Small Business Labs

The Lifestyle Employment Contract Versus Freelancing

Mercer's study, Rethinking what we need from work, found that "employees are more focused on securing their financial, physical, and emotional health and well-being than by achievement and climbing the ladder."

Because of this, they are proposing firms shift to a lifestyle contract to attract and retain talent (click on the Mercer report chart below to enlarge).

The new contract suggests 6 areas employers should focus on if they want to win the war for talent:

1. Step up efforts on retention
2. Align to shifting workforce needs
3. Focus on financial health
4. Reimagine well-being at work
5. Accelerate diversity, equity, and inclusion
6. Build a more flexible future

When you look under the hood at most of these areas, Mercer suggests employers offer greater work flexibility, autonomy, and control.  

These are, of course, key reasons workers choose to pursue independent work and freelancing.  

We've long viewed the choice between having a traditional job and freelancing as a competition.  

And most traditional jobs offer much less work flexibility, autonomy, and control than freelancing does. And we've long wondered why more firms don't provide at least some of the flexibility, autonomy, and control freelancing offers.  

And perhaps, they will.  

One of Mercer's focus areas, financial health, is where traditional employment has always had an advantage over independent work.

And because of this, it's a good area for employers to double down on in their competition with freelancing for talent (and their competition with other firms).  

Before the pandemic, we were seeing a trend of employers offering more flexibility, greater work/life balance, higher pay, and better overall financial support.

However, there is much talk - especially in the tech industry - about cutting back on these changes. And if we have a recession, there will be more talk.

Our hope is that more companies will adopt some form of the lifestyle employee contract.

Either way, we think the appeal of freelancing and independent work will be sufficient for their numbers to continue to grow.

Skift's Travel Industry Megatrends

Skift is a travel industry analyst firm and one of our favorite sources on travel trends. Much of their content is behind a paywall, but they also produce free content (we subscribe to several of their newsletters).  

We follow travel trends because of our interest in remote work and digital nomads. We're also active travelers, so we like travel trends.  

They recently released their 2023 Travel Megatrends report. It covers 22 travel and travel industry trends.

Two trends jumped out at us. 

Blended Travel Comes of Age covers the growth of travel that includes work and leisure. Key quote:

"The pandemic has led to a permanent change in how we live our lives between work and the personal. No longer just a trite category called "bleisure," the idea of blended traveling is front and center for every major travel company now. How new strategies focused on the blended traveler will emerge more clearly in 2023, as the industry recognizes the whole traveler holistically." 

As the Skift chart below shows (click to enlarge), the share of business travel that includes a weekend has increased substantially since the start of the pandemic.

Because of the growth of blended travel, the entire travel industry is trying to figure out how to serve this market segment better.

The other trend that caught our eye is The Anywhere Traveler Puts New Destinations on the Map. Key quote:

"Millennials now surpass Boomers as the largest sector of the U.S. population, giving rise to a new class of "anywhere travelers." This group has a strong passion for experiences that take them to less obvious destinations. These habits, in their own way a new form of balancing overtourism, will put new destinations in focus."

We like this trend for several reasons.  

First, It illustrates one set of impacts due to the aging of baby boomers. Aging boomers will have many economic and societal impacts, and these, in our opinion, are being underestimated.

And second, the Anywhere Traveler will increasingly be a remote worker or digital nomad.  

The other 20 trends are also interesting, and the report is well worth reading for anyone interested in shifts and trends.

Digital Nomad Programs for Families

Digital nomads traveling with children are not unheard of. But because of the challenges of traveling long-term with kids, there are relatively few digital nomad families.  

That's why we found The Florentine's Digital nomad community Boundless Life expands to Tuscany. It covers the firm Boundless Life, which describes itself as "Your family's complete solution to living around the world."

This includes, according to Boundless Life, "Forward-thinking education, furnished homes, coworking space and a wonderful community of like-minded families."

Their education program jumped out at us.  

As far as we know, they're the only organization that provides schooling for kids (ages 1-12) as part of their remote work/digital nomad service offering.  

Boundless Life offers 3-month summer and 6-month programs in Portugal, Greece, and Italy. The picture below (click to enlarge) is from their website. It provides more details on their locations.

The schools are taught in English, with the programs based on the Finnish curriculum, which Boundless Life describes as "world-renowned." Not knowing anything about Finnish schools, we checked with several local school officials. They confirmed that Finnish schools are highly regarded.  

Boundless Life is another example of the rapidly growing array of programs and services targeted at digital nomads.  

These services aim to reduce the challenges associated with being a digital nomad. This makes it easier to become a digital nomad - which is what Boundless Life does for nomads with kids.

The growth of these services is one of the reasons we are forecasting the number of digital nomads to continue to grow over the next 2-3 years.  

See our Digital Nomad section for more on this topic.  

Wunderman Thompson's 100 Trends to Watch in the Coming Year

Wunderman Thompson's Future 100: 2023, which is one of our favorite annual trend reports, was released this week.

It's one of our favorites for several reasons.

First, since a global marketing agency produces it, the production values are outstanding. It's well-written, and the pictures and illustrations are fun and often intriguing.

Second, who else puts out a report with 100 trends? It's almost too much to go through.

And finally, the report includes 10 consumer trend categories covering everything from beauty to work. Click to enlarge the chart below.

We always have our favorite trends from this report.

This year they include The Artisan Wave, Situationships, Non-Linear Work, and Deepsea Tourism. See the report for descriptions.

And we're always interested in their top 3 destinations. This year they are Morocco, Kyoto, and Tanzania. We've been to all three and they're great places to visit.

If you're interested in consumer trends, this report should be on your reading list. It's free.

Accounting Rules Favor the Use of Freelancers by Corporations

According to The Harvard Business Review's February magazine article How Financial Accounting Screws Up HR, accounting rules and practices mistakenly favor using nonemployee labor instead of employees.  

The main reason is the treatment of employees as a fixed cost. Key  quote: 

"...a number of rules have been prompting a major effort by companies to move work to nonemployees. One involves treating wages and salaries as fixed costs. Such costs are a big worry for investors because if business and revenue decline and those costs can't be cut, the profitability and value of the business collapse in a hurry ...

Why wages and salaries are ever considered fixed costs in the United States is a puzzle given that virtually all employment there is "at will," which allows companies to end it unilaterally for any business-related reason. 

The other accounting rules favoring the use of nonemployee labor the article points to are:

• Using per-employee statistics as key performance metrics: Using nonemployer labor reduces the number of employees, which improves per-employee metrics like sales per employee, profitability per employee, etc. 
• The use of nonemployee labor can increase a firm's reported gross margins: Direct labor costs are included in a firm's cost of goods sold. This reduces a firm's gross margin, a metric investors closely scrutinize. Nonemployee labor is much easier to categorize so it's not included in the gross margin calculation than employee labor costs are.
• It's generally harder to get approval to hire an employee than it is a contractor: This is not an accounting rule, but a common financial practice at most corporations.

Based on our corporate consulting work, our work with investors, and our experiences working at corporations, we agree that accounting rules and practices are tilted towards the use of nonemployee labor.

And many corporate decision-makers do not fully understand the impacts of these rules and practices on resource allocation and hiring decisions.

So shining a light on these issues is important.   

But even if the accounting rules and practices are changed - and we think they should - the use of freelancers and nonemployee labor by corporations will likely continue to grow.

The reason is simple.

The main trends driving the use of nonemployer labor - the need for greater business agility and flexibility, the challenges of hiring in-demand labor, the greater productivity and efficiency of nonemployee labor in some instances, and the desire by many skilled workers to be independent - significantly outweigh the accounting impacts.