Approaches to staffing: asset or cost, flexible workforces and employment relations

Staff as an asset or a cost

• Staff as an asset: workers are a valuable resource whose skills, ideas and loyalty create competitive advantage. The firm invests in training, involves staff in decisions and aims to retain them. Typical in firms competing on quality, service or innovation.
• Staff as a cost: workers are an expense to be minimised. The firm keeps wages low, uses the minimum number of staff, offers little training and may replace workers with machines or outsourcing. Typical where competition is on price and jobs are low-skilled.

Treating staff as a cost cuts costs in the short run but may lead to low motivation, high labour turnover and poor service.

The flexible workforce

A flexible workforce can be changed quickly in size, hours or skills to match demand. Methods in the specification:

• Multi-skilling: training workers to do several jobs, so they can cover absences and shifting work.
• Part-time and temporary contracts: staff for busy periods or fixed projects.
• Zero-hour contracts: no guaranteed hours; staff work when needed and are paid for hours worked. The Work Foundation (Lancaster University) reported in August 2026 a record 1.24 million people on zero-hours contracts in the UK.
• Flexible hours and home working: flexitime, compressed hours, remote working.
• Outsourcing: using another firm to carry out a function (IT, cleaning, delivery). The October 2024 WBS11 paper asked about the benefits of outsourcing IT and distribution (10 marks).

Benefits: lower costs, matching staff to demand, access to specialists, attracting workers who want flexibility. Drawbacks: less loyalty and motivation, insecurity for workers, more training and management time, loss of control (outsourcing) and communication problems.

Dismissal and redundancy

• Dismissal is ending an employee's contract because of the worker: misconduct (theft, violence), persistent poor performance or lack of capability. Firms must follow a fair procedure (warnings, a hearing).
• Redundancy is ending a contract because the job is no longer needed: falling demand, closure, relocation, new technology or restructuring. It is not the worker's fault, and redundant workers usually receive redundancy pay.

Key distinction: dismissal is about the person; redundancy is about the job.

Employer and employee relations

• Individual approach: each worker negotiates pay and conditions directly with the employer. Flexible and rewards individual performance, but the worker has little bargaining power.
• Collective bargaining: a trade union (or employee group) negotiates pay and conditions on behalf of all workers in a group. Workers gain bargaining power and the employer saves time by negotiating once; but agreements may be less flexible, and disputes can lead to industrial action such as strikes.

Worked example

A clothing retailer needs many more staff in December than in February. Explain how a flexible workforce could help.

1. Hire temporary and zero-hour staff for December peaks, so wage costs match sales.
2. Multi-skill permanent staff to cover tills, stockroom and online orders as needed.
3. Risk: temporary staff need training and may give poorer service; zero-hour workers may feel insecure and leave.

Answer: Flexible contracts match labour costs to seasonal demand, but may reduce service quality and loyalty.

Check yourself

1. A factory closes a production line because demand has fallen and the jobs are no longer needed. Ending these workers' contracts is
   • dismissal
   • collective bargaining
   • redundancy
   • outsourcing
   Show answer

   redundancy. The job no longer exists.

2. An employee is caught stealing stock and their contract is ended after a disciplinary hearing. This is
   • dismissal
   • redundancy
   • multi-skilling
   • a zero-hour contract
   Show answer

   dismissal. Misconduct by the worker.

3. Which describes a zero-hour contract?
   • The employee works no overtime
   • The worker is paid a salary without working
   • The employer does not guarantee any minimum hours of work
   • The contract lasts zero days
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   The employer does not guarantee any minimum hours of work. Hours depend on the employer's needs.

4. Collective bargaining is when
   • each worker negotiates their own pay
   • a trade union negotiates pay and conditions on behalf of a group of workers
   • managers set pay without discussion
   • workers vote to choose their manager
   Show answer

   a trade union negotiates pay and conditions on behalf of a group of workers. One negotiation on behalf of many.

5. Explain what it means for a business to treat its staff as an asset.
   Show answer

   It sees workers as a valuable resource whose skills create value, so it invests in training and development and tries to retain them.. Staff are valuable, so the firm invests in them.

6. Explain one disadvantage to a business of relying heavily on temporary staff.
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   Temporary staff may be less committed and need training each time, so productivity and customer service may be lower than with permanent staff.. Low commitment and repeated training reduce quality.

7. In August 2026 the Work Foundation reported a record 1.24 million people on zero-hours contracts in the UK. Suppose 32.8% of these 1.24 million workers depend on their zero-hours contract for full-time work. How many people is that, in millions, to 2 decimal places?
   Show answer

   0.41 million. 1.24 x 32.8 / 100 = 0.41 million. (The report gives 32.8% as the record share depending on a zero-hours contract for full-time work but does not state its base exactly, so the question asks you to suppose it applies to the 1.24 million.)

8. Which is a risk of outsourcing distribution to a specialist firm?
   • It always raises the firm's costs
   • The firm must buy its own lorries
   • Loss of control over delivery quality and timing
   • It removes all need for contracts
   Show answer

   Loss of control over delivery quality and timing. The October 2024 scheme noted loss of control and delays (for example a strike at the provider).

Practise with instant feedback Print this lesson

Sources

• Pearson Edexcel International Advanced Subsidiary/Advanced Level in Business specification (2018)
• Work Foundation, Lancaster University: Record 1.24 million people on zero-hours contracts (August 2026)
• Pearson WBS11/01 mark scheme, October 2024 series (published January 2025)

Last updated 8 November 2026. Spotted a mistake? Tell us.