” says Kirsty Erasmus of CXC Global.

New Zealand based Crackerjacks reports that the conflict between the need for workers versus tight budgets will remain for some time yet. Firms need to look at new and innovative ways to source, engage and manage contractors.

Tony Wai of Crackerjacks comments “Traditional recruitment models still have a role to play, especially for those top 20% hard to fill jobs. However the other 80% can be filled more cost effectively by using online contractor hubs like Crackerjacks that allow businesses to easily source staff from thousands of potential and skilled workers.”

“The recession has forced us to find new ways to survive whether that’s in business or as an employee. I have no doubt contracting will continue to play a very important role not just in New Zealand’s recovery in the next 12-24 months but as ongoing and sustained trend globally.” Says Wai.

ENDS

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