Starting with the “Great Recession” of 2008 there have been some dramatic shifts in the workforce that will continue into 2017 -- none more prominent than companies hiring people on a consulting vs. full-time basis.
From a company’s perspective this is the classic “We’ll hire you on contract for six (6) months, and given good performance, we may be able to offer you full-time employment.” While this approach is nothing new for companies and job hunters, it takes on a whole new meaning in our current work environment.
A New Era for Independent Consultants
So what’s changed since 2008? As both an HR professional and career coach who’s worked with numerous people who’ve lost their jobs during this period I’ve observed two significant trends:
Starting with the 2008 recession, and the many layoffs that followed, companies learned to cope with less staff, and are not in a rush to fill new jobs now that the job market has shown signs of loosening up. It’s the old “We can do as much with a smaller staff.” The problem here is that as markets improve overworked staffers who retained their jobs leave for better opportunities.
Being in a “buyers’ market” companies have the luxury of looking for the “ideal candidate” to fill their full-time positions. The problem here is there are no ideal candidates, yet companies and their HR departments continue to look for the elusive unicorn. I discuss this trend more fully in my blog “There is No Ideal Candidate.”
Given companies’ challenge in retaining current employees (retention being of chief concern to HR departments) yet holding out for the ideal candidates to fill new openings, they have chosen to take on new hires on a consulting basis (1099 tax classification) vs. as full-time employees (W-2 tax classification). While beneficial to the company (as least in the short term) not so for the new hire.
So, what is the difference between companies hiring people as a consultant before the 2008 recession and in our current job market? Prior to 2008, and especially during boom periods in our economy, companies would hire consultants to work on specific projects, initiatives, training programs, and for IT professionals, when doing major upgrades to their IT systems. One can recall the many consulting opportunities for IT professionals during Y2K!
As a consultant you were hired to work on specific initiatives based on your particular expertise. These initiatives or projects were of a specific duration, and provided complementary help to a company’s full-time staff. You were essentially told by the company’s management what needed to be done but not how to do it – the “how” resting on your expertise and professionalism in getting the job done. This is also an important legal distinction under U.S. labor laws as to how companies classify their employees.
The shift I’m now seeing is that many companies are not making this distinction in hiring consultants (i.e., addressing what needs to be done) vs. telling a consultant how to do the job, the latter often including very specific steps as to how the job should be completed. In short, they’re treating consultants as full-time employees, except without the benefits that go with full-time employment. What’s important to know here is that if you’re being hired as a consultant you know exactly the terms and conditions of the assignment, and that it’s clear to the company that you’re being hired based on your particular skills, areas of expertise, and past work accomplishments in using your best judgement in meeting the company’s needs. Of course, in the real world these distinctions are not always clear, so caveat emptor.
In short, the job market will unlikely show any immediate changes in how companies hire people in this current work environment, and this may be a more “permanent” shift in how companies employ people going forward (I use the word “permanent” carefully since nothing is really permanent – least of all when it comes to employment). It really requires on your part, if looking for a new job or switching careers, to expect companies to make you an offer on a consulting basis with some vague promise of full-time employment. Most of all, it requires you, the new hire, to have the true mindset of a consultant in accepting the offer!