The Freelance Economy has Been on the Rise
Over the course of the last few years, there have been rapid changes in the freelance economy and how businesses procure talent. Workers have begun seeking more independence, financial freedom, and control over their work-life-balance. Research from Edelman Intelligence* estimated that 66 million workers in America would be participating in the freelance economy by the end of 2022 (1), up 10 million from 2018, and comprising 40% of the current workforce. By 2027, Edelman estimates that the total percentage of workers participating in the freelance economy will top 50%.
For centuries, organizations have relied mostly on traditional sources of talent, but now and in the years to come that trend will turn on its head. Change is no longer coming, it is here, and the way we look at, procure and manage an organization's most valuable asset will never be the same.
Growing Freelance Economy puts the Power in the Hands of 1099 Workers
Prior to the pandemic, businesses were already facing a monumental shift in their workforce as baby boomers began to retire. Baby boomers have been the backbone of the American workforce for generations, but over 75 million of these essential workers will be retiring in the coming years, according to research by SHRM. Unlike their predecessors, the up-and-coming generation places a priority on flexibility and are always looking for the next opportunity with which to hone their skills. Retaining workers, as always, will be a key part of future HR efforts, putting the employee in the driver's seat of how they would like to work.
Adding to the challenge is the amount of burnout workers have been feeling over the last few years, with a survey by the American Psychological Association (APA) finding that burnout rates are at all-time highs across industries and professions. According to the APA’s 2021 Work and Well-Being Survey, “nearly 3 in 5 employees reported negative impacts of work-related stress, including lack of interest, motivation, or energy (26%) and lack of effort at work (19%). Meanwhile, 36% reported cognitive weariness, 32% reported emotional exhaustion, and an astounding 44% reported physical fatigue—a 38% increase since 2019.” This level of burnout resulted in a record-setting amount of resignations throughout 2021. Termed the “Great Resignation,” nearly 4 million Americans quit their job just in the month of July last year, signaling a dramatic shift in power from the employer to the employees.
It’s safe to say that 2022 will be the “year of the employee,” with 52% of adults looking for new jobs at the beginning of 2021 and the retirement of our most experienced workforce. It’s clear that businesses across industries need to adopt a new way of procuring talent in order to thrive, and one of those strategies is to employ a “blended workforce.”
Freelance Workforces Are Growing to Become The Norm
With all of this in mind, the last few years have brought many changes to the business community as organizations have attempted to shift strategies during the unprecedented events of 2020, 2021 and the aftermath. For the front office staff, they were faced with the harsh reality brought on by COVID, however where and when they would physically report to work changed mightily, as being physically present was a requirement. But for those whose roles are more technology-based, or tethered, their story played out a bit differently. First, the new normal consisted of full-time work from home, and all in-person interactions were replaced by virtual meetings. Then came a blended approach to work, one that merged part-time remote work and part-time on-premise work - allowing employees to work both at home and at the office.
Finally, now as the pandemic moves closer to an “endemic,” another work strategy is emerging. This encompasses a blend of full-time, or (longer-term) part-time, W2 workers with the highly specialized and talented skills that a freelancer, or contract worker, can bring to the table. Attracting and retaining these workers will be fundamental to future business success in this ever growing freelance economy, and as work environments continue to evolve.
How to Adopt a Freelance Workforce and Thrive
As discussed, a true blended workforce combines the efforts of W2 workers and skills-based freelancers. In order to effectively adopt a blended workforce and take advantage of the freelance economy, you will need to consider the following:
Invest in the right technology
Blended workforces can bring together collaborators from across the globe, significantly impacting the talent pool but also creating new organizational challenges to overcome. One of these is how to effectively onboard new team members without having the opportunity to work with them face-to-face. Technology, namely a freelance management system, gives you tools to help streamline and automate the majority of your contractor management process. These include, but are not limited to, a customizable online onboarding process, mobile applications to facilitate assignment management and simplified ways to submit proof of project completion.
Additionally, paying your freelancers in a timely fashion is critical to ensuring that you attract and retain the best-of-the-best. Freelance management systems can help you manage at scale the onboarding, project assignment and paying of your contract workforce; saving you time and resources.
Maximize worker engagement
Once you find that desired contractor, the next step to thriving is to retain that worker. In order to do that you will need to create a differentiated worker experience that maximizes the engagement and satisfaction of these flex workers. A few ways to do this include:
1. Provide regular assignments - if a contractor knows that you will be providing a consistent flow of work, they are more likely to keep hours open just for you.
2. Keep improving - one of the best ways to improve your engagement with freelancers is to ask them for feedback and actively listen to their input. Things like was there a clear scope of work? Were we responsive enough? Do you feel that you were heard? You require your employees and contractors to continuously improve, but you need to hold the same standard for yourself and your internal processes. Regularly polling your freelancers to see where you can improve in building more goodwill and increase the chances of your top talent continuing to search your organization out for further contracts.
3. Be inclusive - even though freelancers and contingent workers are typically engaging on short term projects, they still want to feel as though they are working with you to achieve an end goal. Consider a brand ambassador program where workers can accumulate points (which can then be redeemed for prizes) by engaging in different activities with your company. Or set up a referral program where workers receive a bonus if the person they have referred successfully completes an assignment for you.
Streamlined Payment Options
Surveys performed by Fiserv (as reported in ADP Spark Magazine) found that 31 percent of contingent workers have been paid with a paper check, while only 13 percent of them preferred them. ADP goes on to say that the same report discovered that 80 percent of workers prefer to be paid electronically. Not only have direct deposit or other means of electronic payment become standard, they also provide a digital trail that makes it easier to track down payment in the event of a delay or issue. Couple that with the speed of payment and you can see why flexibility is crucial to retaining freelancers.
Get the full picture
According to Ardent Partners, “60% of all contingent/contract labor is unaccounted for in financial planning, forecasting, and budgeting within the average company.” With human capital taking up 70% of an organization's budget, it is hard to comprehend having no insight into 60% of the spend on your contingent workers. In order to thrive in the freelance economy, you need to have the full picture of your entire human capital; including compliance and ensuring your freelancers receive the appropriate documentation for their own tax management.
Win the War on Talent in a Freelance Economy
Talent is the number one challenge facing many organizations today. Contract workers have an important role to play in the freelance economy, and in fulfilling this labor shortage. These independent contractors allow businesses to scale up and down based on customer demand, helping organizations save money and time while leveraging specialized talent. It’s important to remember that managing 1099s is different from managing a traditional W2 workforce, so businesses need to put the right recruiting strategy, HR processes and technology platforms in place to build a successful blended model… ultimately helping you win in the war for talent.
*Source: Survey conducted by Freelance Forward (Edelman Intelligence) in Sept 2020; SIA Workforce Solutions Buyer Survey America 2021