Harnessing Flexibility

This is the third in a series of articles produced for the Future of Work Hub by Lewis Silkin LLP looking at the importance of harnessing flexibility in the future world of work. 

Changing workforce and societal expectations, compounded by the financial crisis and recession, have resulted in a growing emphasis on flexibility. New forms of employment have spread rapidly over recent years, driven by profound underlying changes in technology. Digital forces are increasingly disrupting and transforming long-established norms of employment, leading to far greater levels of self-employment and/or “as and when required” working. Organisations increasingly need be able to adapt their workforces quickly to changing circumstances in order to survive and thrive. 

In light of this, many businesses are responding to changing attitudes and the shifting labour market by radically rethinking their existing organisational structure and traditional approaches to engaging staff. Organisations are shifting away from hierarchical, post-industrial era, business models to a flatter and more “porous” organisation in an effort to become more agile. In a recent report by Deloitte, business leaders identified “building the organisation of the future” as the most important challenge for 2017, given the pace of change and the constant pressure to adapt. 

Technological advances have not only given organisations opportunities to operate more flexibly in response to globalisation and rapidly changing market conditions, but they have also allowed employees more control over when and where they work and how they balance work, family and outside interests. Managed properly, flexible arrangements can benefit both organisations and individuals by improving performance and wellbeing.

The UK has one of the most flexible labour markets in the world. It can, however, be challenging for businesses to navigate the variety of diverse and developing employment models in the context of the existing legal framework, both nationally and abroad where countries vary considerably in their approach. Regulation often lags behind actual practice in the labour market, so employers need to be aware of the constraints and consider the most effective approaches to embracing new working methods.

Another seismic trend over the past few years has been the growth of the “gig economy” – the move away from traditional “9 to 5” jobs towards technology-enabled “gigging” for a multiplicity of work providers at any one time.  Related to this is the increasingly widespread use of zero hours contracts.  While the flexibility such arrangements can offer works well for many workers, the relative lack of security in some cases may leave some feeling vulnerable, with the flexibility benefitting the employer coming at the unreasonable expense of the individual.

A study published by McKinsey last year found that 162 million people in Europe and the US, some 20-30% of the working population, engage in some form of independent work. It further found that about 70% of them did so through choice, while 30% did so out of necessity. The issue of choice and the tension between “flexibility” versus “insecurity” were also reflected in the CIPD’s report on the use of zero hours contracts and the Good Work review of modern employment practices, commissioned by the UK government and led by Matthew Taylor, both of which illustrated how shifting patterns of work have resulted in more insecurity for some. 

The recent litigation and publicity generated by gig economy business models illustrates the tension between the traditional employment law framework and more novel modes of work provision. A relationship that a business treats as a self-employed or “worker” relationship can subsequently be categorised by an Employment Tribunal or HM Revenue & Customs as an employment relationship, with greater statutory protection and rights for the individual in question and obligations to operate PAYE for the company (with potential penalties for failing to do so).

There is no doubt that technology and digitisation have opened up new possibilities for working patterns and arrangements, but this has generated tensions around working time.  Home-based and “on-call” working arrangements are already generating litigation around issues such as whether travel time or on-call hours constitute rest time or working time that attracts the national minimum wage. This is likely to be an on-going area of focus as technology continues to enable different ways of working.

Over recent years, legislative changes have supported increased flexibility in the labour market. Following changes in the law in June 2014, the legal right to request flexible working now extends to all employees (not just those with caring responsibilities). While this legal framework can help facilitate flexibility in the workplace, employers should tread carefully when dealing with competing requests from different segments of the workforce so as not to fall foul of anti-discrimination legislation.  Line managers need to be able to deal with difficult conversations about turning down a request and make decisions objectively without any (conscious or unconscious) bias. Certain areas or functions in the workplaces may reach a “saturation” point where no further flexibility requests can feasibly be accommodated. Employers should therefore ensure that any flexible working patterns agreed with employees are open to periodic review. 

From an employee perspective, being “always on” and having work spill over into holiday and leisure time can present serious challenges for health and wellbeing. As non-traditional working arrangements increase, these types of issues will fall increasingly under the spotlight and line managers will need to be equipped with the skills to manage them. 

Many UK employers will have five distinct generations in the workplace by 2020. Offering flexibility will be crucial in responding to their different needs and expectations, thereby helping organisations in the battle to attract and retain top talent. The increasing numbers of millennials in the workforce, embracing a much more fluid approach to work and life, will no doubt drive changes in the way that employers interact with employees.  As highlighted in our previous article, for older generations, the concept of retirement has in many ways been retired and there is often no longer a stark choice between being in or out of work. With generous workplace pensions becoming much rarer, many will seek - and financially require - something of both worlds. Increasingly, partial “retirements” will be funded by working part-time, and flexible working requests, traditionally the preserve of new parents, will become a normal aspect of the transition to retirement. 

Employers are recognising the need to revise their contractual framework to support more diverse and flexible working models, increasingly driven by digitisation. Perhaps the term “employer” will itself gradually become obsolete. Either way, important considerations will include evaluating the need for core working hours, base working location and exclusivity of working arrangements, and considering how best to protect business interests.

Employers that embrace “portfolio” workers and scrap “exclusivity” clauses could gain a march on the competition by actively encouraging and facilitating employees’ outside interests and gaining access to a broad and flexible on-demand talent pool. One challenging issue is how to balance such an approach against concerns about confidentiality and competition. The more traditional, contractual means of protection may not provide an adequate solution in a more networked and collaborative business environment.

FUTURE DEVELOPMENTS

Non-standard forms of work will clearly have a big part to play in the future labour market, but the good news is that flexibility allows companies to meet new challenges. As the working relationships evolve and the shape of the employment “deal” comes under increasing pressure, employers need to be ready to adapt.

While the traditional model of employment remains the norm for the time being, digitisation and the rapid rise of the gig economy is spawning new species of work relationships with which employment laws and tax regimes have struggled to keep pace. The media and political furore surrounding zero hours contracts and gig economy workers illustrates how these issues can draw the attention of government and trigger regulatory intervention.

Legislators and judges will continue to grapple with the tension between flexibility and security, with the past year or so having seen moves at EU level and within the UK to find a legislative solution. In the EU, a proposed new European Pillar of Social Rights would guarantee basic rights for workers, regardless of the basis on which they are engaged. In the UK, the Good Work review made a number of proposals for legislative changes to the employment law landscape to address these issues. The Good Work review took place alongside a number of related parliamentary inquiries into matters such as the status and rights of the self-employed, agency and “gig” economy workers and the adequacy of the UK’s welfare and tax system in this context. As flexible working becomes more prevalent, and technology continues to re-shape workplace relations, we can expect trade unions to continue mobilising to protect workers engaged in new modes of work, and an increasing number of legal claims concerning employment status.

The UK’s vote to leave the EU will no doubt lead to changes in the employment landscape over the next few years. Economic uncertainty following the vote is leading many employers to turn to short-term staffing options, rather than permanent recruitment. Another major issue is the extent to which EU-derived employment laws will be repealed or reformed after Brexit. The government’s Brexit white paper states “…not only will the government protect the rights of workers set out in European legislation, we will build on them. Because under this government, we will make sure legal protection for workers keeps pace with the changing labour market…” With what some regard as a creeping “casualisation” of the UK labour market and with developing concerns about an increasingly flexible (and possibly more insecure) labour market, businesses would be prudent to expect further scrutiny and protective regulatory intervention in the future.

In order to support diversity in the workplace, we may see further moves by the government - beyond the new shared parental regime - to encourage gender balance in undertaking childcare responsibilities. The new gender pay gap reporting obligations and the government’s proposals for grandparental leave are recent examples of regulatory intervention.

CHECKLIST

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Watch out for the next article in the series will look at the benefits and dangers of social media.  To read the introduction to the report which gives an overview of the impact of three megatrends - globalisation, technology and changing demographics - on the world of work, see the introduction to the series.

If you would like an advance copy of all sections of the report "Future Proofing Your Business", click the button below to let us know. 

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