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Contractors boost productivity, generating almost £5,000 more per employee

Contractors key to boosting productivity and creating jobs

Firms that have at least 11% of their workforce as contractors are more productive businesses, with each employee generating on average an extra £4,669 for their organisation, a study by Trinity Business School and the University of Derby has found.

In turn, this creates new jobs, helping aid the UK’s economic recovery. According to the research, firms hiring freelancers and contractors above the 11% threshold created 914,400 new jobs. This equates to 1.2 additional new roles per firm.

Contractors bring expertise and innovation

Marc Cowling, co-author of the report and Business Economics professor at the University of Derby, said: “Our research was the first to debunk the view that freelancers are cheap, low value workers who cause job losses by replacing core employees. Rather we found they add specialist skills and expertise that create value and profit and allow firms to increase their core workforce as they accelerate their growth.”

Professor Andrew Burke, of Trinity Business School, added: “This view overlooks a different type of freelancer who works in sync with employees but brings expertise and innovation not available within firms and on a swift basis, thereby enabling these businesses to innovate, grow faster and ultimately create more employee jobs.”

Previous research has shown that companies who engage freelancers to grow and innovate contributed to the economic recovery following the 2008 financial crash. An increasing number of studies, including a recent report by REC, show that freelancers and contractors will be key to this recovery too. They offer businesses vital skills and flexibility that will enable them to grow and recover in a post-COVID-19 era.

Looming IR35 reform must not deter businesses

However, uncertainty over firms’ continued use of contractors due to the IR35 reforms coming in next year must not deter businesses from hiring freelancers, warns IR35 specialist Qdos.

Seb Maley, CEO at Qdos, said: “We welcome the research that demonstrates freelancers and contractors stimulate growth and create new jobs. Independent workers offer a cost-effective way for businesses to gain access to key skills they need to recover and grow following the pandemic. 

“It’s no secret that looming IR35 reform has made many businesses that engage contractors anxious. IR35 is a complex legislation but the changes mustn’t dictate how businesses engage these workers – they are vital to our economic recovery and this timely report shows us exactly that.”

By Contractor Weekly

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2 thoughts on “Contractors boost productivity, generating almost £5,000 more per employee”

  1. Geoff

    So, a business making £100k a year with 2 employees makes £50k per employee. If one of the employees were instead a contractor it would make £100k per employee.

    How much do these academics make? I would like to get on that gravy train.

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