According to an Australian Bureau of Statistics (ABS) report released today there are now almost one million Australians who work as independent contractors in their main job. 

The Forms of Employment report provides a comprehensive insight into the shift in Australia’s labour market - from the traditional employer-employee relationship built around full-time employment, to branching out into other less traditional working arrangements. 

 It shows that as well as the one million contractors in Australia’s labour market there are also around 367,000 employees engaged on a fixed term contract (one-third of whom are in the Education and training industry) and almost 610,000 ‘other business operators’ (people managing their own business).

For the purpose of this blog post, we will focus solely on the independent contractor group.

The profile of Australian Independent Contractors

So who are these one million independent contractors?

The ABS defines independent contractors as “ … people who operate their own business and who are contracted to provide labour type services for others without having the legal status of an employee”.

While there was a slight increase in the overall number of independent contractors to 986,400 in the year to November 2013, independent contractors as a proportion of the Australian workforce remained unchanged at 8.5%.

Somewhat surprisingly, the proportion of independent contractors in the Australian labour market is lower than several years ago, when in November 2010 some 9.8% of people in a job were contractors. It is possible that greater scrutiny of contractors in recent years by both the Australian Taxation Office and workplace relations regulators as well as uncertain economic conditions may have contributed to this decline.

Men are much more likely to work as independent contractors than women – 11.9% of working males compared with 4.6% of females. Although this is somewhat skewed by industry trends (see below).

People tend to gravitate to independent contracting mid-career, with almost half of all contractors being in the 35 to 54 year age group.  Independent contracting also seems to be a choice (or is it by necessity?) for many in the later stages of their career, with 7.1% of all independent contractors being 65 years or older compared with just 2.3% of employees.

By far the most common industry in which an independent contractor works is Construction (304,800), reflecting the very unique operating structure of that industry, followed by Professional, scientific and technical services with 149,300 (encompassing many of the traditional consulting-type sectors).

The professions in which independent contractors work is predominantly Technicians and trade workers (293,000) as well as Professionals (231,600).

Independent contractors reported much more control over their working hours than employees. Some 84.9% of contractors had some say in their start and finish times, compared with 41.3% of employees.

But on the flip side to greater control of working hours ... long working hours are commonplace, with 23.7% of independent contractors working 49 plus hours per week, compared with 11.5% of employees. Independent contractors were almost three times more likely than employees to work 6 or 7 days per week.

There was a close to even split with just slightly more than half of contractors working on one contract at the time of the survey with just under half working on multiple contracts.  Almost two-thirds reported being able to contract or sub-contract out their work to others if needed or desired.

The vast majority of independent contractors are going it alone, with around 80% not having any employees.

Implications

People engaged in non-standard and/or non-traditional work represent a significant proportion of Australia’s working population.  While the proportion of independent contractors has plateaued after a small decline, it could be argued that this trend will soon reverse, as economic conditions improve and more people reach the age at which contracting becomes an attractive proposition.

Many mid-career workers in particular are choosing to work beyond the traditional employment model. Perhaps this is because they have established their career, they have some financial security behind them, and in many cases are seeking flexible work to assist with parental responsibilities or pursuit of other interests.  

For mature workers, contracting is increasingly becoming the means by which they continue to work, but on their own terms. Anecdotally, younger workers increasingly desire to move away from traditional employment models but may lack the financial stability and experience to do so in greater numbers.

These trends have implications for employers in getting work done by using the right mix of employment models that suit their business best.  This includes engaging full-time employees, part-time employees, casuals, fixed term employees, flexible working arrangements, teleworking, use of contractors and consultants, and outsourcing.  

Organisations who want to engage the best talent to achieve specific results will need to look beyond those working under a traditional employer-employee model and find ways to effectively source and manage these forms of work.

Do your HR team and other line managers have the skills and knowledge to manage such a workforce and does your infrastructure support it?

For those working in or contemplating a move to independent contracting, while there are many benefits such as generally more autonomy and flexibility of work, beware the demands that this form of employment can have on your time - as highlighted by the many contractors working long hours and across the entire week.

Non-traditional forms of employment are here stay. How is your organisation meeting the challenges and opportunities that this trend presents?  How does this fit with your career and life plans?

For more information please see the ABS’s summary at:

http://www.abs.gov.au/ausstats/abs@.nsf/Latestproducts/6359.0Main%20Features3November%202013?opendocument&tabname=Summary&prodno=6359.0&issue=November%202013&num=&view=