The gig economy beckons - buying a business with a blended workforce

The world of employment is changing, driven in large part by rapid technological change that is evolving the way we work, live and play. A little as 20 years ago our forebears would have baulked at the idea of flexible workplaces, ‘on-the-go’ staff, the so-called gig economy, remote working and much more.

In the past, companies were much more rigid than they are today. They employed staff full-time, to work in-house, Monday to Friday, 9 to 5. And growth was slow - it didn’t happen overnight. But today there are companies like Automattic, which developed the blogging platform WordPress. It’s grown rapidly into a 190-employee company valued at $1 billion - and nearly all its workers, spread across 28 countries, are based at home. The firm’s founder, Matt Mullenweg, gives his workers a $2,000 stipend and a Mac to set up their home office, as well as a Mac, and invests significantly in travel, allowing teams to meet up for ‘hack weeks’. So how do they get everything done? Forget meeting rooms and even email - the firms uses chat rooms, Google Hangouts and its own blogging tools.

We are living through major upheaval and change in the world of work. Over the past several years there has been a major trend in companies hiring workers just to carry out specific tasks in a set amount of time. They work from home, deliver pizzas by bicycle for Deliveroo for example, or come into the office on a casual basis, sitting alongside permanent, on-payroll employees a few days a week. This is what we might call a ‘blended workforce’ - one which has a variety of workers employed on different contracts according to business needs.

And if your area of dealmaking is in the tech, services or marketing sectors, it’s likely your next acquisition could well be one that comes with a blended workforce. How does this impact upon the investment opportunity? Is it a positive or a negative?

Gig economy
In the UK, it’s thought that five million people are part of the ‘gig economy’, so it’s clearly a rising and important part of the workforce. Given the Chancellor Philip Hammond wanted to increase the amount self-employed people pay in National Insurance, the government clearly has its eyes set on the demographic too. The benefits of acquiring a company with a blended workforce include:

You would avoid all or some Tupe regulations when buying it - when you acquire a company, you would also take on the responsibility to honour employees’ existing contracts, conditions of employment and any ongoing disputes, but Tupe does not apply to the self-employed.
Savings on employee benefits like automatic pensions.
A reduction in energy costs, office rental, IT suite, company car costs and more because some of your workforce is flexible.
Less HR red tape to deal with.
Becoming an ‘agile’ company - enjoying the ability to reduce freelance capacity when workloads drop etc.

As well as mere cost savings, there are other benefits. Freelancers can come with fresh thinking and new ideas, injecting life into your business and sparking creativity. And while your permanent employees are likely to have worked in the one industry, your self-employed workers might have worked across sectors, bringing a wealth of experience to the table.

But for all the pluses, it’s important to lay out some concerns. Not all companies who use a lot of freelance or gig workers are popular: there have been plenty of high-profile stories that don’t put these companies in a good light. In some instances, freelance workers don’t get benefits and protections like sick pay and holiday pay that payrolled employees do.

Aside from the potential for negative publicity, there are the usual stumbling blocks to consider, which affect all kinds of acquisitions. Two of the main reasons acquisitions fail are: a misreading or mismatch of company culture and problematic or insufficient communications after the deal. These are no less likely to occur when buying a company with a blended workforce. There may even exist a subculture of contractors - this is more difficult to control or get back onside after a breach of trust or communication foul-up, than with a central workforce.

While there are both upsides and downsides, buying a company with a blended workforce will not only bring you reduced red tape and potential cost savings. It will give you a diverse, modern-day workforce, one that better reflects the rapidly changing world of work today.

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