A Future of Work study found businesses are very much still figuring out how to treat contractors. Its conclusion: A "social contract" is in order.
It's news to no one that work today looks a lot different than it used to, from how days are structured to how long people stay—and expect to stay—at a company.
The motivating forces behind those ongoing changes were the focus of a survey of 800 employers, developed by the Aspen Institute's Future of Work Initiative along with the Markle Foundation, Burson-Marsteller
and Time Magazine, and conducted by research firm Penn Schoen Berland. The survey builds on a November 2015
survey of 3,000 Americans to understand the on-demand economy.
The survey found, at the center of the issue, a tension between the intellectual benefits of efficiency and the human dynamics of a team. Companies prefer full-time employees, but they're increasingly turning to contractors, who they can place as needed, but who are less invested in the big picture. Contractors, meanwhile, enjoy an unprecedented flexibility and day-to-day control, but still face a work culture that leaves them to figure out their own benefits and retirement packages and keeps them at arm's length from niceties or incentives that could suggest the contractor is an employee (and the legal ramifications
that can go with that).
"We are at a critical point in the evolution of the modern workforce. The traditional employment model is shifting as companies increasingly use contingent workers and embrace the principles of the On-Demand Economy," the report authors wrote.
"These workforce trends pose a threat to conventional employment and are forcing employers to re-evaluate the social contract and other core elements of the employer-worker relationship. Though the workforce has not yet been dramatically changed, it is clear that we are witnessing a fundamental shift," they continued.
Among the employers surveyed, the majority (56 percent) prefer full-time employees, although more than half (60 percent) are using independent contractors.
The employers (90 percent) cited the benefits of being able to quickly adjust their workforce as needed and "[save] my company money on benefits."
Other benefits included the ability to hire for specific skills (82 percent), cost savings on salaries (78 percent) and a simplified tax situation (79 percent).
Over the last five years, 62 percent of all employers said their organization has been using more independent contractors. Among the same group, 62 percent also described the on-demand economy as a "completely different way of doing business," while 52 percent described it as bringing "more wage-earning opportunities to more people."
But while it's more efficient to hire on an as-needed bases, employers understand that loyalty and personal investment in an outcome are compromised in the arrangement.
Fifty-eight percent agreed that independent contractors aren't as loyal; 54 percent said they are "not always around when I need them"; and 57 percent called contractors "not as invested in their product."
The majority of companies (58 percent) agreed that hiring full-time employees is better "because they provide more value over the long term, despite having to pay more up front on taxes and benefits." Among those using contractors, that number dipped to 49 percent, and among those not using them, 71 percent agreed.
Then there's the matter of health care.
The worker survey that this new employer survey builds on found that more than half (54 percent) of contractors believe they should receive more benefits as part of their job, while two-thirds of employers believe they shouldn't be responsible for providing contractors with benefits—although they disagree about who should
Twenty-two percent of employers believe workers should be responsible for their own benefits, 18 percent said private companies should step in and help contractors figure out and manage that part of the work equation, and 9 percent said the government should be responsible.
Among those who use contractors, only 17 percent offer them the same health care benefits they offer W2-based employers, and only 13 percent offer the benefits, such as paid vacation, they offer full-time employees.
"The consensus that held the 20th Century social contract together is coming apart," Bruce Reed, co-chair of the Aspen Institute's Future of Work Initiative, said in a June 30 statement.
"We need a 21st Century social contract that works for everyone by making it easier for employers to share its responsibilities in investing in workers," he added, "and easier for all Americans to take more benefits with them from job to job."