July 19th, 2017 | Sterling

The “Gig” Economy and Contingent Workforce in the UK

The UK economy has changed dramatically over the last 50 years from relatively stable employment in the public or private sector to an increased reliance on temporary or contracted labour. While the manufacturing world has shrunk, the on-demand or contingent workforce (or gig economy) has grown. Freelancers are relying on websites and apps like Deliveroo, Uber and TaskRabbit to connect them with paying jobs. Today’s contingent workforce includes highly skilled specialists and consultants that can be found in nearly every industry. Large corporations are continually hiring more flexible, contingent workers to fill their staff. The contingent workforce is growing at a phenomenal rate in the UK, and is showing no signs of slowing down.

What is a Gig Economy?

According to the Cambridge Dictionary, “a gig economy is a way of working that is based on people having temporary jobs or doing separate pieces of work, each paid separately, rather than working for an employer.” The latest employment data from the Office for National Statistics shows 71,000 self-employed workers in Q1 2017 raising the number of contingent workers to over 4.61 million, while the amount of people working in the public sector continues to decline. Figures released in 2016 by the Association of Professional Staffing Companies (APSCo) revealed that the number of vacancies for contract work was exceeding those for permanent roles, particularly in the finance/accounting and IT industries. The temporary or contractor worker sector of the economy is growing at a rapid rate and will have an effect on the economy and political system in the UK for many decades to come.

What are Contingent Workers?

Contingent workers are non-permanent employees, such as contractors, freelancers, agency workers and consultants. The meteoric rise of this group of workers is down to a few factors, such as changing economic and market conditions, skills shortages and a shift in general working patterns. Freelancers and contractors often enjoy higher job satisfaction as they have the flexibility and choice as to when, where and how they work; while employers can flex their workforce to meet immediate needs or demands, and tap into a rich pool of talent, skills and experience, without the burden of keeping them on the payroll.

However, behind the advantages of hiring contingent workers lie a few challenges, namely the hiring and screening process. According to our Background Screening Trends and Best Practices 2016 report, just 53% of organisations screen their contingent workforce, compared to the 91% that perform checks on full-time, salaried employees.

Brexit and Contingent Workforce

Brexit could have an impact on the contingent workforce. According to Kevin Barrow of Osborne Clarke, “There are likely to be some challenging indirect effects of Brexit relating to contingent and agency workers, not least in relation to possible increased regulation ‘against’ UK recruiters across the EU, pan-European recruitment operations and the impact of new tariffs and immigration laws and the right of non-UK EU nationals to work here and how staffing companies will perhaps try to get work permits for them.” Some EU-derived employment laws, including Agency Workers Regulations or Working Time Regulations, or UK-originated laws, such at the National Minimum/Living Wage or Pensions Act, will unlikely be repealed, but it will depend on negotiations with the EU.

Staffing Agencies and Background Screening

One of the major sources of contracting temporary contingent workers is via recruitment agencies and Recruitment Process Outsourcing Organisations (RPOs). Staffing companies have “a touch” upon every industry from light industrial to technology sector to medical to hiring for one-off tradeshows or special events. The integrity of the candidates placed with a staffing company can make or break their reputation and branding. Client companies look to a staffing company to provide them with the best-skilled workers to meet their productivity goals.

The staffing industry is extremely fast paced. Open jobs must be filled quickly with the most qualified candidates. Each of the companies that the staffing agency works with could have different background screening requirements for their workforce and a myriad of background screening needs. Performing background screening checks helps to protect staffing companies from possible bad hires, which can cause undesirable situations at an employer. If a staffing agency fails to do due diligence in their hiring processes and puts a worker who is unfit for employment or causes a threat to the employer, then the staffing agency may be liable for breach of contract claims. Therefore, staffing companies and the employers themselves must develop a comprehensive background screening policy that explicitly states the types of screening that will be performed for the positions they are hiring for.

The Risks of Not Performing Background Screening on Contingent Workers

Freelancers and contractors often have the same access to company resources, sensitive information, and customers as their full-time co-workers, so gaps in the screening process could pose risks to employers. It may only take one person to damage an organisation’s reputation or put existing staff at risk, which is why it is important to ensure that your extended workforce has the necessary checks performed on them. Some of the risks involved in not screening contingent workers include employee fraud, theft, data security breaches or hiring migrant workers who have no legal right to work in the UK.

With ever increasing numbers of contingent workers entering the labour market, it’s vital that effective, robust policies are in place to screen them. Employers must also make sure that HR teams and managers are aware of the risks of not following correct procedures. It is a good idea to carry out the same exact background checks on contingent workers as would be run on full-time employees. If there is any doubt about the screening process, then companies should consider using a third-party screening provider to ensure that all legal obligations are being met. By using the same screening provider and the same process for all workers, you can be sure that the hiring process is fair and equal for everyone, and that you thoroughly understand an individual’s background before recruiting them.

As a large portion of the contingent workforce could be from countries outside of the UK, it is important to have global background screening programme in place. Find out more about best practices for international background checks and more in Background Screening for Global Workforce.

This publication is for informational purposes only and nothing contained in it should be construed as legal advice. We expressly disclaim any warranty or responsibility for damages arising out this information. We encourage you to consult with legal counsel regarding your specific needs. We do not undertake any duty to update previously posted materials.