Empowering the Freelance Economy

Flexeconomy: it contributes £37bn to the UK economy so why are agency contractors still excluded?

A 50 % increase in flexible working could create 51,200 new jobs and unlock £55bn for the UK economy. Photo by Polina Zimmerman from Pexels
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SPECIAL REPORT

Agency contractors: where do they fit within the “Flexeconomy”?

What’s in this report:

  • Flexibilty for all: cultural change in mind-set and how to argue your case for flexible working
  • Umbrella companies and recruiters: will they fight your corner for flexibility?
  • What does flexible working even look like?
  • When can an employer deny flexible working?
  • If your request for flexible working is denied, then what?
  • Blanket contractor bans, but flexible?
  • Agency workers that are also unpaid carers: where do they stand when it comes to flexible working rights?

Every employee in Great Britain will be given the right to request flexible working – regardless of time served – under government plans to modernise the way people work.

This comes as the government also announces that it will give unpaid carers who are also balancing a job one week’s unpaid leave as a day one right.

But there are still some grey areas about flexibility where agency workers and umbrella contractors are concerned. According to several sources, including small business legal site, Legal Donut, only employees have the right to request flexible working. That means self-employed contractors, agency workers, consultants, and company directors who do not have an employment contract are all excluded.

Employees who have ’employee shareholder status’ are also excluded (except in the 2 weeks after returning from parental leave). They have agreed to give up some of their employment rights – including the right to ask for flexible working – in return for free shares in the business, according to the legal site.

Then there is the hazy area of umbrella contractor “employees”. The umbrella company does not find the working contracts for them (even if some have a relationship or kickback agreement with certain agencies). Contractors aren’t employed by the recruitment agency, so unless a recruiter is flexible-working focused, such as Ten2Two or 2to3days, and is willing to negotiate a candidate’s wish for flexible working, contractors could have little power to ask for it.
This poses a variety of problems, especially for career progression for those contractors with school-age children or adult dependents. This lack of flexibility is arguably stifling the government’s plans for a digital, diverse and highly skilled nation.

“At ETZ, our biggest challenge is finding full-time employees with the technical skills to perform the duties which we require of them. Salaries alone won’t attract the best talent either, work from home is usually mandated by good employees as a requisite condition,” Nick Woodward, an IT contractor, serial recruitment tech entrepreneur and Founder of ETZ Technologies, tells The Freelance Informer.

Flexibility for all: how to argue your case

  • Attracting top talent – 87% of people want to work flexibly, rising to 92% for young people
  • Cost-savings – flex request refusals cost businesses £1.7bn a year
  • A highly motivated, productive workforce – 9 in 10 employees consider flexible working to be a key motivator to their productivity at work – ranking it as more important than financial incentives. Employers have reported seeing improvements in staff motivation and employee relations
  • More competitive business environment – the CBI Employment Trends survey found that 99% of all businesses surveyed believed that a flexible workforce is vital or important to competitiveness and the prospects for business investment and job creation

Flexible working contributes £37bn to the UK economy annually and this could be doubled if companies rolled out more flexible working options, according to the findings of new research by Pragmatix Advisory. The findings call out for “flexibility for all” so that sectors that traditionally have not considered flexible working, try to make it work.

The report links flexibility to improved staff morale and productivity, forecasting that a 50 % increase could create 51,200 new jobs and unlock £55bn for the UK economy.

In recognising that flexible working is more than homeworking, the report highlights how even the traditionally ‘hard-to-flex sectors’ can embrace flexibility. Construction workers, for example, can take advantage of self-rostering whilst those working in healthcare can swap mutually agreed predictable hours.

In fact, refusals to accommodate flexible working requests costs businesses £1.7bn a year, the report found, complementing a separate report from Durham Business School from earlier this month, which found that parents who are denied flexibility tend to be less productive (Source: City A.M).

Dr Rose Cook, senior research fellow at the Global Institute for Women’s Leadership, King’s College London, said research recently carried out highlighted that improving parents’ working lives and keeping them in employment relies on far more than just allowing them to request flexible working from day one.

Flexibility as it currently stands arguably bolsters gender inequalities rather than tackling them, says Cook, since it is so often associated with poorly valued, marginalised roles, and is unavailable within higher-quality jobs.

“Mothers especially should not be having to sacrifice fair, fulfilling and meaningful working lives so that they can manage caring responsibilities. Both structural and cultural changes are needed across the workforce so that these trade-offs don’t need to be made,” says Cook.

“People don’t talk about your children… when I asked for the support from a manager, it’s like, Why? Where do you need to go? Why do you need time off? What is your priority? Can your wife not pick up the children from school?”

Father, working in the charity sector
Paul Hamer, Chief Executive of Sir Robert McAlpine believes flexible working can work for many sectors not considered before, including construction

Paul Hamer, Chief Executive of Sir Robert McAlpine, said of the Pragmatix report findings: “We have been supporting Flex Appeal because we believe that everyone has the right to a healthier work-life balance and flexible working could help us alleviate the mental health crisis in construction.”

The misconception that flexible working is only applicable to a select few sectors needs to change. Flexible working can refer to working patterns, workload or time spent in the workplace, and this report, one of the first of its kind, demonstrates the glaring benefit to the UK economy if adopted more widely. We hope it supports the Government in encouraging all manner of sectors to engage with the possibilities of flexible working.

Paul Hamer, Chief Executive of Sir Robert McAlpine

Under the government’s plans, around 2.2 million more people will be given the right to request flexible working.

The proposals consider whether limiting an employee’s application for flexible working to one per year continues to represent the best balance between individual and business needs. The consultation also looks at cutting the current 3-month period an employer has to consider any request.

If an employer cannot accommodate a request, as can be the case, they would need to think about what alternatives they could offer – for example, if they couldn’t change their employee’s hours on all working days, they could consider making the change for certain days instead.


Who’s going to fight a contractor’s corner when it comes to flexibility?

“Working inside IR35 not only leaves contractors essentially in no-rights employment; it also has significant financial consequences: four out of five contractors (80%) working inside IR35 said they had seen a drop in their quarterly earnings – by an average of 30 per cent. A quarter even said their income had dropped by over 40 per cent,” says IPSE.

With a surge of contractors now working through agencies and umbrella companies following status uncertainty under private sector IR35 regulations, what chance do they have to get the flexible working rights that other workers enjoy?

“Theoretically, being a direct employee of the umbrella company should create legal entitlements to key employment protections,” says workers’ union the TUC.

“Workers who are employed by umbrellas should be entitled to a range of employment rights (subject to qualifying periods) including redundancy payments, unfair dismissal protections, maternity leave and pay and they should be paid between assignments if they are not working,” said the TUC in its report, Umbrella companies: Why agencies and employers should be banned from using them

Research commissioned by the TUC suggested that these benefits were largely “theoretical” and didn’t find any evidence of this happening in practice.

The report said: “It should be noted that the ‘extra’ rights that come with employee status by working through an umbrella company, as compared to a ‘worker’, may not be very valuable to an itinerant worker who moves around from umbrella company to umbrella company. For example, rights to claim for unfair dismissal or a redundancy payment are only available after two years’ service.”

The TUC doesn’t believe that umbrella companies are carrying out necessary functions in the labour market. According to the workers’ union, the use of umbrella companies, as the majority operate today, appears to “have nothing to do with supporting workers, and more to do with parts of the labour supply chain taking an additional cut out of payroll funds.”

“Employment agencies should be required to pay and employ the staff they place with end clients,” said the TUC.

The union’s stance could prove controversial for recruitment agencies.

What does flexible working even look like?

Source: Ten2Two

Flexible working methods could include job-sharing, flexitime, compressed, annualised and staggered hours, as well as phased retirement – not just working from home.

Types of flexible working include:

  • Job sharing: two people do one job and split the hours
  • Part time: working less than full-time hours (usually by working fewer days)
  • Compressed hours: working full-time hours but over fewer days
  • Flexitime: the employee chooses when to start and end work (within agreed limits) but works certain ‘core hours’, for example 10am to 4pm every day
  • Annualised hours: the employee has to work a certain number of hours over the year but they have some flexibility about when they work
  • Staggered hours: the employee has different start, finish and break times from other workers.
  • Working from home: it might be possible to do some or all of the work from home or anywhere else other than the normal place of work
  • Phased retirement: older workers can choose when they want to retire, meaning they can reduce their hours and work part time

Flexible working allows employees to balance their work and home life, including helping people who are managing childcare commitments or other caring responsibilities as well as ensuring that people who are under-represented in Britain’s workforce, such as new parents or disabled people, have access to more opportunities.

When flexible working isn’t granted, then what?

Peter Cheese, Chief Executive of the CIPD, the professional body for HR and people development said the government’s consultation on giving employees the right to request flexible working from day one of employment is a welcome move, but will not work in some circumstances

While research has shown companies that embrace flexible working can attract more talent, improve staff motivation and reduce staff turnover – boosting their business’s productivity and competitiveness, there are some circumstances where businesses will not be able to offer flexible working., the government has admitted.

That’s why the government is clear that they should still be able to reject a request if they have sound business reasons and will also respect freedom of contract rather than prescribing specific arrangements in legislation.

Peter Cheese, Chief Executive of the CIPD, the professional body for HR and people development said the government’s consultation on giving employees the right to request flexible working from day one of employment is a welcome move to help create more inclusive workplaces.

Learning from the pandemic, many organisations are now open to more hybrid ways of working which give their employees greater say over where and how they work. But the reality for those whose roles can only be done at their place of work – such as restaurants, warehouses or hospitals – is that they often have very little flexibility.

Peter Cheese, Chief Executive of the CIPD

“We believe a day one right to request flexible working will help broaden the accessibility of all types of flexible working, including flexibility in hours as well as location. In turn, this will boost inclusion, wellbeing and performance which is beneficial to both employers and employees alike,” said Cheese.

The proposed changes should also mean that all applicants will know they can ask for flexible working before applying for a job. Equally, employers will need to consider whether they can offer flexible working before advertising.

When an employer can reject flexible working requests

  • The government’s consultation on flexible working focuses on contractual flexible working arrangements, the government recognises that people don’t always need something so formal to help them balance their home and work life. A call for evidence will be launched looking at the sorts of ad hoc or informal flexibility people may need – for example, to attend a one-off appointment
  • Employees with 26 weeks continuous service have a right to request flexible working under existing legislation. An employer can currently reject a request for specified business reasons such as:
    • extra costs that will be a burden on the business
    • the work cannot be reorganised among other staff
    • people cannot be recruited to do the work
    • flexible working will negatively affect quality
    • flexible working will negatively affect performance
    • the business’ ability to meet customer demand will be negatively affected
    • there’s a lack of work to do during the proposed working times
    • the business is planning structural changes

Blanket contractor bans, but flexible?

Some contractors may become cynical when they hear Tim Bailey, Zurich UK’s CEO boast that the insurer is embracing flexible working when they were one of several companies to reportedly make blanket bans on PSC (limited company) contractors and only engage contractors via umbrella setups from April 2021, ahead of the IR35 rules coming into force.

By offering roles that fit flexibly around family life, employers open the doors to a much wider pool of untapped talent. This will also help people progress into higher paid jobs whilst fitting other commitments around their careers. Workers want a new deal and there’s a danger that businesses that don’t get on board, won’t be able to compete for the best candidates.

Tim Bailey, Zurich UK CEO

José Luiz Rossi, Managing Director, Experian UK & Ireland said while the credit rating agency welcomes the government’s focus on flexible working, they don’t yet have all of the answers to how flexible working will work for all situations, therefore the business views the pandemic as “an opportunity to adopt new ways of working” where the majority of its workforce is given the flexibility to work to a pattern that suits them regardless.

“It is important we give colleagues choice and flexibility to work in the most effective and beneficial way possible. We know more flexibility is what most colleagues want and we also see the benefits in collaborating in our offices when required,” said Rossi.

Agency worker + unpaid carer: where do they stand?

The focus on flexible working should also benefit up to 5 million people across the UK who are providing unpaid care, with nearly half doing so while also working full-time or part-time.

Labour Markets Minister Paul Scully said that millions of people face the dual challenge of balancing full or part-time work with other responsibilities such as caring for loved ones.

By introducing one week of additional leave for unpaid carers, we will give these unsung heroes greater flexibility to help them better manage their personal and working lives, while giving them greater access to the job market.

Labour Markets Minister Paul Scully 

The government response to the consultation on carer’s leave will confirm key elements of what the leave entitlement will look like:

  • one working week of unpaid carer’s leave (per employee, per year) will be available as a day one right to those managing caring responsibilities for those with long-term care needs alongside work
  • eligibility, both in terms of who the employee is caring for and how the leave can be used, will be broadly defined
  • the leave will be available to take flexibly (from half day blocks to a whole week)
  • there will not be an extensive administrative process to ensure legitimacy of requests to take Carer’s Leave as the leave is unpaid

The measure will also look to balance the needs of the employee with the employer, with a minimum notice period of twice the length of time being taken, plus one day (in line with annual leave notice periods). While this may seem fair, this will not always be practical if an emergency arises. 

As we move beyond the pandemic, we must seize the opportunity to make flexible working an option for everyone. No-one should be held back in their career because of where they live, what house they can afford, or their responsibility to family. I want everyone to have the same opportunities regardless of the background or location. This is the right thing to do for workers, families and our economy.

Minister for Women and Equalities Liz Truss
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