Dealing with a growing dependence on independent workers

Once upon a time, a person applied to a company for a full-time job, spent decades earning a regular salary with health benefits and paid leave, then retired with adequate savings and lived happily ever after.

For many people, that sort of linear career progression is becoming a fairy tale. Taking its place is a modern narrative with a far less predictable plotline: the rise of the non-traditional workforce.

Some of the characters in this new landscape of work call themselves "solopreneurs" - entrepreneurs with a staff size of zero. Others are known as "permatemps", who may put in hours equal to full-time staff but are kept on contracts because companies lack the budget or headcount to provide the benefits that come with a full-time position.

Then there are "taskers" who sign on to ad hoc jobs, performing tasks ranging from helping strangers buy groceries to delivering pizza during peak hours.

Many of these independent workers boast "portfolio careers", consisting of a patchwork of diverse skills and short-term work experience. They may or may not belong to the "gig economy", using digital platforms such as Uber and Airbnb that match customers directly with service providers or asset owners. Such "giggers" now make up only 10 to 15 per cent of all freelancers, but the number is expected to grow.

What unites these various workers is their exclusion from the world of permanent full-time jobs which, itself, is shrinking as technological disruption reduces the need for humans to perform repetitive tasks and separates work outcomes from job titles.

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While there have always been people working outside the scope of a typical employer-employee relationship - taxi drivers, property agents and freelance writers are just a few longstanding examples - the growth and complexity of this non-traditional workforce are being accelerated by the advent of technology and a generation of millennials who view lifelong employment as more shackle than security.

Singapore has 200,000 such freelancing workers, Manpower Minister Lim Swee Say said in Parliament earlier this month. They include sole proprietors such as hawkers and provision shop owners.

This works out to about one in 10 employed residents, but the number is likely to increase if global trends catch on here. Some reports predict that independent workers could comprise 40 to 50 per cent of the US workforce by 2020, up from 20 to 30 per cent currently.

To stay on top of this trend, Mr Lim announced that the Manpower Ministry (MOM) is setting up a tripartite workgroup - partnering with the labour movement and businesses - to study the issues faced by this group of workers.

One question it may want to look into is whether the current legal framework and workforce vocabulary adequately provide for the growing diversity of how individuals offer labour for reward.

For all their fancy new job descriptions, in the eyes of the law, most of these non-traditional workers are defined broadly and negatively - simply as non-employees, or self-employed.

Apart from a few bound by standard employment contracts, the rest are unlikely to be covered under the Employment Act that extends to most rank-and-file employees and that stipulates, among other things, workers' rights to paid sick leave and medical benefits.

Yet this is not a definition that is set in stone. In Britain, Uber recently lost a court case in which it tried to argue that all its tens of thousands of drivers were self-employed contractors who had control over their working hours and conditions.

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The judge instead ruled that while Uber drivers were not strictly "employees", they could not be truly described as "self-employed" since they were bound by strict working conditions set by Uber. Instead, they fell into a third category of "workers" who, in Britain, have the right to minimum wages and holiday pay, but not the protection against unfair dismissal that is accorded to employees.

Research by British charity network Citizens Advice has shown that as many as 460,000 people in Britain could be falsely classified as self-employed, costing millions of pounds annually in lost tax and employer insurance contributions.

But even among the growing group who are unquestionably self-employed, it could be useful to identify sub-groups based on differing objectives, demographics or needs, to lay the ground for more tailored economic and social policies that can better support them.

For this purpose, global consultancy McKinsey has offered a helpful framework to sort through the rich vocabulary of what it calls "independent workers", dividing them into four categories.

The first is "casual earners", such as students, retirees and caregivers, who take side jobs for supplemental income and do so by choice. For them, independent work offers a chance to earn money with flexible hours, but is not their primary source of income. This category accounts for four in 10 independent workers in the US and Europe.

The second sub-group is "free agents", who actively choose to engage in independent work and derive their primary income from it. This group - which makes up three in 10 independent workers in the US and Europe - is likely to include so-called solopreneurs and skilled independent contractors, such as plumbers, designers and writers.

The remaining three in 10 independent workers are more or less equally divided into the "reluctants" - those who would prefer traditional jobs but end up earning their primary income from independent work - and the "financially strapped", who do supplemental independent work out of necessity.

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These last two groups would probably be of greater concern to policymakers, as they may need more active help to realise their aspirations or make ends meet.

But free agents are also vulnerable to the downsides of independent work, such as job insecurity, retirement inadequacy and one-sided contracts, as well as a lack of medical benefits, paid leave and holistic training opportunities.

How does McKinsey's framework map onto the Singapore context?

Quite well, in light of some data that Mr Lim disclosed in Parliament. He said nearly 70 per cent of Singapore's freelancers choose to rely on independent work as their primary source of income, which means they roughly translate to McKinsey's "free agents". These include taxi drivers, hawkers and property agents.

Another 15 per cent opt to freelance on the side, making them "casual earners" in the McKinsey framework. About the same number are primary freelancers who would prefer a full-time job - "reluctants" - while a tiny group of about 2 per cent are "financially strapped".

The good news is that freelancers who are driven to take on independent work out of necessity, rather than out of choice, form a relatively small proportion of overall independent workers in Singapore, compared with the US and Europe.

However, with seven of 10 freelancers here working as "free agents" and depending on independent work for income, more attention will need to be paid to how they can meet their retirement and healthcare needs, receive fair treatment from their clients, and upgrade their skills to maintain their employability.

One way to help them could be to set up a freelancer association dedicated to addressing the needs of non-traditional workers. Such an outfit, regulated by the Govern- ment with support from trade unions and employers, can be a one-stop shop to provide legal, business and financial planning advice, simple contract templates, and training courses, grants and subsidies to help in career progression.

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It could also borrow from the models of small and medium-sized enterprises (SMEs) and make use of centralised resources and risk pooling to offer affordable medical coverage, retirement savings plans and insurance schemes. A few MPs, such as Ms Foo Mee Har (West Coast GRC), have suggested similar risk-pooling initiatives.

After all, freelance workers are to employed ones what SMEs are to large multinationals - in need of more hand-holding to make up for their lack of resources, and a collective voice to address the unequal division of bargaining power.

A credible freelancer association could help put stronger pressure on companies to do their part when engaging independent workers - whether in implementing fair employment practices or even making pro-rated contributions to their Central Provident Fund accounts based on the number of hours they have worked, as proposed by MP Tan Wu Meng (Jurong GRC).

An active and thriving freelance population can be an economic boon, allowing people with personal time commitments to make a living and offering companies an alternative and more flexible workforce. Finding a way to make independent working arrangements work will be a happy ending for all.

This article was first published on Mar 26, 2017.
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