Will The Current Economic Climate Increase Demand For Contractors?

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According to Vincente Cuñat (Finance Lecturer, London School of Economics) firms will begin to offer more short fixed-term contracts rather than permanent jobs in the current economic climate.  This will allow firms to save money in the short term as well as using them as a true flexible resource, thus making it easy to let these contractors go when needed, or as projects are completed.

Organisations may be forced to reduce numbers but as we have seen with BT recently, this can affect both permanent employees and contract staff. However, many companies will undoubtedly feel less convinced about investing in the positive attributes of permanent employees verses being able to fulfil their business needs through contract flexible resources. Utilising contractors efficiently can underpin effective delivery without the need to maintain the salaries of permanent individuals that may be ‘sat on the bench’ for periods of time and therefore raising the cost of delivering a project. Conversely, contractors or consultants can be ‘wheeled in’ at very short notice and equally, dispensed with, also at very short notice but without financial penalty and thus, maintaining the profit margin for a given project.

Mr Cuñat said “Financing constraints tilt the balance towards a higher use of fixed-term contracts” speaking ahead of the launch of his research paper, Financing constraints and fixed-term Employment Contracts.

Cuñat added,  ”At the beginning of a downturn firms unable to access external finance reduce employment much faster than financially unconstrained firms, both because they are forced to cut wages to avoid insolvency, and because they employ a higher fraction of fixed term workers who can be dismissed without cost.”