Employment Relationships for Recent Graduates in the Private Labor Market: Employee or Independent Consultant?

Abstract

The main focus of this paper is to study the employment relationships for recent graduates in the private labour market, and how legal and economic factors influence the selection of being an em-ployee or an independent consultant. Thus, we first examine how the rules of employment law affect employees and independent consultants, followed by which part have the better rights. Within the same context, sick pay, termination, holiday, and maternity leave is discussed.

Furthermore, the paper examines optimal job security, including notice of termination, trade condi-tions and the flexicurity model. Additionally, how job security influences the working environment will be analysed. The parties work-life balance, including working hours and flexibility, is another factor which is analysed according to the selection problem.

Economic factors such as the principal-agent theory, strategic contracting, and risk profile, will be applied accordingly. The purpose of using these relations is to understand how the parties interests are combined. In addition to this, the paper investigates how the economic factors influence the se-lection of being an employee or an independent consultant and furthermore, which of the parties it would be optimal for the firm to hire. The paper points out that an additional factor impacting the selection problem is generations, due to the variation in values.

Lastly, whether new or adjusted legislations will be optimal for the community, including firms, em-ployees, and consultants will be discussed. Here the paper will involve solutions to different methods which may improve the rights of employees and independent consultants.

The results of the analyses indicate that the legal factors speak in favour of an employee position, however the economic factors reveal no clear answer. It will be relevant to improve the rules of em-ployment law of the independent consultants, due to them currently being almost absent. However, their flexibility should not be adjusted. Finally, in order to improve work-life balance and rights in general, it would be beneficial to adjust the flexibility and some of the employee legislations. Overall, these initiatives will result in economic efficiency.