THE FUTURE OF CONTRACT FINANCING FOR PUBLIC AND PRIVATE SECTORS
The term contract financing refers to finance individuals working on a contractual basis, or on an interim basis, explained Gibbs, on a visit to the island to meet with stakeholders and get a better understanding of the market.
Under contract financing, the tenure of work is often three, six, nine or 12-month contracts, which can often move to a rolling basis after that.
“It’s something that’s becoming increasingly popular, particularly within developed markets, and particularly those that have a significant amount of finance work,” said Gibbs. “The structure of those engagements can be a little unique. And that’s where I think a lot of the learning is for those moving into that area.”
The engagement is typically either direct or through an agency, such as a recruiter. There’s also a different legal structure surrounding such contracts.
For example, the employee or worker can either offer their services through a limited company, which can be one that they directly own themselves, or can be via an intermediary, which is often coined or termed an umbrella company. Alternatively, they could have an engagement directly with that employer.
“And that’s considered a fixedterm contract where you’re paid through the employer’s payroll,” explained Gibbs. The pay, particularly under the limited company example, is typically either hourly or daily rates. In a fixed-term contract example, it’s typically daily or monthly rates.
Contract financing is required, typically, for one of five reasons. The first is a sudden loss of a human resource or finance resource, which can occur due to a variety of factors, such as someone moving to a new job and having to go on, what’s called, ‘gardening leave’, the practice of an employee leaving a job being asked to stay away from work during the notice period, while still on the payroll. This can be particularly concerning expatriates who might need to return home for family reasons. Or it could be when someone suddenly falls ill.
THERE ALSO IS AN INCREASED CHANGE AROUND REGULATION. TECHNOLOGICAL ADVANCEMENT AND GROWTH ALL REQUIRE REGULATION TO KEEP PACE.
Secondly, contract financing can be due to one-off projects, often which require technical expertise. Third, it can be due to changing regulation, which usually can require technical knowledge and become one-off projects. The fourth reason is maternity cover, and the fifth being to trial employees before making permanent positions.
“It’s largely driven around these five reasons,” explained Gibbs. “With increased mobility and globalization, the average amount of jobs in a typical lifetime is increasing all the time. It’s a general trend. As a result, there is a greater requirement to cover that job turnover. The drivers are all the same; increased change, increased competition, companies needing to be agile, and forever improving to keep pace, and that results in an increasing amount of projects.”
There also is an increased change around regulation. Technological advancement and growth all require regulation to keep pace. Crypto-currencies are an excellent recent example. There’s an increasing amount of regulation and regulatory introductions and requirements around such developments. These often need a one-off or a project response, usually with technical expertise that might not exist within the present business.
The requirements around maternity leave are driven by the trend of an increasing amount of women in the workforce, along with the implementation of supportive labour laws for maternity cover. It’s a growing requirement, and there’s an increasing demand for that cover.
In the trial of employees before making them permanent, it’s typically using other senior critical positions within an organization or by elite employers like the top law and accountancy firms, as well as investment banks and blue-chip companies. Alternatively, it can be in small teams where employee harmony and fit are integral. It’s the same where turnover is particularly disruptive within the business. Given the trend of increased turnover, generally, such considerations are becoming more prominent, and particularly as human resource sophistication and techniques are evolving.