Contingent Shift-based Workforce in The UK: Understanding Macro Trends and Implications

The contingent shift-based workforce has consolidated its position as a key pillar in the UK’s labor market. According to a report, the number of temporary workers in the UK touched 1.43 million in April 2024, with steady growth witnessed over the years. Furthermore, data suggests that most organizations report having one-fifth of their workforce as flexible employees. What’s led to these shifting sands towards a more fluid workforce model?

In this blog, we’ll deconstruct the larger macro trends that have been driving the growth of contingent workers in the UK. We shall also explore the implication of this for businesses and touch upon where technology application can transform the ease and efficiency of managing a fluid workforce. 

What are the macro trends shaping the growth of the contingent workforce?

The surging demand for contingent shift-based workers is shaped by the following macro trends:

• Rising economic uncertainty: Economic uncertainty has been amplified over the past few years due to occurrences like Brexit, the COVID-19 pandemic, and geo-political tensions. With that, the fluctuating global markets have impacted business and growth. According to the Office for National Statistics (ONS), the UK's GDP growth in 2023 is estimated at 0.1%, a stark slowdown from the 4.3% increase in 2022, marking the weakest annual growth since the 2009 financial crisis. In times of such uncertainty, a natural repercussion of turning more towards hiring contingent workers has emerged to manage the fluctuating market demand.

• Shortage of workers due to demographic shifts: Labor markets have been experiencing massive worker shortages driven by demographic shifts. The pandemic had exacerbated this issue further in the UK, where a large proportion of workers over 50 exited from the workforce. This aging population is also impacting the future labor markets, creating production challenges and affecting investment plans due to the lack of skilled staff. Data projections from PwC suggest that skills shortages can potentially cost companies trillions in unrealized annual revenues by 2030. In reality, organizations are feeding this gap by turning to contingent shift-based workers.

• Changing millennial workforce preferences: The millennial working population is revealing evolving preferences to how they want to approach work. They’re increasingly prioritizing flexibility and work-life balance which has led to the growth of the part-time and gig workers. The gig economy’s contribution has risen to £20bn in the UK economy. According to another report, temporary employment placement has consolidated its position among the top four employment industries in the UK, which explains the growing trend.

• Technological advancements: Technology is advancing rapidly and has been introducing ease in hiring, managing, and coordinating temporary workers. For example, AI-driven tools are simplifying optimized temporary workforce deployment with unmatched ease. Software platforms are enabling seamless scheduling and payroll management for shift-based employees. This convenience is also leading to increased adoption of contingent workforces for its benefits in improving flexibility, scalability and cost-efficiency for organizations.

• Regulatory changes: Legislative and regulatory changes are influencing the shifting preference towards the contingent workforce. Ever since the IR35 reforms were introduced in the UK to ensure contractors pay taxes in a manner similar to full time employees, it has become more challenging to hire contractors through personal service companies. As a result, many businesses are opting for temporary staffing solutions like contingent shift-based workers to fill up vacant positions. 

• Industry-specific nuances: Specific industries, like healthcare and retail, are witnessing bouts of high demand for contingent workers due to their changing operational needs. For example, healthcare institutions were battling with staff shortages and fluctuating patient care demands during health emergencies. This led them to seek temporary shift-based workers to continue service provision smoothly. The National Health Service (NHS) reported paying £10bn on temporary staff, highlighting the critical role of contingent workers in maintaining service levels. This is also occurring in industries like retail, warehousing, and logistics during peak seasons, redefining the rise of preference for contingent workers.

What are the implications of turning to a contingent workforce for businesses?

• Cost savings and flexibility: Relying on contingent workers opens business opportunities for optimizing labor costs by reducing fixed expenses during fluctuating demand or projects. However, this necessitates managing talent well. According to a study by Forrester Consulting, with the support of a comprehensive workforce management platform, businesses can achieve a 366% return on investment (ROI) through cost savings and operational efficiencies​​ when hiring contingent workers. Companies using Magnit’s solutions have 99% of contingent workers with positive experiences who drive increased productivity and reduced turnover. 

• Quick access to specialized skills: Leveraging contingent workers unlocks access to a broader pool of talent with specialized skills and expertise for businesses. This is without undergoing the lengthy hiring processes associated with permanent staff.
  
  Using the support of dependable contingent workforce management platforms can make it easy to hire skilled workers and staffing partners. For instance, being able to leverage a vendor-neutral MSP's relationship with thousands of recruitment agencies gives access to an expansive talent pool, while AI technology facilitates the ability to streamline the hiring process..

• Challenges in workforce integration and management: Contingent workers, due to their temporary nature, have a tendency to feel less connected to the organization and its values. This impacts teamwork and collaboration. On the management side, there can also be challenges in predicting their needs timely or navigating managerial aspects like attendance, pay rates, and invoicing.
  
  Overcoming these requires exploring robust workforce management systems and processes. This can propel better visibility of workers' needs and expectations and support better management. Technology can help gain control over contingent labor management programs and drive better decision-making around aspects like talent sourcing, quality, integrations, shift-scheduling and optimization. 

• Compliance and legal complexities: When hiring contingent workers, complying with labor laws and regulations is essential. For instance, classifying workers and managing contracts at scale appropriately is important to avoid legal issues. 

To tackle these complexities, leverage AI-powered technology to ensure continuous monitoring and incident reporting and reduce the risk of human error.  Outside of the technology factor, ensure that you complete regular audits of agency suppliers and keep up-to-date with changing regulatory requirements with the help of a trusted third-party partner. 

Bottom Line: Contingent shift-based workforce can boost business outcomes when managed well

Broader shifts in the UK macro-environment are leading to a growth in contingent workforce adoption and reshaping the nuances of traditional workforce planning. The increased dependence on temporary workers is unfolding several benefits for businesses, provided the workforce hiring, integration, and management are smooth. 

If you want to succeed with a more dynamic workforce model, forecast accurately and tend to changing talent needs, check out this comprehensive ebook for guidance on effective contingent shift-based worker management. Download our ebook: 6 Steps to Mastering Contingent Shift Worker Management

Disclaimer: The content in this blog post is for informational purposes only and cannot be construed as specific legal advice or as a substitute for legal advice. The blog post reflects the opinion of Magnit and is not to be construed as legal solutions and positions. Contact an attorney for specific advice and guidance for specific issues or questions.