Here is a snap shot of CXC’s latest Contingent Workforce Salary Benchmark Report, taking a look at some trends in contractor pay rates and the phenomenon of that’s been labelled the great resignation.
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In 2020, Texas A&M University’s Anthony Klotz gave a name to the growing segment of the workforce that was quitting en masse.
Dubbed ‘the great resignation’, Klotz predicted that workers quitting their jobs would peak in 2020 due to the COVID-19 pandemic. In the US, that prediction eventuated, with resignation rates increasing by .5% in 2020 – the biggest jump on record. The movement has since expanded beyond the pandemic, encapsulating general dissatisfaction with working conditions.
Has the same thing happened in Australia? According to LinkedIn, in October 2020, 26% more workers moved to a different company compared to the same time in 2019.
On the other hand, according to the ABS, in 2021 only 7.5% of employed people changed jobs – the lowest rate on record.
Despite many employees hunkering down in their job during the pandemic, one thing’s for certain. Employers are still experiencing a talent shortage for critical niche roles. According to Ai Group, 73% of Australian companies expect they will find it difficult to source and retain skilled workers in 2022.
CXC closely monitors our client’s contractor workforces, and keeps track of significant movements around resignations, terminations and contract end dates. This has been particularly beneficial to our clients during the turbulence of the last three years.
For us to be concerned about a grand exodus of contractors, we would need to see significant instability of our contractor workforce. The turnover of our contractor for the last three years was:
Halfway through 2022, we’ve seen a small .26% of contractor turnover.
As you can see, 2019 and 2020 were periods of significant churn of our contractor workforce. 2021, on the other hand, has seen surprising stability.
Below, we compare this data with ABS statistics on job mobility, which looks at the percentage of employed people who changed employers.
Apart from 2020, our contractor workforce has been more stable than the wider Australian workforce.
We delved further into the data, in an effort to determine:
- The effects of COVID-19 on contractor offboarding.
- How resignations have been affected during this time period.
- If clients are incentivising contractors to remain in their business, either through pay, training, flexible working arrangements or a permanent placement.
- Whether there continues to be a talent shortage in 2021, despite high retention of contractors.
Firstly, we need to highlight the various ways contractors leave their roles. Below are the reasons we capture for a contractor departing:
- Early termination – In these instances, contractors are terminated either with cause (in cases of breaching policies) or without cause (usually because a project has finished early). For the purposes of this report, we’ve grouped both with and without cause together. Specific reasons captured include:
- Breach of client or CXC policies.
- Performance issues.
- Budget constraints.
- The contractor being not suitable for the role.
- The project being cancelled, or their services not being required anymore.
- The scope of their role has changed.
- Natural finisher – This simply means that the worker’s contract has come to an end, and they have not been renewed.
- Made permanent – Should the client wish to continue to engage the worker’s skills in their current role, they often opt to employ the worker on a full-time basis.
- Put on a fixed or max term contract – When a worker reaches the end of their contract, some organisations put them on a maximum term contract, where they are providing a worker with full-time employment benefits while still having a contract end date.
- Resignation – The contractor chooses to leave before their end date. We capture when a contractor leaves because:
- They found a new role.
- Personal reasons.
- They were unsatisfied with the role.
- Change of tax structure – In a few circumstances, a contractor may change the way they are set up for tax; for instance, changing from a PAYG contractor to a Pty Ltd.
As shown by the tenure of our workforce, a significant number of contractors were leaving their contracts in 2019 and 2020. However, the reasons why they left changed significantly over the last three years. Below, in figure 16, we look at these reasons as a percentage of the total contractors who left.
Generally, when contractors leave it’s usually because their contract comes to an end. We can see this was the most significant reason for a contractor leaving in 2020 at 46.36%, when many organisations were tightening their belt buckles during COVID-19. In 2020, 73.77% of contractors that were terminated early were done so because the project they were working on was cancelled. Compare this to 2019, which was only 27.54%.
However, in general, we didn’t see a significant uptick in early terminations that year, suggesting that, while organisations were letting contractors go, they weren’t pushing them out the door.
The biggest indicator of contractors voluntarily leaving their roles is resignations. As the graph demonstrates, this was significant in 2019, the year before the pandemic started. It also makes sense that resignations were at their lowest during the pandemic, when contractors didn’t want to make an uncertain jump to a new role. According to LinkedIn Australia country manager Matt Tindale, “The vast majority of people were hunkering down in their roles through the pandemic period.”
The proportion of resignations in 2021 was relatively low. This is potentially due to the fact that many contractors took permanent jobs, as many companies weren’t approving permanent hiring.
In Figure 17, we look at the reasons given for resignations.
Unfortunately, a large proportion of contractors leave without providing a reason. However, we can see in 2019, at least 50.86% of the contractors left to start a new role.
Despite not seeing a significant increase in resignations in 2021, what does stand out is the percentage of contractors being made permanent. This has increased from 9.72% in 2019, to 17.94% in 2020, and finally to 27.35% in 2021. Potentially, in an effort to retain skills and staff, employers are offering permanent work.
Download our latest Contingent Workforce Salary Benchmark Report to find out what our contractors have to say and insights from our talent pooling specialists on this topic.