How HR professionals can maintain a balanced workforce
Employment trends have altered significantly in recent years, with companies becoming increasingly reliant on contractors.
The global economic downturn prompted many firms to hire people on a short-term basis, as they became more averse to bringing in permanent employees. In many ways, contractors are a more cost-effective option because companies only have to pay one fee and do not have to cover holiday or sickness pay. Contractors tend to provide greater levels of flexibility and can make an instant impact within a business, whereas permanent employees may require a lot of training and guidance.
Many businesses have a blend of permanent workers and contractors and it is down to the HR department to strike the right balance. It is important for companies to weigh up the cost implications of employing mixed teams and this could prove to be one of the biggest challenges facing HR specialists across Europe in 2014.
Workers to earn more in 2014?
According to Eurostat figures, the eurozone economy expanded modestly towards the end of 2013 and it seems more businesses were in a position to add new members to their teams.
With business activity beginning to improve, companies have started to increase their rates of pay. Wages and salaries per hour worked rose by 1.3 per cent across the eurozone in the year leading up to the third quarter of 2013. This figure stood at 1.2 per cent when taking all 28 EU member states into account.
On a sector-by-sector basis, it appears that employees in the manufacturing and industrial sector have seen their remuneration packages increase the most in recent months. Eurostat confirmed that overall labour costs - which includes wages and non-salary expenses - rose by 1.6 per cent in the 12 months leading up to the third quarter.
There was also a one per cent upturn in pay for workers in the services industry and non-business sector (non-profit organisations), while construction companies reported a 0.2 per cent downturn in the amount of money they paid to employees over the same period.
A new report published by financial industry specialist Markit showed that the eurozone's composite output gathered pace towards the end of last year, with the index posting a score of 52.1. Any reading above 50 represents growth in the private sector economy.
Chris Williamson, Chief Economist at Markit, said "stronger growth looks likely for the first quarter of 2014" and increasing consumer confidence should have a positive impact on the labour market.
He commented: "Most importantly, the labour market stabilised in December, ending a period of falling employment that lasted nearly two years. With inflows of new work accelerating, a return to jobs growth should be seen in 2014.
"The revival in consumer confidence that should result from the labour market improvement should provide an all-important boost to the economy in 2014."
What impact will this have on staff procurement?
While it is always encouraging to see the economy performing well, HR departments will have to think more carefully about how they manage their labour budgets as their companies' fortunes continue to improve.
Firms may be tempted to hire new staff on permanent contracts, but this is not always advisable. Many businesses, particularly in the manufacturing industry, were forced to scale down their workforces during the recessionary years, as their order books became more sparse.
To avoid a repeat of the mass redundancies that were reported in 2008-09 in many European countries, it makes sense for employers to maintain their current approach of hiring talented professionals as and when they need them. As mentioned, contractors will naturally cost a company more money in the short-term, but they do not have to worry about offering them employee benefits provisions and firms are not left with an unsustainably large workforce if orders suddenly fall.
In certain sectors - most notably IT and telecommunications - it is far more practical for firms to bring in an interim manager who can oversee short, one-off projects, before moving on to something new. This is a trend that has developed in Europe in recent years and is likely to continue into 2014 and beyond.
Not only does this strategy provide cost benefits, it can also help a business to significantly improve its performance. Somebody coming in from the outside will be better placed to offer a fresh perspective on how a company can grow and they can call on their experience in other organisations when making positive changes.
While talented contractors have become a vital component of any successful business, it is important that freelancers are complemented by a solid permanent workforce.
Some of Europe's most prosperous organisations have a pool of full-time employees working in harmony with contractors. Firms in certain sectors have found it difficult to find highly skilled youngsters who they can nurture and develop over time. This often means that more training and supervision is required, which can come at great cost - hence the growing demand for contractors who can hit the ground running.
The European Commission is keen to tackle this issue and is placing more emphasis on apprenticeships and greater incentives for young people to study vocational subjects at university. This is an area where Germany - which is renowned for its engineering and manufacturing excellence - tends to lead the way.
In a recent interview with Euractiv, James Calleja - director of the EU agency Cedefop - suggested that some EU member states are performing far better than others when it comes to providing youngsters with key tools and experience that will benefit employers in the long run.
He was quoted as saying: "In reality, different member states are cruising at different speeds. Some are still on the runway and require more assistance.
"We are entering into a whole critical discussion on whether universities should open up to all applicants in different courses and we have to strike a balance between the needs of young people on the one hand and labour market needs on the other."
Mr Calleja added that the IT sector is a particular cause for concern at the moment, as firms are struggling to hire enough people with the necessary expertise to develop and adopt new technology.
"One of the key fields here is IT. We need more people to solve problems through IT and people who have done work experience are more attracted to learn such skills," he continued.
So, while it is tempting for HR professionals to rely heavily on contractors to fill vacant roles within their business, it also makes sense to build a permanent infrastructure that can help to ensure greater continuity in the long-term.
Conclusion - How to strike the right balance
There is no doubt that talented contractors can provide a huge amount of value to businesses - particularly in sectors such as IT and engineering.
It is important that HR specialists continue to maintain a firm grip on who they are hiring, how long their contract is for and how they will fit into the company alongside permanent workers. With the eurozone economy starting to grow, organisations are likely to expand their workforces in the coming months and it is crucial that HR departments plan their hiring policies carefully.
Using the IT sector as an example, a company may need somebody to oversee the introduction of a new customer relationship management system - something that technology research specialist Gartner predicts will become more popular in 2014 - that can be used across an entire business. It is up to the HR team to decide whether it is more cost-effective to bring in an external contractor for the duration of the project or to appoint somebody in-house.
It usually makes more sense to opt for the former, as the firm can select a talented professional who has a good track record of successfully integrating new technology into enterprises. While they are likely to demand higher pay, you do not need to cover the cost of training and the project is likely to run more smoothly if an experienced person is in charge. This is an important consideration, as mistakes can lead to delays and downtime, which can be very costly.
Companies should try to put measures in place now to ensure full-time employees of the future are better equipped to complete important projects of this nature. The European Commission wants to see more youngsters studying vocational subjects and also believes firms will benefit in the long run from offering more apprenticeships.
The most successful firms - regardless of their line of work - will have a good balance of talented full-time workers and highly-skilled contractors working in tandem.