Employment Flexibility

According to Smith (1989), Flexibility refers to labor market and labor process restructuring to increased versatility in design and the greater adaptability of new technology in production. Moreover, in middle 1980s, as Atkinson said, the flexible firm was a new model of employment that suggested employers to begin to introduce new staffing and employment strategies. Firms had to find more flexible ways to achieve greater flexibility from their workforce and to take into account the new market realities. There are some pressures to be flexibility. Firstly, new patterns of work are emerging. For example, the call centers which have over 40% of flexible workers. Moreover, the increased female employment In India and the more popular part-time work in USA or UK can prove it. Secondly, it is the demands of employers. They need a well control of labor costs to have a competitive advantage and flexible workers are easy to fire in recession period. Moreover, the legal system has changed. For instance, UK Government supports flexible labor markets. The EU also claims employee to have equal treatment and rights and benefits.

There are three types of flexibility. The first one is Functional flexibility which refers a firm's ability to deploy employees between activities and tasks to match changing workloads, production methods or technology. It is associated with multi-skilling and polyvalency. For example, multi-skilled workers can move across different job boundaries. The second one is numerical flexibility. Via the use of non-standard employment contracts, firms have the capacity to adjust labour inputs to fluctuations in output to achieve flexibility. It includes freer use of hire and fire. For example, the outsourcing and temporary contract enable the flexibility. Lastly, financial flexibility means a firm's ability to adjust employment costs to reflect the supply and demand in the labour market. As far as direct wages is concerned, it involves moving away from standardised pay structures to more individualised systems depending on the performance.

As mentioned above, Atkinson developed a new model. He suggests that the 3 types of flexibility can be brought together in a concept of the 'flexible firm'. In addition, many UK firms wanted to introduce new organizational structure, therefore breaking up the workforce into 2 groups: Core and Periphery. Firstly, core group focuses on the person rather than the job. This group conducts the organisation's key activities, enjoys job security and possibility of career development in labour market and in return for the obligation to be functional flexibility. The employees in the core group are full-time permanent career employees such as managers, which are measured against cooperation and progress. Secondly, there are 3 types of people in the periphery group. To begin with, these workers have limited career prospects and high turnover rate because of their relatively deskilled tasks which need the firm's specific training. For example, clerical supervisory, their jobs are not stable and they will be the first one to leave the company in recession. The second outsourced workers with short term contract are in the external group. These workers usually have non-firm specific skills required by a firm on discontinuous basis who ask for a high fee, such as systems analysts.