Contractors increase opportunity to create more jobs

Contractors could be the key to boosting employment in the UK, according to latest research from Trinity Business School.

The data has been compiled by Professor Andrew Burke, Chair of Business Studies and Dean at Trinity Business School, and Marc Cowling, Professor of Business Economics at the College of Business, Law, and Social Sciences University of Derby.

The research, using data from a random survey of 1,028 SME owner-managers and Senior Executives in the UK, shows that when contractors make up at least 11% of a company’s workforce, that firm’s productivity will increase.

This in turn generates greater profits, as the average productivity of firms with at least 11% of their workforce being self-employed was £4,669 higher per employee than firms with less than 11% working for them.

Interestingly, contrary to the traditional view that freelancers take jobs from others, jobs created by firms in the UK above the 11% threshold was 914,400, which equates to 1.2 additional new jobs per firm.

Professor Andrew Burke, Chair of Business Studies and Dean at Trinity Business School, commented, “People normally associate the use of freelancers with employment destruction as they are perceived as doing work that otherwise could have been done by employees. This view overlooks a different type of freelancer who works in sync with employees but brings expertise and innovation not available within firms and on a swift basis, thereby enabling these businesses to innovate, grow faster and ultimately create more employee jobs.

“Our research is the first empirical research to see which type of freelancing effect dominates. Using UK data, we find that there is a positive net effect of freelancing on employment creation but to generate these gains firms have needed to take a deliberate strategic initiative to adopt a freelance intensive workforce model comprising of at least 11% by freelancers.”

Marc Cowling, Professor of Business Economics at the College of Business, Law, and Social Sciences University of Derby, added, “Our research was the first to debunk the view that freelancers are cheap, low value workers who cause job losses by replacing core employees. Rather we found they add specialist skills and expertise that create value and profit and allow firms to increase their core workforce as they accelerate their growth.”

To find out more about contracting please contact Jaime on 01206 591 000 or email jaime.thorpe@contractorumbrella.com.