The Big Enterprise Freelance Debacle

4 min read
Scott Lancet
Scott Lancet, Sr. Enterprise Account Executive
August 02, 2018
The Big Enterprise Freelance Debacle
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$300 billion. That’s how much is spent on contingent labor globally, according to a recent Accenture report. That figure will undoubtedly grow in the coming years as large enterprises begin to realize the benefits (optimized cost structures, improved work quality, accelerated go-to-market capabilities) of a flexible workforce.

Unfortunately, a majority of that investment on freelancers and independent contractors is going unchecked. According to a report by Ardent Partners, 60% of all contingent labor is unaccounted for in financial planning, forecasting, and budgeting within the average company. You read that right. A majority of CEOs, CFOs and CHROs couldn’t confidently tell you how much they spend on contract labor.

You Can’t Manage What You Can’t Measure

Why is this happening? Simply put, most enterprises don’t have the technology, processes or organizational infrastructure to effectively measure their spend on non-employee talent. On the other side of the token, when it comes to their W-2 workforce, most enterprises have powerful software in place designed to give them visibility into every aspect of their traditional workforce.

Human Capital Management (HCM) software — like SAP’s SuccessFactors, Workday or Oracle — always has been focused on providing insights into every dollar invested in traditional human capital. When you consider the fact that total human capital costs in most organizations average nearly 70% of operating expenses, you can understand why.

So, with millions and millions of dollars now being invested into non-traditional talent, why are big Fortune 500 enterprises so behind the 8-ball when it comes to managing this new, and rapidly growing, segment of their workforce? While freelancers have been around for decades the recent and explosive growth of the freelance economy has presented a new challenge for businesses looking to manage the hundreds, if not thousands, of freelancers now within their ranks.

While there certainly are implications for a poorly managed freelance workforce, they go far beyond cost or P&L considerations. A lack of visibility into your contingent workforce can lead to regulatory and compliance issues with the IRS, Department of Labor and State Labor Departments (just ask Google, FedEx, Lowe’s, etc.).

Moving Past Spreadsheets & Emails

Those who do use an independent workforce tend to rely on spreadsheets, excel graphs, or home-grown systems. These methods are not scalable and don’t account for the nuance and complexity of contract work. Fortunately, a new crop of enterprise software is emerging that could address this growing problem. Freelance Management Systems (FMS) are being adopted by a few progressive enterprises looking to be strategic with their external talent. This cloud-based software system allows businesses to manage the entire workflow of their freelancers and independent contractors from a single dashboard.

Take a second and imagine that you could get in-depth analytics and insights into the breakdown of all your non-employee spend. How much are you spending on freelancers in California? Are non-employee guidelines from HR and Legal being enforced? What department’s hiring practices are causing a higher risk of worker misclassification? What portion of your overall contract spend went towards developers? Until now, that kind of intelligence has been almost impossible to glean.

At its core, FMS technology allows businesses to consolidate every aspect of their freelance workforce under one roof. More importantly, this software arms executives with a powerful analytics engine they can use to efficiently scale their freelance workforce compliantly.

Companies have already benefited – While FMS is an emerging technology, there already are Fortune 500 companies that have started to reap the rewards (significantly lower operational costs, accelerated response times, improved work quality). The trail already has been blazed, the time is now to adapt or get left in the dust.

If you are interested in an evaluation of your 1099 labor force and if an FMS is right for you, please email me at [email protected]. Leveraging an FMS takes the guesswork out of managing freelancers and drives profitability back into enterprise organizations. The benefits of the on-demand model are well documented. It’s now time for enterprises to learn about the best tool to capitalize on this.