5 Things Every HR Pro Should Know About the Freelance Economy

Think your workplace’s corporate structure somehow separates you from the freelance economy? You may want to think again. The freelance economy is growing incredibly fast. Independent workers make up 34% of the American workforce and industry experts estimate that they could represent 50% of the private workforce by 2020. Freelancers don’t work in traditional offices and they aren’t managed by traditional HR departments, but they’re not totally separate from the corporate workforce. In fact, they’re a big part of it. Independent workers, including freelancers and independent contractors, are constantly interacting with the full-time work environment, whether they’re applying for full-time jobs or performing contract work.

Whether you’re hiring independent workers today or considering doing so in the future, here are five things every HR pro should know about the dynamic freelance movement.

1. Understand the difference between freelancers and temps

Freelancers and temporary workers are different breeds. In basic terms, temps are hired to fill a specific job position for an agreed upon duration of time. They’re managed not by the company they’re working for, but by an external staffing firm. Freelancers, on the other hand, are hired to work on specific projects until they’ve been completed to both parties’ satisfaction. They’re not managed by an external firm, but instead work independently.

Although there is some overlap between these definitions, as professionals migrate from one workforce to another, it’s important to maintain clear distinctions, both for legal and ethical reasons. Freelancers are required to be equipped with proper legal paperwork, tax information and other relevant documentation (insurance, certifications, etc.). Lastly, it’s important to remember that any business working with a freelancer must adhere to federal labor guidelines in order to remain compliant and avoid misclassification penalties.

2. The freelance economy is built on a community of relationships

Freelancers often evoke an image of a gun-for-hire type that will take care of your company’s problems and then ride off into the sunset. And while this is a nice, romantic ideal, few freelancers operate in such a bubble.

The freelance economy is a well-established community, in which independent workers help each other out, refer clients and even report back to one another about employers. If you want your company to have a presence in the freelance economy, you need to adopt hiring practices that foster good relationships. Get a feel for the market to find out what kinds of compensation, copyright agreements and work arrangements are fair and common practice, before you try to get your money’s worth.

3. Short-term work obligations also require well-defined scope

Don’t make the mistake of thinking that just because your relationship with an independent worker will only last a short time, that you don’t have to record your engagement. It’s imperative that your freelance engagements are properly documented, even if an assignment only requires a couple of hours worth of work.

It’s also important that you define what skills and tools are required for the assignment, what expectations you have for the work, and what deliverables will constitute successful completion of the assignment. Clearly communicating with your freelancers will ensure that all parties are on the same page and that short-term work arrangements meet both internal and external labor requirements.

4. Ensure that copyrights are agreed upon before work is completed

Who really owns the engaging ad copy written by a freelance author, or the awesome artwork a freelancer creates for your new brochure? While many companies simply assume that the content created for them belongs to them, it’s critical that the independent worker who created it also agrees to that fact.

Deciding who owns what is a tough balance to strike. In today’s competitive freelance climate, content producers would be foolish to give everything away. While you should reasonably expect the majority of the rights to what you paid for, you should also be flexible enough to accommodate freelancers who want to use their work as portfolio samples or as references on their resumes. Helping contract workers spread their talent and find future work is the best way to contribute to a healthier freelance economy.

5. Freelancers are contingent in nature – account for their mobility

As previously mentioned, some experts believe that by 2020, freelancers will account for around 50% of the private workforce in the U.S. And for HR professionals, that provides both potential benefits and potential risks.

While businesses will get to draw from an ever-increasing pool of skilled workers, those same individuals may be working for several different companies and won’t have permanent ties to any one company. While a good freelancer will stay on board with you until they’ve finished a current project, failing to account for freelance mobility could leave you in a risky lurch when a contractor suddenly discovers a more lucrative opportunity. Make sure your freelancers understand that payment is contingent upon the final delivery and approval of the assignment.