The End of Employees

Donovan Tinsley gets up in the morning at 7:00 AM and makes his morning coffee. He then wakes his children up and helps get them ready for school. His children leave the house around 8:20 AM for school. Donovan then puts his shirt and tie on. By 8:35 AM, he is at work in downtown Atlanta, reporting to duty for a Fortune 1000 company.

What is his secret?

For the last three years, Donovan has been working as a contractor, performing his duties remotely from the comfort of his home office.

Millions of American workers, and undoubtedly many more around the world, are no longer employees in the traditional sense. Instead, they are independent contractors. They perform the same function as employees do, except that they are not on that company’s payroll. Some do work in the company’s office alongside employees. Many, however, also work remotely like Donovan. Working as contractors comes with its perks and perils. In the United States, health insurance is often tied to employment. Contractors who are working independently must fend for themselves for health insurance. On the up side, contractors, especially those who work remotely, enjoy tremendous flexibility and are immune to the grinds of the daily commute.

What is the benefit to employers? Employers enjoy greater flexibility, as well. By outsourcing a part of their workforce, employers have greater budgetary discretions. Employee salaries, government taxes, unemployment insurance, health insurance benefits, and other employee benefits may not come into the picture when working with contractors. Employers are better able to expand or contract their workforce in response to market conditions and company’s financial performance.

Employers who contract workers on a remote basis also enjoy the benefit of drawing talent from a more diverse pool of workers. And by taking advantage of the global workforce, employers can reap the benefits of having greater coverage, increased productivity, and sometimes reducing labor costs.

Virgin America boasts the airline industry’s best revenue per employee metric, as Virgin Airline outsources many of its non-client facing functions such as baggage handling and catering to contractors, according to a Wall Street Journal article.

Working with contractors, of course, comes with its challenges. The labor laws governing employee and contractor classification vary from domicile to domicile.

Accenture even predicts that by 2026, a large company in the world will have no employees at all outside of the C-suite.

With labor costs often constituting many companies’ largest expense line, this trend towards outsourcing is going to continue. 

Steve Chu is the President of Treehouse Strategy, a management consulting company specializing in international growth and #growthhack.

Treehouse Strategy also provides outsourcing and managed services solutions to companies seeking to reap the benefits of globalization to gain a competitive advantage.

Steve is an entrepreneur, China watcher, author, and a frequent speaker in international conferences. He is passionate about #growthhacking, business model innovation, and international marketing. 

Contact him at [email protected] or @TreehouseG11N