Employers and Employees Can Benefit from Reducing Insecure Employment

Daniel Kopasker and Catia Montagna (University of Aberdeen)

Featured image: Cytonn Photography on Unsplash

Last month Business in the Community hosted a roundtable event that brought together employers and HR professionals to discuss the incentives to provide secure employment. The title of the event, like the findings of our recent Productivity Insights Network project conveyed a very clear message: job security is good for business.

How can employers benefit from job security? The key finding in our report predicts that every 1% of employees transferred from temporary to permanent contracts will increase UK firms’ productivity by 0.7%. This result is in line with studies of other countries. We also find that reducing temporary employment is particularly beneficial to the less productive firms.

Within the project we formed an industry-level panel, covering the period 2004-2017, that combines employer-level data from the Business Structure Database (BSD) and employee-level data from the Annual Survey of Hours and Earnings (ASHE). Using this matched dataset, the figure below demonstrates a clear upward trend in the incidence of temporary employment over the period. As is well known, this period of increasing temporary employment coincided with stagnating labour productivity growth.

Trend in the Incidence of Temporary Employment in the UK Private Sector

Source: ASHE-BSD 2004-2017 matched dataset using main job only for private sector employees (n=1,428,901).

Our findings demonstrate that there are substantial potential benefits from effective legislation or HR policies addressing insecure employment. One proposal, within the UK Government’s Good Work Plan is to introduce an employee’s right to request more secure employment after a fixed period with an employer. How effective or enforceable such legislation would be remains to be seen. Certainly, in Ireland  legislation has gone further than allowing employees to make a request.

Contract status, however, is only one aspect of insecure employment. We have previously found that around 10-15% of employees on full time permanent contracts experience work-related insecurity, and this is damaging to their mental health. The challenge for HR professionals is to understand and address the sources of this insecurity. These could include factors such as workload, management style, and financial pressures as highlighted in a recent report on workplace mental health.

The causal relationship between insecure employment and mental health is central to our analysis. In related research we found that the mental health benefit of increasing job security is worth around £2,000 per year to employees. Although this is a conservative first estimate, it clearly shows the value to employees of secure employment.

Employers do not have to wait for government legislation to reap the benefits of limiting insecure employment. The Chartered Institute of Personnel and Development (CIPD) have developed the Mental Health at Work gateway that provides resources, training and information to develop approaches to workplace mental health and many employers are introducing HR policies to improve workplace mental health.  By recognising the interrelationship between insecure employment and workplace mental health, such practices can benefits employers and employees.

Our report, in combination with other research, clearly demonstrates that reducing insecure employment is good for both business and employees’ mental health.

We conjecture that workplace mental health is a key pathway to achieve productivity benefits through reductions in insecure employment. Our aim is now to form knowledge exchange partnerships with employers to test this conjecture. If you are interested, please get in touch.

You may also be interested in Professor Karina Nielsen’s Productivity Insights Network project (‘Thriving at Work’), which has produced resources to support employees returning to work following mental ill-health sickness absence.