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Six ways contractors and freelancers boost the construction sector

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It’s no secret that contractors and freelancers form a significant part of the construction industry workforce in terms of numbers.

Now a fascinating study has highlighted the vital role played by contract construction workers and their invaluable contribution to the sector.

The research, conducted by the Centre for Research on Self-Employment (CRSE), found that contractors and freelancers working in construction are highly skilled and typically earn more than permanent employees.

As the report states:

The results debunk the myth that freelancers are the most vulnerable, lowest-paid workers in the construction industry.

Contractors and freelancers in construction – six benefits to the industry

The research found that contractors and freelancers add value to the construction industry and wider economy in six main ways:

1) Boosting productivity

By using freelancers instead of employees for specialist functions, businesses can avoid idle, unused labour downtime. This leads to labour cost savings of 27% – 86% per project. Savings are greatest when the labour needed is both short-term and highly specialised. In these situations, using employees would be too slow and involve excessive downtime, thus creating excess overhead costs.

2) Increasing output

Engaging contractors allows businesses to use a ‘pay per project or task’ variable cost model, helping them to de-risk construction ventures. This also enhances the expected return on investment and thus increases total industry output.

3) Minimising risk

The use of contract and temporary labour makes finance for construction projects cheaper and easier to find by allowing businesses to de-risk their projects. This adds a further boost to the industry’s economic activity.

4) Driving competition and innovation

Contractors and freelancers help the construction industry adopt lean entrepreneurship management techniques. These allow lower fixed and sunk capital costs for each building project. They also make firms of all sizes much more agile and flexible. This allows small and medium-sized enterprises (SMEs) to compete with larger firms (because if there are freelancers available, there is no need to have a large internal employee workforce to cover a diverse range of labour skills). Overall, contractors promote a more competitive, high-performance industry, which improves choice, quality and price for consumers.

5) Managing supply and demand

The use of non-permanent workers helps businesses manage fluctuations in demand, thus encouraging them to grow when market demand is above average – and reducing business failures when market demand falls below expectation.

6) Making costs more predictable

Utilising contract labour allows firms to pay for output rather than input. This can make building project costs more predictable and mean that fewer managerial resources are needed to monitor labour productivity. Paying based on output instead of according to hours worked can also boost productivity by aligning the interests of the worker and the firm more tightly.

How freelancers underpin the construction industry

The CRSE research shows just how important contractors and freelancers are to the construction industry.

The think-tank states that:

Through their unique economic function, freelancers both underpin and enable the entire construction industry’s business model.

One key finding is that, without freelancers’ contribution, the construction industry would be smaller and would hire fewer workers. The report concludes:

Genuine freelancers play a pivotal role in promoting economic performance in the construction industry. They are not entrepreneurs, but enable entrepreneurship, and their unique contribution must be recognised and valued.

Hear, hear!

Get the report

The report, entitled The Economic Role of Freelance Workers in the Construction Industry, can be downloaded here.

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