Business Leadership
August 6, 2019

Congress Doesn’t Like Contingent Labor, But What About the Contractors Who Do?

On August 5, a group of senators sent a formal letter to Google CEO Sundar Pichai, demanding that the iconic Internet giant convert its staff of temporary contractors to full-time employees. At issue for the congresspeople involved is the allegation that contingent labor has created “anti-worker practices.” They assert that these arrangements have negatively affected over 120,000 non-traditional talent who support Google’s projects. “Making these changes to your company’s employment practices will ensure equal treatment of all Google workers and put an end to the two-tier employment structure you have perpetuated,” wrote Sen. Sherrod Brown (D-Ohio), who led the charge. Eileen Naughton, Google’s vice president of people operations, naturally disagreed. But the situation isn’t as black-and-white as it would appear. It neglects the nuances of the gig economy, where many workers have chosen to buck conventional employment. It also ignores the role that staffing agencies play as employers of record. Let’s dig a little deeper.

Hey Google, Tell Me About Your Contract Workforce

In the letter, Senator Brown accuses Google, and other companies like Uber and Lyft, of mistreating contractor workers, abusing employment classification processes, perpetuating income inequality through low pay, and depriving talent of necessary benefits—all of which, the senators behind the letter state, have given rise to increasingly precarious conditions for large numbers of the U.S. labor force.

As the New York Times explained in its coverage of the story, “In addition to the other demands, Mr. Brown encouraged the company to eliminate noncompetition clauses and prohibit mandatory nondisclosure agreements about the terms and conditions of employment, including in contracts between temps and their staffing agencies… He also said Google should accept liability for workplace violations that occurred with temps or contractors — instead of passing responsibility onto staffing agencies.”

Contingent talent currently make up between 40% and 50% of workers in large tech companies, according to estimates by OnContracting. Maintaining an agile population of contractors helps these organizations complete mission-critical initiatives and contain costs for projects that don’t extend indefinitely.

“Ms. Naughton said Google worked with staffing companies that had a particular expertise and could offer a ‘career path to employees,’” the article noted. “She added that using contingent workers was a common practice in almost every industry in the United States and the government.”

Are Freelancers and Contractors Miserable? Perhaps Not.

When passions flare and heartstrings are tugged, it’s easy to see the gig economy as a dire, detrimental form of oppression where talent can be depicted as subjugated serfs. However, enough data in the market suggests that this feudal outlook has been, at the very least, wildly exaggerated.

As John Rampton wrote in Inc., industry polls and surveys suggest that a noteworthy amount of freelancers and contractors consider themselves happier than traditional employees. He cited a few attention-grabbing statistics.

  • ReportLinker’s research concluded that freelancers are happier and more optimistic than full-time employees, with 84% of respondents declaring that they find real purpose in their work.
  • McKinsey Global Institute’s (MGI) report on the subject of independent talent found that 97% of contractors described themselves as “much happier” than their traditionally employed counterparts.
  • The same MGI study also discovered that 14% of workers in full-time jobs would like to become independent professionals.
  • “Furthermore,” Rampton pointed out, “82% of contractors and freelancers stated that they were proud of their career. They reported 63% actively looking forward to going to work every day.”

Why would non-traditional employees profess greater satisfaction on the job? For all the benefits that contingent labor offers to corporations, the same structures pose significant advantages to contractors as well.

  • They have the flexibility to determine their schedules and choose the companies they will serve. They typically receive health benefits from their agencies under the Affordable Care Act (ACA); but with the fierce competition for talent, many staffing firms are offering comprehensive benefits plans to attract the best workers.
  • Through their staffing agencies, contractors have the same labor protections as permanent employees, and don’t bear the financial burdens of having to purchase their own equipment or resources.
  • Unlike independent contractors in the gig economy, contingent talent are exposed to new jobs and new environments with each assignment; their experiences across businesses and industries allows them to acquire new, transferrable skills for greater opportunities.
  • They have the power to better negotiate their rates. In certain cases, studies have found that complementary talent can earn more than their full-time equivalents. An article for the Dallas News found that contractors can regularly command pay premiums at 20% to 30% higher than normal employee in a company.
  • Contract projects and contingent assignments allow temporary talent to network, try out prospective employers, choose a career field, pick an industry and experiment with different career paths before deciding on permanent opportunities.
  • While working for various organizations and industries, contingent professionals constantly learn new skills, making them more valuable and qualified as time goes on; they don’t stagnate.

We Need to Focus on the Gray Amid All the Black and White

Lawmakers frequently lament the precarious state of independent workers, and for unwary freelancers, the risks can be high. But for contractors working with a staffing firm, many of those perils are easily bypassed. The staffing supplier is the employer of record, which means that the essential mechanics of traditional employment prevail. Workers receive benefits, they have statutory taxes withheld, they are covered by the staffing company’s insurance, they have dedicated HR support, and if the staffing provider has a robust employee engagement solution, the talent enjoy ongoing development opportunities and redeployment to other programs.

Regardless of the environment, industry, employment arrangement, or company, it’s impossible to imagine that we can universally prevent abuses and violations. These situations present themselves across the spectrum, whether the workers impacted are under contract or full-time employment agreements. With outsourced staffing programs, one upside is that there are more watchers watching the watchmen, so to speak. If communication and transparency thrive, it’s easier to detect and police potential problems before they escalate. But all of that said, the situation brewing between legislators and Google canvasses the issues with a pretty broad blanket.

More than an indictment of contingent labor, we believe the conflict between Google and Congress better illustrates the need for staffing agencies to evolve as employers of record—providing superior benefits, competitive pay, skills development, career paths, and concierge-level support. With that, clients who want to continue reaping the boons of contract labor must throw staffing firms a bone by allowing higher markups and pay rates for the quality of talent they expect. Simply demanding that all workers be full-time employees solves no problems for businesses or the professionals who want to decide their own vocational destinies.

Photo by Ali Yahya on Unsplash

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