Will 2025 See an Increased Tug-of-War Between Employer and Worker?

As we reflect on 2024, terms commonly used to describe the year include “dissension,” “polarization,” and “chaos.” Despite strong employment data and a declining inflation rate, the uncertain social and political climate has led many businesses to exercise caution when hiring, delaying projects, and tightly controlling spending. Over time, this may weaken the economy, creating a self-fulfilling prophecy. 

With each change in presidential administration, political maneuvering often contributes to uncertainty. Recent court rulings have struck down new regulations regarding the overtime rule and the non-compete ban. While final rules for enforcing the Pregnant Workers Fairness Act, a new definition for retirement security, and a framework for classifying independent contractors are currently in effect, the new administration may challenge some of these regulations and introduce new policies. Additionally, the courts have yet to rule on some ongoing challenges. Furthermore, the emphasis on immigration issues impacts worker visas and increases the enforcement of I-9 regulations and processes. 

How will these changes play out in a labor market that continues to suffer from a shortage of critical skills? We can anticipate a rise in workplace tensions, making it increasingly difficult to source, engage, and retain the necessary talent. 

Research independently conducted by ADP and KickResume indicates that more than half of American workers are more likely to change jobs than to wait for an internal promotion. Their studies show that in 2024, the median year-over-year pay increase for those who changed employers was 10%, compared to 5.1% for those who stayed with their companies. Additionally, the studies found a decline in the frequency of internal promotions, with only 17% of American workers receiving a promotion in the past five years. 

Studies also show that return-to-office (RTO) policies can increase employee turnover rates. Many businesses that have implemented RTO policies are experiencing resistance from their employees. In response to this pushback, companies are using various digital tools and platforms to monitor office attendance, including HR management systems, scheduling software, and employee self-service portals. A study conducted by Unispace found that over 40% of companies with RTO mandates faced unexpectedly high levels of employee attrition, and nearly one-third of these companies struggle with recruitment. 

In response to political pressure, social media campaigns, and litigation filed by majority-group employees, there has been a decline in commitment to corporate Diversity, Equity, and Inclusion (DEI) initiatives. Companies that have diminished or terminated their DEI programs reported a rise in attrition, an increase in discriminatory practices, and greater difficulties in attracting diverse candidates. 

Post-COVID, many workers are facing a rise in the cost of living without an accompanying increase in compensation. Initially, companies cited losses tied to supply chain disruptions and other factors, but the recent growth in corporate profits has fueled a rise in labor activism. More workers are participating in labor strikes and demanding better wages, benefits, and working conditions.  

One consequence of these trends is the increased use of an extended workforce, which consists of individuals engaged for limited periods. This workforce includes professionals hired through staffing agencies, independent contractors, project services teams under outsourcing agreements, and workers sourced by a company but employed by a third party as the employer of record for the duration of their engagement. These arrangements provide benefits for both the company and the workers: 

• The company can access the necessary talent for specific projects and only pay for these resources as needed. 
• Companies do not have to manage the administrative burdens associated with screening, onboarding, payment, tax withholding, reporting, and more. 
• Workers enjoy greater flexibility regarding work schedules, locations, and assignments. 
• Professionals can take on a series of temporary engagements to quickly build their skills and experience, which enhances their marketability. 

These benefits are only realized when these non-employees are properly integrated into the established workforce. Firms like nextSource provide the guidance needed to effectively build a high-performing extended workforce, delivering assistance in: 

• Establishing a workforce composition plan based on skills requirements, duration of need, cost impact of alternative approaches, etc. 
• Executing a change management plan that generates support from hiring managers, suppliers, employees, and contract workers. 
• Ensuring compliance with labor regulations specific to temporary workers. 
• Verifying that all workers on assignment have been screened and comply with company policies. 
• Overseeing the supply base (contract compliance, performance assessments, audits, etc.). 
• Providing market-based pay and bill rates. 
• Continuously enhancing the workforce management program to adjust to changes in business priorities and market conditions. 

If you need assistance with managing your extended workforce, it’s time to contact nextSource. We have many tools and resources available to help you with your contract talent needs. You can find help here.