Freelancers Make Up 34 Percent of the U.S. Workforce
According to a 2014 study commissioned by the Freelancers Union, 53 million Americans are independent workers — about 34 percent of the total workforce. This number is expected to balloon to 50 percent by 2020. While the names associated with today’s non-full-time-employee workforce may vary — the “gig economy,” the “flex economy,” “on-demand labor, and the “external workforce” – one thing is for certain: In 2016, the non-full-time-employee workforce has already reached its true tipping point.
According to Deloitte’s 2016 Global Human Capital Trends study, 51 percent of global executives surveyed said their organizations plan to increase the use of flexible and independent workers in the next three to five years.
There are visible social, political and economic changes that are reshaping the modern labor environment in such a way that its influence will be irreversible.
As someone who has spent the last few years building a workforce technology business, I have been closely following various trends and movements in the modern labor market. Here are a few of the most significant ones I’m continuing to watch.
1. New ways of sourcing and hiring
As the need to use independent contractors increases, so does the need to create more efficient ways to find, hire and manage them.
For many years, online freelance marketplaces have been the most common way to quickly find and engaged remote talent. More popular services such as Freelancer.com, PeoplePerHour and Elance/Odesk (now Upwork), have been assisting small businesses around the world in finding affordable talent to perform small tasks or to work on specific projects.
As large companies start to embrace this nonemployee workforce, more comprehensive and sophisticated platforms are emerging.
Work intermediation platforms (WIP) or, as many call it, freelancer management systems (FMS) which serve as a “digital bridge” between enterprise fulltime employees and independent workers, help companies integrate the external workers with the company’s fulltime employees and teams. These systems help to simplify the way companies find, on board, manage and pay their talent.
While there are a few vendors specialized in providing WIP solutions such as Work Market Inc., Upwork Enterprise or shortlist.co, some companies are also choosing to build their own WIP platforms.
For example, PWC’s Talent Exchange system provides highly skilled independent workers with direct access to PWC’s employees seeking talent for their projects. The platform enables greater exposure for work opportunities to external talent and agility for internal teams.
Another example of a corporation building its own platform to manage its external workforce is The Washington Post. Their “talent network” system provides a more efficient means to find, hire and deploy freelance writers. Not only can these freelancers fulfill jobs assigned by the Post’s editors, but freelancers have the opportunity to pitch story ideas to the paper as well.
2. Administration automation
When freelancers are hired at scale, it adds a great degree of complexity to management. Companies have been using Excel and email to manage their freelancers, independent contractors and suppliers for years, however, with the rise of the “ondemand economy,” Excel is no longer sufficient — hence the need for new ways of working.
Work intermediation platforms (WIP) can automate the entire process of freelancer onboarding, including collecting profile information, doing background verification and verifying licenses and certificates or client references.
Registered candidates get automatically grouped and added to various talent pools within the system, so they are accessible for all full-time employees when the need arises. WIP systems can also send work assignments, collect quotes and keep track of invoices. Many systems are now capable of accepting invoices and issuing payments directly from within the platform.
The flexibility and automation provided by these platforms drives significant benefits to the companies and the external talent / workers.
3. Misclassification and compliance management
The lines between nonemployee and full-time employment workers continually blur, and while some organizations may be tempted try to push the boundaries of an independent contractor relationship to avoid paying taxes or employee benefits, the risk is simply not worth it.
Take a look at Microsoft. In 2000, the company had to pay the Internal Revenue Service $97 million due to a benefits case brought on by a group of long-term temporary workers who should have been properly classified as permanent employees (classification W2). They accused the company of improperly denying temporary workers of benefits received by regular employees.
The pain point is a collision between 20th century labor law and modern flexible working arrangements. Andrew Karpie, a principal analyst at Spend Matters focusing on the staffing industry, says that “Employers may get more help classifying independent talent in the future. More on-demand platforms are starting to work with outside firms to make sure their workforce is compliant with labor laws.”
One way in which companies can reduce their risk is by partnering with a work intermediation platform (WIP) provider to use their technology to find and hire their nonemployee talent. Modern enterprise WIP platforms include monitoring the worker misclassification and prevents companies from making costly mistakes.
The “on-demand” economy is certainly on the rise as corporations around the world continue to embrace the new work models by using more flexible and independent workers. But as quickly as they are to adopt this movement, it will influence a change in some areas in which the company the runs.
The model for this kind of employment is still evolving, and companies are reshaping their policies to continue to attract the best talent from the independent workers labor market.