Look around – how is your work changing? Are you in an office, an open-plan environment or working from a location of your choice? Have you been working in the same role, with the same team, for a long time? Are you working with different teams on different activities or projects?
From corporates to university environments to startups – from the innovative multi-disciplinary Charles Perkins Centre, University of Sydney, to PwC’s new activity based working, to the many co-working spaces across Australia – how we work is changing.
What will the employer and employee relationship look like 2, 5 or 10 years from now? How will Australia’s laws change to address the widespread changes in work practices? A key issue to address is the increase of the independent individual worker.
Our Current Laws Need to Evolve
Australia’s current employment, superannuation and tax laws impose different obligations on an employer/hirer depending on whether a worker is a permanent employee, casual employee or contractor. Even if a worker is a contractor, the hirer may be required to pay superannuation for individual contractors if the contract is principally for the individual’s labour. Our laws need to evolve, so it is clearer and easier for both the worker and the business to hire independent individual workers on a flexible or project basis.
What Does the Future of Work Look Like?
Tamara Erickson, London Business School, gave five key predictions of the future of work at the World Business Forum in Sydney earlier this year.
- Work to be organised by tasks, activities and projects, not careers and roles;
- Co-ordination of use of resources;
- Portfolio Staffing;
- Automation of knowledge work; and
- Humans to focus on discretionary effort.
We discuss these five changes below as well as the implications of these changes for our current way of working with set titles, reporting lines and compensation subject to periodic review. Employment and employment agreements of the future are likely to look and feel more like current independent contractor hiring agreements.
What Has Changed in Our Lives?
Two key recent socioeconomic changes have considerably affected our work lives, namely an increase in life expectancy and a dramatic shift from children being a financial asset to a financial liability.
For economic reasons and personal satisfaction, many people will seek to work to an older age than in the past. There will be a considerable pool of older workers, particularly in the next 20 years as the baby boomer generation reach their 60s and beyond. Ms Erickson predicts that senior workers will seek flexible, task-based work rather than long-term, full-time permanent roles.
Birth rates are also falling in all developed countries. In agrarian societies, children were a financial asset in the past as they could work and contribute from a young age. However, children in communities which rely on industry and service-based work are now a considerable financial liability. Not only are they not contributing financially, but they also require a longer period of schooling and other expenses. Ms Erickson predicts that as more countries develop, birth rates will continue to decline in these countries, and globally.
Work to be Organised by Tasks, Activities and Projects, Not Careers and Roles.
Workplace silos divide people into separate, delineated areas which may optimise output for industrial companies, but not for knowledge-based companies. Silos also do not foster innovation between areas. Ms Erickson then foresees workplaces with flexible groups that come together to focus on particular projects.
Work titles are likely to be specific and time-based. For example, an individual may lead a project, rather than be the head of a particular area. Businesses will then likely evolve to break work into projects, hire new team members and reallocate current team members to work on specific projects, rather than hire for long-term roles. Individuals may choose which projects they want to be involved in and how many at one time. This gives both the business and the individual flexibility on who is hired at any one time. Businesses can scale up the number and size of projects, or scale down, as necessary.
Performance management will be more project and task based, rather than role-based. Compensation is also likely to be tied to specific projects rather than to a long-term role.
These changes in job description and compensation have implications for our concept of awards and award wages, as awards are based on roles, not on specific projects. These changes also have an impact on the current Australian approach to employment contracts which specify a single position, title, reporting line and salary.
Ms Erickson summarised the rapid change in attitudes to work between generations as follows:
- In the past, traditional generations focused on shared values and loyalty. They joined like-minded organisations and groups and had long-term careers with one business. It was not uncommon to have the same job for their full working career.
- Baby Boomers were born into more prosperity but also a time of increased competition. The effect is that Baby Boomers are often hard-working, competitive, and goal oriented.
- Generation X has seen the breakdown of long-term careers for their parents and other senior people, including waves of redundancies due to a variety of reasons including financial crises. Members of Generation X are less trusting and more self-reliant.
- Generation Y is also more likely to be self-reliant and to seek more immediate rewards rather than far-off long-term rewards.
- Generation Y has seen the breakdown of traditional promotion paths. For example, in law or accounting, the goal of working hard to make partner after ten years has changed as the road to partnership becomes longer, more challenging and less likely.
- The current youth, known as ReGen, are well aware of a scarcity of global and local resources, from the environment to permanent roles. They are focused on building their own future.
Co-ordination of Use of Resources
In an environment with a scarcity of resources, and increasing competition, Ms Erickson predicts that businesses will continue to use their current resources more effectively, rather than just increase the resources available.
Teams will coordinate with each to determine who is using company resources at what time. Companies will increasingly consider issues such as:
- What resources do we need full time?
- What resources can we share?
- What resources do we only need part time or on an as needs basis?
- What resources do we need to own?
- What can we hire?
A key example is office space which is often a high fixed cost. We are seeing companies reduce the office space required by moving towards open plan workspaces and hot desking. We are also seeing a rapid move from staff working full-time in the office to flexibly working at a client’s office or from home, consequently reducing the office space required.
Ms Erickson predicts an increase in portfolio staffing, where a pool of individuals work as needed. She predicts that the human resource function will become more like a staffing agency, that focuses on finding and keeping flexible people, on an on-demand basis, rather than hiring and retaining a large pool of full-time employees.
Hiring is traditionally considered a labour intensive role. The rise in online job sites has decreased the cost and time required to locate candidates. The growth in remote work also means that there are more candidates available, as geographical proximity to the office does not limit their capacity to work.
Businesses will need a strong employment brand to attract great people, and great managers will resemble teachers – focusing on what skills the team needs and how individuals can develop those skills.
Automation of Knowledge Work
Ms Erickson predicts that artificial intelligence will take over much of the data work that human analysts currently perform. Watson, the AI oncology robot IBM created, assists oncologists by analysing a patient’s medical information against data and expertise to provide evidence-based treatment options.
McKinsey & Company’s research on the automation of knowledge work to date suggests that a focus on automation of entire occupations is misleading. They consider that few occupations will be automated in their entirety in the near or medium term. Rather, certain activities may become automated requiring the transformation of entire business processes and the jobs people perform. They provide the example of how ATMs have redefined a bank teller’s job.
What are the Implications for Labour Laws?
A traditional employment relationship is based on a clearly articulated and fixed employment relationship: role, title, a set reporting line and a set salary with performance and salary reviews. Labour laws and hiring arrangements need to adapt to challenges including:
- People working from remote locations, which has implications for supervision, performance management and occupational health and safety;
- Short term roles and fast turn-over which affect how we hire, describe roles and measure and reward performance; and
- The legal distinction between employees and independent contractors becomes less clear and less relevant if many more people work flexibly and on a project basis.
Businesses That Will Excel
Businesses that will excel include those that can generate bright people with the right value and cultural fit. This requires businesses to identify and explain company values and answer clearly, “what does it mean to work here?” They must also teach individuals what they want to learn as well as help workers build relationships to foster innovation.
Australia’s current employment laws draw a clear distinction between employees on the one hand and independent contractors on the other. Traditionally employees receive a salary, superannuation, leave, were fully covered by the employer’s insurance and had a notice period on termination. Independent contractors were traditionally paid by the project and did not receive a salary, superannuation, leave nor notice.
These traditional distinctions are breaking down. We need laws that more clearly recognise the independent individual worker, so there is legal certainty for both parties, including:
- An obligation to pay superannuation for the worker;
- An obligation to pay PAYG tax per relevant thresholds;
- The flexibility to change a team member’s role based on the project; and
- The ability to terminate a role at the end of the agreed project, without cause or fault.
If you need assistance navigating through Australia’s current employment laws, get in touch with our employment law team on 1300 544 755. Or, let us know what you think about the future of work on LegalVision’s Twitter page.
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