Primary Flexibility — the Flexible Firm and its Determinants

The aim of this paper will be to identify the factors determining the use of ‘non‐standard employment contracts’ or what we term ‘primary flexibility’. While ‘standard employment contracts’ relate to full‐time, permanent jobs, non‐standard employment contracts concern part‐time or temporary labour and combinations of the two. In the literature non‐standard employment contracts have been lumped together with other flexible working practices, (e.g. overtime or shiftwork), under the umbrella of ‘flexibility’ or the concept of the ‘flexible firm’, which may employ one or a number of labour supply adjustment mechanisms in response to product market demand volatility. ‘Working practices’ are arrangements appertaining to the organisation of the workforce within the pre‐established basic contractual boundaries of the job, (i.e. whether it is full or part‐time, permanent or temporary). Clearly, such an amalgam of non‐standard forms of employment and flexible working practices, an organisation's use of which carries the tag ‘flexible firm’, can be misleading. The flexible firm is held by some to be the antithesis of the internal labour market (ILM) form of employment structure, in which labour is a quasi‐fixed factor of production. However, flexible working practices obviously can, and do, operate within both ILM structures and non‐standard forms of employment. The concept of the flexible firm, therefore, requires tighter definition. We would define the flexible firm as one which embodies non‐standard employment contracts for the majority of its workers, or primary flexibility. (‘Primary’ because flexibility is built into the job contract rather than superimposed). The flexible firm, thus defined, is indeed the antithesis of an ILM structure. Flexible working practices or ‘secondary flexibility’, as noted above, may operate within a flexible firm or an ILM employment structure.