The Economics of Modes of Employment

It is generally recognised that the cost to a company or other organisation of employing people to work for them is considerably more than the actual wages or salaries paid. The number and weight of these additional costs has been steadily growing in recent years so that no longer are they insignificant but represent, on the contrary, important factors to be considered in the total cost of employment. The cost of ‘labour’ in the classical economic sense is no longer a periodic payment to the employee which can be turned on or off at will, but is a complex computation of various costs and expenses, some of which are incurred at the out‐set of employment and others of which continue throughout the term of employment. These additional costs, on top of the wages or salary, govern to a large extent the mode of employment which an employer will prefer. By ‘mode of employment’ is meant the type of contract which the worker may have with his/her employer in terms of the time when he/she will be at work and the relation of wage or salary payment to that time. It has nothing to do with the nature of work, the level of individual wage or salary, the status of the job or the method of recruitment.