On the outside, it may appear that financial services is a bastion of well paid, permanent employment, with scarcely a zero hours contract in sight. Indeed, it seems a million miles away from the gig economy world of Deliveroo and Uber. But, financial services is facing disruption from various fronts and one of these could well be employment. So, what are the potential risks involved and how can risk managers ensure these are managed from the outset?
Non-permanent can be a positive
Firstly, there are a number of reasons why having a portion of the workforce on flexible terms can be a positive. For an insurer, for example, they may want to have staff on stand-by when they have a surge in claims, such as after a severe storm or flooding. Companies may also find it makes sense to use staff at all levels and pay scales on an occasional basis, whether they work in catering, as drivers, or in IT, for example. With the rise of the lean fintech sector, all businesses need to look at their labour costs – and gig economy workers often cost less.
They are not always cut price though - in a number of business critical sectors, there is a shortage of talent and IT roles – such as data science - are a prime example. What is more, given that Brexit is likely to make shortages of employees in many areas more commonplace, the employment dice will become loaded more heavily in favour of workers.
Gig working can certainly suit some and figures from the Office of National Statistics released this June show that over the last decade, the number of self-employed workers in the UK has risen from 3.8 million to almost 4.7 million. Last year, the number increase by 174,000 and currently, some 15% of the UK workforce is now self-employed.
Numbers may grow yet further as consultant Mercer found in its 2017 Global Talent Trends Study that the majority of full-time employees (77%) said they would consider working on a contingent or contract basis.
While employment protocol is primarily managed by HR, there can also be broader risks where risk managers will want to provide input. These include:
- Financial risk - staying abreast of the changing legal situation, such as the recent Uber employment tribunal that found a group of drivers should be classified, as ‘workers’ meaning they should be entitled to holidays and sick pay. There is a gradual ‘creep’ towards better worker protection and this is likely to raise costs for employers – and could even mean allowing access to auto-enrolment for a pension in the future
- Cyber is a huge risk facing all businesses. Risk managers should keep a close eye on staffing within IT departments and for project teams. It often makes sense to bring in contract and freelance staff where particular expertise is required but often only for a limited time. However, cyber breaches can be more likely if someone has not been subject to training and at worst, there may be a risk of data theft. Clearly, this can also be a risk with a permanent employee, but working on a short-term basis should be subject to checks and scrutiny
- Enterprise wide – an increase in non-permanent staff, whether on full contracts or not is only going to increase in all areas, including risk management and compliance. Research from Manpower found that two thirds of millennials think the ‘right’ length of time stay in a role before being promoted or moving to another organisation is less than two years – a quarter say they think it should be 12 months
The gig economy has its critics, but it is expanding with growing numbers of people opting for this way of working – there are both rewards for both employers and employees and a range of new risks also to be managed.