Freelancers and the future of recruitment

Businesses in the UK have been grappling with soaring employment costs and increased complexity. An increase in national insurance contributions and new employment rights legislation have put yet more pressure on businesses that are already navigating a challenging economic environment. Business leaders are looking ahead to an uncertain future, which is affecting hiring decisions and, in turn, reshaping the UK workforce.

 

At Employment Hero, we recently commissioned new YouGov data to get under the skin of how businesses are hiring in the UK. We spoke to over 1,000 UK business leaders, and it is clear that the way firms are hiring is changing. The data shows that 39% of UK businesses have reduced full-time recruitment. At the same time, one in four businesses are hiring more freelancers and contractors, and plan to continue doing so.

 

The data also revealed that 56% of businesses believe employing staff has become more complex over the past year. Employment reforms have triggered widespread concern, with over half of UK firms (53%) saying they are worried about unintentionally breaching new employment laws. This concern is directly influencing hiring decisions, with the majority of firms reporting that changes in employment have affected their ability to grow over the last year.

 

 

Business leaders navigating complexity

Against a backdrop of increasing complexity and red tape, rising employment costs and broader economic pressures, many companies are rethinking the traditional hiring model. Our research found that full-time employment costs have risen by almost 10% in the past year alone. This is a sizable shift for small and medium-sized businesses, which is where the impact is being felt most acutely.

 

It is not simply about cost. The data suggest many reasons a business might seek more freelance or contract workers. Other factors cited included flexibility and accessing specialist skills. Freelance and contract work is common practice across many industries and works for businesses looking for flexibility, but the emerging issue is that businesses who have traditionally provided permanent opportunities are being pushed into freelance hiring not because of a hiring strategy, but to avoid cost and complexity.

 

 

An untethered workforce emerges

This complexity creates an ‘untethered workforce’ in the UK where workers move more frequently between freelance, contract and short-term roles alongside traditional permanent employment.

 

That may suit some people, but it also risks pushing more workers into less secure forms of employment with fewer protections and less certainty. Over time, that has the potential to change the shape of the labour market and how people build careers in the UK.

 

A graduate looking for a first role, a parent returning to work, or someone trying to move into a new sector may increasingly need to think about short-term contracts or freelance work as part of their career plan. That raises questions around how your income works, how you build a portfolio of experience and how you create long-term security.

 

This change is both practical and psychological. Freelance and contract work requires a different kind of infrastructure around the individual. People need to understand how their income works, how to price their skills, how to manage tax, how to plan for gaps between contracts and how to protect themselves financially. They need tools, confidence and support.

 

 

Businesses who innovate will thrive

If businesses benefit from a more flexible workforce, there is also a need to ensure they pass those benefits on to the people they employ. That means being clear about expectations and paying freelancers and contractors on time. The risk is that if businesses seek freelance hiring to reduce complexity, responsibility is also reduced. 

 

HR and people teams also need to respond to this change in how work is being organised. The businesses that succeed will be those that put the right systems in place to identify the skills they need, set clear timelines and build the tech stack needed to make employment seamless for both employer and employee.

 

Businesses are facing rising costs and greater hiring complexity, and if the result is a more fluid workforce, the systems in place need to be adaptable and scalable. AI-powered tools can enable businesses to find the right talent, connect them to the right opportunities, and handle the associated administration at a pace that matches growth ambitions. This will also ultimately benefit a workforce that is seeking clarity, opportunity and stability.

 

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Kevin Fitzgerald is UK Managing Director at Employment Hero

 

Main image courtesy of iStockPhoto.com and Maria Vonotna