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From: www.itworld.com
The end of work as we know it
December 8, 2000 —
JOBLESS, BUT NOT WORKLESS, is the wave of the future, says James R. Ziegler. As
executive director of the Pleasant Valley, Calif.-based Professional Association of
Contract Employees (PACE), Ziegler is onto something. The Internet economy may finally
put to sleep an Industrial Age dinosaur: the permanent job. Recent dot-com downsizings
in the wake of the Wall Street meltdown demonstrate that the term permanent position is
an illusion. All jobs, whether by design or not, are temporary.
If permanent is no longer so, then does impermanent describe the state of IT work
today? Possibly, experts say. The fastest-growing labor classification in the IT
industry is the so-called contingent workforce: the army of free-lancers, consultants,
contractors, free agents, and part-timers who fill the trenches, at least occasionally
and very often regularly, in virtually every high-tech enterprise. "The temporary
worker market has become the primary means of hiring for much of the technology and
support job categories," says Peter Yessne, publisher of the Staffing Industry Report
newsletter.
The numbers are big: In the United States during just the first quarter of 2000, an
average of 2.88 million temporary workers were employed daily, a 7 percent increase
from the same period in 1999, according to the American Staffing Association's
quarterly member survey. Estimates on the size of the contingent labor pool vary from
10 to 35 percent of the total workforce, says Kathleen Heaton, senior writer at Net-
Temps, an online job posting board specializing in contract professionals and based in
North Chelmsford, Mass.
Temp vs. perm battlefield
If you're not a member of the contingent workforce, you're a permanent employee,
right? Don't look to your employee handbook for support. Employers will use the term
temporary but fear that workers will take permanent literally -- and will take them
literally to court. Instead companies prefer to denote former permanent employees as
full-time employees.
Is the grass greener?
The use of contract employees at some companies has generated controversy. Full-
time employees often resent these contingent workers who perform relatively the same
tasks for as much as double the in-house employee hourly rate. Full-time employees
don't realize or they forget that contingent workers receive few, if any, employee
benefits.
The benefit void has been attacked by the contingently employed, some of whom log
years at a single company. In recent history, Microsoft's eagerness to use contract
workers brought trouble for what some cited as an abuse of the practice. The company
was criticized for hiring contract workers, or "permatemps," essentially on a full-time
basis in order to avoid the cost of benefits, including stock options.
As a result of legal actions and pressure from unions, Microsoft in February cut
back on the use of contract workers and now places limits on their tenure with the
company. Nevertheless, the practice of using contingent workers has been so widespread
at Microsoft that conttingent workers there have successfully lobbied for benefits
traditionally reserved for full-time workers.
The anti-temp forces
As the contingent labor pool has grown, so too has the surrounding controversy.
Some opponents lament the end of corporate paternalism toward the worker, arguing that
companies turn temps into commodities to be discarded when their skills are no longer
needed.
Others argue that companies fill jobs with temps, who are purported to be the least
powerful and lowest paid of all employees. In other words, the workers most likely to
be forced to accept temporary work are the ones least able to afford periods of
unemployment between assignments. Opponents say companies offer more incentives to
regular workers who have skills essential to meeting customer demands and which are not
readily available in the open market.
Some call this practice exploitation. Others, including members of the contingent
IT workforce, simply call it yesterday's economy. Combine the current hourly wages for
contractors with the power and desired skill sets that tech talent possesses, and does
the exploitation argument hold water?
Increasing numbers
It might be a stretch to believe that the growth in the contingent technical
workforce is due to an easy exploitation of that talent. Recruiting and signing on
technical temporary staffers can be as difficult as recruiting full-time IT
professionals.
Given demand for skilled IT workers, many techies prefer the flexibility and high
fees that an alternative work arrangement can bring. There seems to be little, if any,
immediate slowing in the growth of the contingent workforce, industry observers say. In
a survey conducted by Net-Temps, 96.5 percent of surveyed contractors said that they
intend to continue working as contractors for as long as they are able.
This is not your father's career
The increased use of and opportunities for the contingent workforce in the
information technology industry are fueled by the very thing spurring the industry's
growth -- the World Wide Web. The Net has disrupted the economy so completely that the
old model of working for one company until retirement seems quaint. Today a career is
not made with one organization; it's made of a series of projects and problem sets.
This change opens the door to the possibility of a successful white-collar career as a
contingent worker: The temporary labor pool has gone upscale, representing not only
blue collar and secretarial but also technical, professional, and managerial workers.
This breed of temporary also has access to increasing professional support: They can
subscribe to industry newsletters or join unions and associations organized to promote
their causes.
Technical contract employees differ from temps in that the former provide specific,
advanced, technical and professional skills. As a result, they are paid more than
nontechnical temps. Technical temps also tend to have longer assignments. In other
respects contract employees are similar to regular temps.
A breed apart
Not everyone is cut out to join the contingent workforce. To be a successful member
of the alternative army of workers, a recruit must be comfortable handling the
responsibility for his or her own future. Contractors and technical temporaries, while
in demand, cannot always be sure what the next assignment will be. There is still some
risk to not being an in-house employee.
But the opportunities abound for IT professionals who want alternatives to regular,
full-time work. Contingent workers, consultants, contractors, and free agents are wooed
by job board providers and temporary help agencies, such as Ants.com, Manpower, and
Fanning/Uniforce.
"These people are an enterprising group who arre quite happy steering the course of
their own careers. For at least three-quarters of independents, the choice to go solo
was not economically necessary but instead driven by an entrepreneurial spirit. To be
one's own boss was most important to male contractors, whereas their female
counterparts appreciate the scheduling flexibility and increased ability to tend to
family matters," Net-Temps' Heaton says.
Defining the titles: Contractor or technical temp
Contract employees are skilled temporaries who are employed by a contract
employment agency. These leased employees, or technical temps, are then assigned to a
client company under terms specified by a contract between the agency and the client
company.
Contract employees do differ from other temporary employees: A contract employee
has specialized job skills usually not available within the client company. They also
are paid a higher rate than the full-time in-house staffers. The hiring agreement can
include a fee for a specified project or a commitment for a certain number of days of
service.
These arrangements are often handled through a recruitment firm or headhunter. The
firm's client company does not handle employment taxes and benefits: The independent
contractor is not their W2 employee. The Internal Revenue Service has strict rules for
defining "independent contractors" and imposes penalties for employers who misclassify
employees as independent contractors.
Dependent vs. independent
At one end of the spectrum are agency-dependent contract employees. Agency-
independent direct consultants are found at the other end. All contract workers fall
somewhere on this continuum.
Control differentiates the two. In the agency-dependent model, the agency locates
the assignment, recruits the contractor, and negotiates with and bills the client. The
agency withholds applicable taxes from the contractor's regularly scheduled payroll
check. The difference between the client bill rate and the contractor pay rate (minus
taxes) is the agency's revenue.
Just where a contractor settles on the continuum is a personal decision that has to
do with comfort level and immediate circumstances. But most of all it has to do with
the free agent's understanding of how the contracting industry operates and how he or
she uses that information to its best advantage.
Income and professional security are strongly influenced by where you fall along
the continuum. For someone who wants to retain 100 percent of the fees from the
assignment, he or she would ideally work as an independent contractor. However,
independents are responsible for finding assignments, billing for time, and paying all
applicable taxes and liability insurance.
Find representation or go it alone?
In considering a stint as a temporary worker, you must decide whether to be agency-
independent or agency-represented. Both hold advantages. Millions of troops in the
alternative workforce army prefer working with an agency. Someone else -- the agency
recruiter -- is scouting the temp-assignment horizon. Employers routinely hire temps to
perform Web maintenance or coding or to fill in when e-commerce loads increase --
during the holiday shopping season, for example.
However, the choice isn't always available on desired assignments. To limit
liability, some enterprises will not work with self-employed independent contractors
because these indies are not incorporated and often have limited, if any, insurance
coverage. Other companies prefer to forego the administrative nightmare of working with
hundreds or thousands of independent contractors. These agencies provide the bodies and
simplify the paperwork.
Consultants
Consultants belong to a special class of independent contractors. They arre paid to
offer advice or to carry out a defined project with a specific deliverable. Consulting
companies are made up of anywhere from only one to thousands of employees. For billing
purposes, the client may require a consulting firm to report aggregate hours broken
down by the project. The individualized work efforts of consulting firm employees are
never tracked by the client, as is the case with contractors.
Be wary about the consultant label. Independent contractors are often wrongly
referred to as consultants. Recruiting companies also call themselves consultants
because of the role they play locating qualified workers, but the term can stretch
credibility.
Employee leasing
Leasing isn't just an automotive term anymore. Employee leasing involves a company
outsourcing complete human resources administration for a class of employees. Companies
such as Microsoft are famous (or infamous) for contracting with an employee leasing
company to supply programmers or analysts on a long-term basis. Leased workforces can
range in size from one to several hundred employees.
A team leader, often an in-house employee, supervises these permatemps. The agency
is the employer of record and takes care of all hiring, payrolls, administrative
paperwork, regulatory matters, and benefits. In addition to programmers, database
administrators are often found in this arrangement.
Free-agency benefits
As Microsoft officials know, benefits, especially stock options, can be a big issue
for both contingent and permanent staffers. PACE's Ziegler has a mission: "My goal is
to make it possible for a downsized, full-time employee to enter the contingent
workforce and not give up any benefits, and at the same time to have the advantages of
the self-employed." He says PACE makes that possible by handling many of the tasks --
obtaining medical insurance, funding the contractor's pension plan, negotiating with
employers -- that contractor traditionally neglects.
The talent war opens opportunities
As the war for talent intensifies, so will the expected demand for temporary
workers with professional skills sets. Ziegler believes that free agency is the model
for the future workforce. "Companies are starting to outsource all their operations and
keep only middle-management people to make the strategic decisions," says Ziegler,
author of the Contract Employees Handbook.
In the Net economy, the shortage of talent is an employer's main constraint. The
Net economy also is spawning new types of representation for contract workers,
including full-service and pass-through agencies. The question is how to protect
yourself and optimize opportunities.
InfoWorld