Consultants go independent for pay parity and work-life balance
While more than a quarter of workers in the US and Europe now rely on freelance work for some portion of their income, the consulting gig economy is also booming. A new study has sought to explain why a growing number of consultants are tempted to ditch life at the firm and go it alone, finding a drastically reduced gender pay-gap and more flexible working patterns to be among the key reasons for the shift.
The UK’s gig economy is expanding apace, with the country now home to more than 2 million freelancers. Surveys of workers in the US and Europe have meanwhile found that approximately 25-35% say they freelance for some portion of their work income.
While a large number of gig workers are indeed performing lower skilled and lower compensated tasks with firms such as Lyft or TaskRabbit, a sizeable portion of these are independent consultants, who buck many of the other less palatable gig economy trends, as they typically command larger fees and higher levels of experience to leverage when negotiating with clients. Indeed, recent UK research revealed that 59% of the gig economy consists of knowledge and professional services workers.
To better understand who is going independent and why, and what this might mean for companies, management consultancy Eden McCallum and London Business School worked with the Harvard Business Review to conduct an online survey. The poll took in the opinions of 307 independent consultants and 94 traditionally employed consultants in Europe and North America in the final quarter of 2018. The independent consultants in the sample are highly experienced, and approximately 75% are the main or sole household wage earner.
The questionnaire found that 90% of independents proactively chose to start independent consulting, whereas only 10% reported being forced to go independent as a result of losing their job. Adding to this, 68% said they planned to remain independent for more than three years – more than double the 32% who planned to do so when the researchers first conducted the process in 2002.
The increase has occurred despite the notable uncertainty and instability built into the independent career path. As there are no employee benefits, no mega global brand to fall back on, and career progression is less clear and tangible, the swings in workload and income can have a profound impact on independents in a way formally employed consultants would not have to worry about.
Those whose priority is security and stability will subsequently find that a traditional firm is still a better option. Nine in every ten of the consultants surveyed were found to be satisfied with their current situation, however, a higher rate of satisfaction than their employed counterparts.
This may be because independence also appears to address the problematic and persistent gender pay-gap found at traditional consulting firms. The survey found there was a 28% gender pay gap for those employed in a traditional firm, but this fell to just 3% when these same individuals were working independently. At the same time, millennials have also found they can earn at least as well (13%), or often more (79%) than those of the same age who are traditional employees.
At the same time, independents are still significantly cheaper to hire than a broader consultancy, meaning many clients are increasingly inclined to hire independents. This trend has been further pushed forward by the quality of work delivered by the professionals in question. Most are meeting their target days and earning more or at least the same as when they were employed, despite working fewer days. According to researchers, 91% of respondents also said they feel independent work offers better value for money for clients and two-thirds said their recommendations are more likely to be implemented.
As found in a previous Eden McCullum study, independent workers also feel they are doing more meaningful and more impactful work, while performing essentially the same sets of tasks as employed workers. Meanwhile, they find they have a better sense of work-life balance, which remains the top motivator leading highly skilled employees voluntarily into the world of independence.
How to compete
According to the researchers, companies now face an uphill task if they are to retain their most talented employees. In a seller’s market, where the skills of employees are in heightened demand amid an ageing population and heightened competition, it will not be long before more staff strike out on their own in the knowledge they could be happier and better paid as an independent.
The report suggests firms need to offer employees more choice and control over the work they do. At the same time, they need to more rapidly address the undervaluing of women and younger workers in their companies. Minimal parental leave, high expectations for travel, 24-7 client availability, and promotions based on “presence” rather than output all undermine women’s advancement in traditional firms. At the same time, the question for many women facing the sluggish progress of addressing the gender pay gap as their prime years of their careers ebb away is therefore rapidly shifting from “should I leave” to, “why would I stay?”
Beyond retaining talent, though, firms could also consider creating an “independent” division. Pointing to the example of PwC’s Talent Exchange, the study suggested that the firm grants some access (although not exclusive) to professionals who choose the independent path, allowing the firm participate in and experiment with this new approach to professional careers. At the same time, many traditional firms have already chosen to create a separate division to offer alumni the option to work as an independent professional, while still maintaining an association with the firm.
