Predicting the future of work is not an exact science, however one prediction that most people seem to agree with is that there will be a significant rise in freelance and contract working. This trend is already here; recent years have seen both a significant rise in the contingent workforce and the advert of talent marketplaces shaping the “gig economy”.
My guest this week is Connor Heaney, Managing Director of CXC Corporate Services. I first met Connor last year when I spoke at CXC’s future of work summit in Dublin. Since then Connor has been running future of work think tanks all over the world and has some important perspectives on how companies should be preparing themselves for the future of work.
In the interview with discuss:
• The positives and negatives of the rise of the gig economy
• The lack of government readiness to understand the changes and give the new workforce the support they need
• Predicted growth rates for the contingent workforce and its implications for traditional companies
• How ready companies are for the legal and tax implications of larger contingent workforces
• The evolution in Employer Branding that is needed make sure companies are attracting the right contingent talent.
• Recruiters versus algorithms
Connor also talks the most interesting technology innovations he is seeing in the space and gives us his view on the future
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Transcript:
Matt Alder [00:00:00]:
Support for this podcast comes from CXC Corporate Services, part of CXC Global. They are the leading global advisor on contingent workforce solutions, helping companies reduce cost, mitigate risk and improve multi country compliance across their contingent workforces and supply chains. To find out more about how CXC Corporate Services can help you, please visit www.cxccorporateservices.com. that’s www.cxccorporatesevices.com. cXC facilitating the future of Work.
Matt Alder [00:01:00]:
This is Matt Alder. Welcome to episode 54 of the Recruiting Future podcast. Predicting the future of work is not an exact science. However, one area which most people agree on is the predicted growth of freelance and contract working. This trend is already here with a recent significant rise in the contingent workforce and the advent of the talent marketplaces which are shaping the gig economy. My guest this week is Connor Heaney, MD, of CXC Corporate Services. I first met Connor a few months ago when I spoke at CXC’s Future of Work Summit in Dublin. Since then, Connor has been running Future of Work think tanks all over the world and he has some very important perspectives on how companies should be preparing themselves for the future of work. Hi Connor, and welcome to the podcast.
Connor Heaney [00:01:54]:
Hello Matt. May I say good afternoon to you from a very sunny London. How’s things up in Scotland today?
Matt Alder [00:02:00]:
Yeah, I am in Scotland today, really sunny, slightly windy and I’ve just been out on the beach, so it’s all, it’s. Yes, it’s all very lovely. Could you just introduce yourself and tell everyone what you do?
Connor Heaney [00:02:17]:
And Matt, thank you very much for having us on the show. Myself and the rest of the team at cxc, we’re really huge fans of the podcast and your work in general. So thanks very much. So just in relation to myself, my name is Connor Heaney. I’m the Managing Director of CXC Corporate Services. So we’re part of the CXC Global group of companies and what we do, Matt, is we provide global compliance, contingent workforce management programs. It’s quite a mouthful, I know. Other than advisory services to some of the world’s largest companies and managed service providers. We operate in 68 countries, Matt, and typically we work with multiple stakeholders across count, acquisition, hr, procurement, finance and the associated recruitment vendors to bring cost transparency, best practice, good governance and risk management across the contingent worker population and associated supply chain. So really what we do in, in summary is that we help those companies manage reputational risk, deemed employment risk, tax gen liability or financial risk in relation to their contingent workers. So we’ve been in operation now for the last 24 years. Next year is our 25th anniversary. So we’re very excited about that. Something that we’re really passionate about as well. Matt, as you know from speaking at one of our many future workforums in Dublin last year is around the growth of the contingent worker and also the gig economy and really how that’s creating both difficulties and opportunities for how contingent workers are sourced, procured, onboarded, paid, engaged and managed and how that creates problems actually for both the end users and governments as well. Matt. So that’s pretty much what we do in a nutshell.
Matt Alder [00:04:16]:
Now you mentioned your future of work events that you’ve been doing and I know you’ve been doing all over the world. I think the one in Dublin last year which I spoke at, I mean it was, it was, it was fascinating just to hear the different points of view that you guys had gathered round. You know, the contingent workforce, the future of work and all the issues. What’s, what’s been most interesting for you? You know, what’s the most interesting topic, the most interesting aspect of the way that works, evolving that you’ve, you’ve learned about those events?
Connor Heaney [00:04:52]:
Great question Mark. I think there’s a couple of strands to that. I think the first one is really the growth of the contingent workers. So as it stands, according to recent research from ardent partners, roughly 35% of today’s total workforce is comprised of non employee workers. So that can be in anything from temps to freelancers to statement of work contractors to the traditional type contractors or independent contractors that we would know here in the uk. And you know what’s equally interesting about that is that those numbers are expected to grow to 50% of the total workforce by 2020. So in four years time we’ll be looking at a really interesting mix of the workforce in many different and diverse organizations. And one of the things that, that we’re particularly interested in Matt, is what are the implications for that for both the end users, the workers themselves and also the governments in terms of how they can collect their taxes, how they can get their money in and how those companies protect themselves from things like deemed employment or tax chain liabilities. The other thing Matt, that really is of interest to us is how the gig economy or the sharing economy or the on is creating almost like a new type of worker. So if you think of some of the ways that we move around. We can order a driver through the flick of an app or the scroll through of an app. And those companies are investing heavily in technology. But really interestingly, they have very few employees directly with themselves and their model is almost to transfer the risk to the worker themselves. So if you think about the workforce of 20 years ago or even 30 years ago, many, many people had a job for life. That concept has certainly changed with the growth of the contingent workforce. It certainly changed with the recession that we just emerged out of some years ago. And it certainly changed with people’s working habit and preference for a more flexible way of working. But to go back to the companies in the sharing economy, you know, they don’t have really any capital expenditure. You know, for example in the driver analogy, those companies don’t tend to invest or buy cars for the drivers to operate. They don’t have any pension liabilities, they don’t have any holidays to pay. They don’t typically have any variable or bonus payments or car alliances or healthcare, et cetera. So that has seen an unprecedented shift in our view to the worker. And typically the worker now is responsible for their own tax affairs. In that case they’re responsible for the maintenance of the vehicle, they’re responsible for their own healthcare. And that puts a tremendous burden on those particular workers that we haven’t seen, I don’t think for over maybe 100 years or more since, since the Victorian times. And you know, many of the advocates of the gig economy and you know where we are advocates of it as well ourselves Matt, but we want there to be certain protections for those workers and also for the companies that are engaging those particular workers as well. So it’s something that we are seeing a huge amount of interest in through the future work forums. And our next one is due to take place in London in September.
Matt Alder [00:08:34]:
Not so just to go back to you, you mentioned governments in, in, in, in all of this. Now my, you know, my impression is that a lot of governments in, in, in many countries have been caught, have kind of really been sort of caught out by, by this shift. And I know that the, the UK government in particular hasn’t really trying to think of the right word but hasn’t been very pleasant to self employed contractors in the last couple of years. Do you think governments understand this enough? Do you think they’re doing enough to protect workers or are they still playing a massive game of catch up in this kind of big workforce shift?
Connor Heaney [00:09:22]:
Absolutely not. I don’t think governments are Doing anything like enough to look into this area and protect those type of workers. Even if you think about, for a self employed worker, whether they’re a driver or a delivery driver or self employed freelancers like yourself, Matt, or others, if you look at the tax system, the tax system works roughly a year behind. So if you’re a delivery driver and you know you’re being paid weekly and that money’s going into your, into your pocket, you know, you don’t have that level of sophistication. You may not even have an accountant or a tax advisor, probably not. And that money’s gone into your hand and it’s basically gone out again in terms of you having to live and pay your mortgage or your rent or whatever that is. And you know, when it comes to the next tax year, when you have to file your returns and actually pay the tax man, the Exchequer is suffering terribly as a result of that. And you know, it’s not our job, I suppose to be the tax collector, far from it. But certainly the tax framework has not, has not caught up with the gig economy, far from it.
Matt Alder [00:10:39]:
And I think it’s a really interesting topic and you tend to see sort of very black and white opinion on it. So you know, either it becomes all about, you know, either it’s all about the workers rights and the risks and companies are kind of exploiting them. But on the flip side, there’s obviously a tremendous freedom for, you know, for people to work, you know, to work globally to, you know, to sell their talents to sort of various organizations. And I think that, you know, there’s obviously a tremendous positive piece to it as well. How do you find, you know, sort of more traditional companies reacting to this? Are they, are they growing their contingent workforces? Are they doing well in terms of dealing with a different makeup of their, you know, dealing with this different makeup of their workforce?
Connor Heaney [00:11:33]:
Yes, certainly not. You know, if you look at your traditional bank or telco organization, their contractor workforces are growing and they’re growing considerably. And there’s probably five reasons for that in our view. The first is that, you know, there’s less onerous burdens, you know, they don’t have to pay the pensions, the holidays taxation, you know, they’re not liable for redundancy claims, there’s no bonus requirements and the workers, as you rightly point, that want more flexibility. And also the end user or employees do, you know, typically work these days is very much project based. But also the recession has, the previous recession has definitely led to a climate of economic uncertainty. And cost reduction, where large and small companies want to reduce their fixed cost base. And typically that means they’ve reduced their permanent employee headcount, but increase their contingent or contractor workforce. On the flip side, the fourth element of that really is the growth of this kind of contingent workforce is around technology. As we mentioned, the app for the gig economy. And the fifth thing, which has often been discussed by organizations like the rnc, Matt, is around the war for talent. You know, workers typically can earn more as contractors. They can go to market in a much more speedy fashion. But to answer your question in relation to have organizations caught up with that, I think it would be fair to categorize organizations maybe in three ways, Matt, and this might sound controversial, but I think it could be summarized as know, don’t care, and do care. And some organizations don’t know really what lies beneath when they’re engaging their contingent workers, either directly or through maybe a traditional agency supply chain. They’re not aware of some of the risks that they can really be liable for, particularly around tax chain liability or deemed employment risk, particularly in some of the countries like Germany and Stanford. They’re just not aware of that. And then the next category might be don’t care. And I don’t think that’s a deliberate don’t care. But it’s often because they’ve entrusted the sourcing, engagement and management of contractors to third parties. And in their view, that’s all well and good and everything’s above, sorry, everything’s in order and, you know, all the right compliance checks have been done. And quite often that is the case. But sometimes there is considerable risk there nonetheless. And in terms of due care, a lot of the companies that we work with, you know, are global enterprises where they’ve got, you know, a large contingent workforce in many different countries with many diverse and onerous regulations when it comes to the engagement and management and payment of contingent workers and contractor workers. And they’re very keen to have, I suppose, a clean set of heels and be as compliant as possible with the, you know, the workers themselves, you know, so they don’t have any, you know, deemed employment issues. And also with the tax authority. So, you know, in some of the European companies that the tax authorities will actually come and they’ll come to your premises. So there’s been cases in the past and evidence where large telecoms companies and system integrators have had their offices raided because they’ve incorrectly engaged freelance workers. So some companies are certainly ahead of the curve in terms of getting the right type of Supply arrangements, the right type of procurement arrangements and ensuring that there are contingent workforce compliance, compliance across the board. But, but there’s quite a few organizations that still have this decentralized approach to the procurement, management and payment of contingent labor. And they’re sitting on, I suppose, a ton of risks in our view.
Matt Alder [00:15:47]:
The thing that I spoke about when, when we met in Dublin for the Future of Work summit that you, that you had was it was kind of all about how companies actually attract the best people as contractors. And, you know, the notion of an employee brand or employer brand, you know, being perhaps becoming somewhat out of date in this sort of shift to a more contingent workforce. And in my view, I haven’t seen a huge amount of companies really kind of get to grips with how they make themselves an attractive place to be a contractor at, which could very much be the future. Are you seeing that discussion being had amongst employers? Do you think that they do need to behave in a different way to attract the best contract talent to their business? Or can they just carry on in the way that they always have?
Connor Heaney [00:16:45]:
I think not. Some of the companies are certainly gearing up their employer branding to attract contractors, but typically through maybe their MSP provider that might be managing their contingent workforce, you know, in terms of sourcing it and also engaging and paying those contingent workers. And they’ve got some quite sophisticated freelance management systems now that can attract and build up those talent pools of contingent workers. And I think that’s working for some companies for sure. But I think for many of the other companies out there, I don’t think they would consider the branding side of it or the talent attraction. I don’t think they’ve invested the resources in attracting contingent workers. There’s some work to be done there.
Matt Alder [00:17:48]:
So you also mentioned technology as a major driver of this. What’s the most interesting sort of technology innovation that you’ve seen in the last couple of years or so?
Connor Heaney [00:18:05]:
I think for me it’s been the growth of what I would call on demand sourcing platforms or tools. So I’m thinking of one in the UK which would be elevator elevatedirect or hired.com in the United States. And I know it often comes up as a question on your, on your show, Matt, will algorithms effectively replace recruiters? And I always pity the people that have to answer that question because it’s such a difficult one to address and answer. But I think the growth of the on demand freelance management platforms is fascinating because in some cases there is actually an algorithm replacing what I would call the sell side of recruitment, which would be some of the agency type recruitment. But even with the growth of these platforms, Matt, it still doesn’t remove the need for someone to screen, interview and set those particular contingent workers or workers that are coming through those platforms. That human element I don’t think can and should be replaced. And equally in relation to technology, I think technology is getting a bit of a bad name in the recruitment world for many different reasons at the moment. I started my career in staffing and recruitment 10 years ago. Well, most people on your show have had a very varied career path. But 10 years ago when I was starting in recruitment and staffing, the greatest innovation was a functioning CRM system. And that was a real enabler for staffing companies to acquire and attract the talent that they needed to provide to their end customers. Even thinking back to my time then, you know, I worked with some older gents that, you know, were telling me about the fax machine and what an enabler and innovator that was for when they were in the recruitment and staffing world in the 1980s. It meant that they didn’t have to type CVs and you know, deliver them by hand. So, you know, even if you look at LinkedIn as well, I mean, that’s been a huge boon and huge bonus for recruiters and staffing companies. And what I would be a proponent of is that recruiters and MSPs should, should adopt and embrace technology wherever possible and use that technology to embed themselves in their clients and sort of lock out the competition if at all possible.
Matt Alder [00:20:41]:
Thank you very much for asking yourself the recruiter algorithm question. That’s brilliant. And you know, and I think that’s a great, I think that’s a great, I think that’s a great answer as well. The, you know, the combination of technology is an enabler and you know, the, the humans, you know, screening humans basically. Final, final, final question where, what does the future look like? So if we’re already at kind of, you know, whatever it was you said 35%, you know, contingent workforce, what, what happens in the future? What does, what does, what does work look like in a, in, in a few years time?
Connor Heaney [00:21:19]:
Oh well, I mean, I think it’s a really difficult thing, I think to predict the future, but I think one thing for sure is that the demand and the growth for contingent workers is certainly going to increase. Probably the main reason for that is that the cost burden is so much less onerous for the end user. And one of the most common two words I hear all the time are cost transformation and cost transparency when I’m speaking with large and medium sized customers. And I think that’s going to be something that those companies are going to be interested in moving forward and they can achieve that cost transformation and cost transparency by continuing to engage and grow the contingent workforce. In terms of the future of work, I mean, I think people should definitely be concerned with automation. I know there’s two schools of thought there, really, the utopian and the dystopian that, you know, technology will free ourselves and enable, you know, people to do less work and enjoy life more. And then there’s this dystopian view that, you know, the robots will take over and we won’t be able to do anything. But to go back to my earlier point, I think technology is definitely to be embraced, is definitely enabling the future of work and I think it’s definitely contributing to the growth of the contingent worker and the freelancer.
Matt Alder [00:22:54]:
Connor, thank you very much for talking to me.
Connor Heaney [00:22:56]:
Thank you, Matt. It’s been a pleasure.
Matt Alder [00:22:58]:
My thanks to Connor Heaney. You can subscribe to this podcast on itunes or via your podcasting app of choice. Just search for Recruiting Future. You can also find all the past episodes@www.rfpodcast.com on that site. You can also subscribe to the mailing list and find out more about working with me. Thanks very much for listening. I’ll be back next week and I hope you’ll join me.
