One of the most exciting discussions surrounding the workforce today focuses on the rise of the freelance economy. As more workers pursue the flexibility of independent careers and more companies pursue an on-demand workforce to scale labor efficiently, the industry is buzzing about what the freelance economy will mean for the labor force overall. While many have focused on online staffing and its impact on the traditional staffing model, I believe the real focus of the discussion should instead be on the shift in the human capital paradigm to include the emergence of freelancers (also known as independent contractors). Moreover, I believe we will see independent contractor workstreams (which includes freelancers, consultants and other on-demand workers that are not managed by staffing firms) become a critical part of comprehensive talent strategies, which is where I believe we will see true disruption and innovation in the labor economy.
Trends In Labor
If we look back to data from the Bureau of Labor Statistics, in 1995, 93% of the workforce was full and part-time employees managed by HR. This breakdown of labor remained roughly the same through the early 2000’s. However, something has happened in the last 5 years. Today, freelancers and temps (also known as contingent labor) make up nearly 15% of the workforce, and by 2020 it’s expected to be nearly 20%. Freelancers alone are expected to grow from ~7% to 16% of the workforce.
This upward trend tells us three things: First, freelance labor is on the rise, and based on the patterns in temp labor, we should expect it to continue. Second, the growth in freelance indicates that organizations are embracing work arrangements other than just staff employees. And third, particularly those enterprises that use freelancers at scale, will need new tools and processes in order to handle the entire freelancer life-cycle.
Temp v. Freelance Labor: What’s The Difference?
Historically the enterprise has dealt with labor in two ways-- by classifying workers as either staff or temp workers. Human resource departments handle the recruiting and hiring of staff employees, and staffing firms are typically hired to handle contingent labor. When we look at the role of the temp worker and the freelancer, the main difference is this: temp workers work for a staffing firm. They are employees of the staffing firm, and every aspect of their contact with an organization (hiring, managing, and payment) happens through the staffing firm. Freelancers are independent workers that have a direct relationship with an organization, with the focus on doing specific assignments. Freelancers are often hired at scale, which adds a great degree of complexity to management-- which is where the need for a freelancer management solution comes in.
While the market is ripe with solutions and processes to bring efficiency to both staff and temp workers, neither category is equipped to deal with the complexities surrounding freelancers. Out of necessity, I believe a new category of talent acquisition is emerging. It’s freelancer management workstream. And it sits right beside HR and Staffing firms in a comprehensive talent strategy.
Where Is The Labor Market Headed?
As someone who has spent my entire career building disruptive labor technology, I have become familiar with the movements in labor markets. And there’s a big one happening now. Here’s the course I predict in the next 2-4 years:
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A independent contractor population continuing to grow as millennials face tough job prospects and often choose more flexibility in their life.
Retirees staying engaged in the workforce as freelancers with special knowledge
Independent contractor usage within enterprises will continue to grow exponentially as companies adapt to the changing workforce, and enjoy the benefits of a variable labor (efficiency in costs, etc)
Companies viewing freelancers as the third prong of a workforce approach (along with staff and temp workers).
Freelancer management solutions such as
Work Market becoming standard expenditures within the enterprise.Markets eventually consolidating and the companies building these systems IPO’ing, becoming absorbed into staffing firms, or becoming a target by enterprise software companies that recently rolled HR platforms into their offerings (See
SAP ’s(NYSE: SAP) acquisition of SuccessFactors and FieldGlass andOracle ’s (Nasdaq:ORCL)acquisition of Taleo)
Given the complexities surrounding the growth of freelancers (which the data suggest is a trend that’s here to stay), that’s where a solution for freelancer management at scale comes in. Work Market, for example, provides the marketplace and technology for companies to find freelancers, verify backgrounds, engage and manage freelancers, rate their performance and pay them. Each of these steps is critical for a company in navigating today’s complex regulatory environment surrounding independent workers.
The workforce of the future will need to be able to accommodate freelancers in order to compete. They will need the technology, tools and processes like those that we provide. Business planning for this starts now, as we’re already seeing among the most forward-thinking of enterprises.
