January 2, 2011
Thirty-year-old Steph Auteri has spent most of the last three years working at The New York Sun and Nerve Media as a freelancer without benefits. Wanting to move from the book publishing industry into journalism, she quit her salaried job at an academic book press a few years ago to copy edit for The New York Sun. She worked 25 hours a week in the office for 12 months. When The New York Sun folded in September, 2008, she again looked for a regular freelance gig.
At her current job at Tango Media, Auteri works 24 hours a week as an assistant editor at YourTango.com. Auteri likes her co-workers and likes being part of the team. But she’s willing to trade the possibility of full-time status for something even more valuable — some autonomy and flexibility. Auteri is part of a new job class — more than a temp but less than full-time employee, a growing state of employment limbo that has been come to called “permalance” — essentially a permanent freelancer or never-ending temp.
A freelancer works on a contract basis and is “free” to decide which projects to accept; a temp is supposed to be exactly that: temporary. Yet when freelancers or temps move become permalancers, they’re often toiling away in an office next to salaried employees, doing similar jobs without benefits, and staying for longer periods, sometimes years. A permalancer usually starts off as a temp, hired to work on a contract basis, ranging from 24 to 40-hour work weeks. Legally this work is supposed to end after the contract expires. But because of little oversight or regulation the contract is easy to extend, which many employers do, again and again.
A Growing Workforce
According to Dr. Alec R. Levenson, labor economist at the Center for Effective Organizations at USC Marshall School of Business, permalancing has been around for decades, but during the recent recession, the practice has grown. As salaried employees were laid off, employers began replacing them with independent contractors, hiring them to do a similar job but without benefits. “Companies have been looking to make their workforce as flexible as possible,” says Levenson.
Indeed, temporary employees have grown during the recession. According to statistics from the Bureau of Labor, in September 2009, 1.72 million temp workers were cited, while November 2010 showed 2.2 million workers in the temp workforce, a 29 percent increase, though it’s unknown how many of those workers are permlancers.
“Companies will hire temporary employees instead of regular employees to see if sales will recover,” says Levenson. “It’s only when sales recover those companies will begin to convert employees back to regular salaried employees.” Levenson says that often companies use a “try before you buy” approach with new employees. Instead of hiring a full-time employee, companies will hire a temporary employee to take over the position.
However, the line between independent contractor or temp vs. full-time employee is fuzzy. Even the IRS doesn’t have a clear set of rules to define the terms, writing on the website, “There is no ‘magic’ or set number of factors that ‘makes’ the worker an employee or an independent contractor, and no one factor stands alone in making this determination.”
According to Ronald Sollish, an attorney focusing on employment and workforce management at Maddin Hauser, independent contractors are hired to complete a project and deliver the project for a particular price. To be considered an independent contractors, the worker should be left without oversight and be in control of their own project; they move into the category of “employee” when the company has control over when and how the work is performed. “In reality, if someone comes in and they’re performing the same services as the person next to them, they are employees,” said Sollish.
“There is no set time limit as to how long someone can do freelance work, nor is there any set hourly threshold which takes someone outside of the freelancer or independent contractor category,” says Megan Starich, an attorney with McDonald Carano Wilson, whose firm advises employers on compliance with labor and employment laws. This can make for rampant misclassification, and employers can easily take advantage of the ambiguous law.
In fact, the Labor Department estimates that up to 30 percent of companies misclassify employees, and federal and state officials have called for a crackdown of the practice, estimating it will save $7 billion over the next 10 years in unemployment insurance taxes and workers compensation premiums that employers don’t have to pay the misclassified contractors. It’s also common for these independent contractors to misreport their income taxes, costing the government money.
Unlike regular salaried employees, permalancers also do not receive health benefits or vacation time. While permalancing may offer more flexibility for its workforce, experts caution that workers can find themselves out of a job during a market change.
William Gould, a labor law professor at Stanford Law School, explained that permalancers are often in a weak position when negotiating terms with their employers. Employers can let a permalancer go at a moment’s notice, with no explanation . When this happens, Gould says that permalancers are left with few legal options unless they can prove they were misclassified.
Starich, the attorney at McDonald Carano Wilson, says that if permalancing grows, more workers will seek coverage through the Health Insurance Exchange in their state, which could strain the system. “Companies do have a need for jobs that are much more short term,” says Sara Horowitz, executive director of the Freelancers Union. “But our government policies haven’t caught up with the fact that our workforce has changed.”
Permalancing and Generation Y: A Different Mindset
Yet some young workers are embracing permalancing. As college graduates across the country struggle to land their first job, many have voluntarily gravitated towards permalancing because of the flexibility it offers.
“Older generations tend to stay at a company for several years at a time,” says Vicki Salemi, career expert and author of Big Career in the Big City. “But Generation Y tends to be known for job hopping.” According to Salemi, Generation Y has a different view of authority and, unlike previous generations, doesn’t feel the same loyalty to an employer, likely from watching their parents devote a lifetime to a company, only to be let go during the recession. Salemi explained that permalancing can provide new skills in addition to recommendations for the next gig.
Lindsey Pollak, a workplace expert and author of Getting from College to Career: 90 Things to Do before You Join the Real World, says that Generation Y has been forced to become more flexible compared to older workers. “You have to make do with what’s available,” says Pollak. “There’s more realism.”