Employment Models: Moving the Cheese

Recently, social media has been rife with news of businesses that are downsizing or closing shop, including Victoria’s Secret (UK, USA, Canada) and Shoprite (Kenya). Those enterprises that will weather the economic storm caused by the COVID-19 pandemic will need to reduce their expenses in order to remain afloat. Predictably, one of the focus areas will be ‘Salaries and Wages’ which is a heavy expense item.

Though employees are the backbone of many businesses, especially those that are not automated, employers of struggling businesses will of necessity embark on a balancing act between goods/service delivery and cost mitigation. Beyond embracing technology, they will need to develop ingenious employment models that are cost effective, legal and functional.

We have discussed some of these options below.

Consultants

While employees render a range of services to the employer over a period of time, consultants are hired to perform a particular service.

Employees are controlled by the employer, guided on how to perform their duties and their equipment is usually provided at the workplace. On the other hand, consultants are informed about the deliverables and they then determine how to do the job and for how long. They usually use their own tools and equipment. An employee is paid on a regular basis e.g. monthly while a consultant receives a bulk payment (usually one-off). A receptionist and a plumber are examples of an employee and a consultant respectively.

Currently, consultancy services are offered by professionals like specialized doctors serving hospitals, or external advocates and engineers serving corporate institutions. Technicians like electricians and plumbers also fit within this category while security services are outsourced to specialized firms.

With the changing times, the known range of consultants may expand to include:

1. Accountants offering bookkeeping services and making statutory payments at the end of the month (1-2 days each month);
2. Teachers who are hired, retained and remunerated depending on their students’ performance;
3. Human resource personnel supporting a business on a quarterly basis;
4. Information technology experts contracted on a need-basis; and
5. The list goes on…

Fixed Term Contracts

Under fixed term contracts, employees are engaged for a specified period of time e.g. 6 months, two years, etc with or without an option for automatic renewal. Under such terms, the employer is spared from the rigorous requirements relating to termination of permanent employees.

Such contracts would be applicable where employers anticipate the need for particular services during a specific period. A good example would be an audit firm with a large portfolio of clients requiring audit services between January and June each year. The firm can opt to hire auditors on 6-month contracts each year, instead of retaining permanent employees who are not busy for half of the year.

Project Employees

An employer may compartmentalize their business into projects, and engage employees to work on those projects. The employee’s term of employment is tied to the life of the project. Upon completion of the project, the employment relationship ceases.

Examples are:

1. A hospital responding to an epidemic can hire doctors to specifically handle the epidemic;
2. A law firm can hire real estate lawyers to handle 500 leases for a newly built office block;
3. A contractor who has won a tender to construct a gated estate can engage workers to build that particular estate.

Seasonal Employees

The demand for certain jobs is dependent on seasons, especially in the agricultural and tourism sectors. During peak seasons, employees may be hired to handle the extra work with the understanding that employment will terminate at the close of the season.

Examples include additional employees who are hired by hotels to serve guests over Christmas, or extra farm hands recruited during the harvesting season.

Pros and Cons

Employers can reduce permanent employees to an optimum, and engage part-time workers on a need basis under the employment models discussed above.

The advantages enjoyed by employers in engaging part-time workers are:

1. Fewer obligations especially regarding compliance with employee termination procedures;
2. Lower employment-related costs e.g. salaries, pensions, gratuity, annual and maternity leave, etc;
3. Better performance at the workplace as part-time employees/consultants will outdo themselves so as to secure future jobs;
4. Opening up of opportunities to more people and increased flexibility, creates vibrancy at the workplace.

Some of the disadvantages that employers should mitigate include:

1. Reduction in business stability due to increased turnover of workers;
2. Compromised privacy and confidentiality within the business;
3. Increased need for goal setting, monitoring and evaluation tools.

Conclusion

As employers consider the different employment models, it is important to note that different economic sectors have their sector specific requirements. Before contracting with part-time employees/consultants, employers should seek legal advice to avoid flouting relevant guidelines and regulations, and to receive ongoing support in case of change in legislation. For this, we can be reached on legal@pckamunya.co.ke

The only constant thing is change, and especially so during these uncertain times. Consequently, employers should not hesitate to move the cheese if in so doing they will navigate safely out of the stormy seas.

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