New Study: Freelancers Make Up 34 Percent of US Workforce

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A study that was conducted in 2014 on behalf of the Freelancers Union showed that 53 million people in the US are freelancers, which makes up for 34% of the total labor force. The freelancer population is expected to skyrocket to almost 80 million by 2020.

There are many names describing the contemporary freelancing labor force, such as “flex” or “gig economy,” “labor on demand” and “outsourced workforce,” but the fact remains: In 2016, the independent workforce has indeed reached its critical stage.

Deloitte’s 2016 Global Human Capital Trends study revealed that just over half of the surveyed global executives admitted that their companies intend to invest more in outsourced workers and freelancers in the following 3 to 5 years.

There are imminent political, social and financial changes influencing the contemporary work environment, in a way that renders it impossible not to exert a decisive effect. Below are the most important fluctuations and trends that I continue to keep an eye on:

  1. New Ways to Source and Hire

Along with the increasing need for independent freelancers comes an equally pressing need to discover them, bring them on board and manage them.

For a long time, online marketplaces for freelancers have been the mainstay for quick discovery and engagement of outside talent. Other popular services like Upwork (formerly Elance/Odesk), PeoplePerHour and Freelancer.com, have been common destinations for small companies and professionals globally, in their effort to find inexpensive talent for short assignments or to work on dedicated projects.

However, as larger corporations move in to acknowledge this independent labor force, more advanced and complex platforms are making their appearance. It’s simply not possible to use simple systems and technology anymore (read this host monster review to understand why).

Work intermediation platforms (WIP), also referred to as freelancer management systems (FMS), play the role of an “electronic bridge” between freelancing workers and full-time staff and help businesses incorporate the independent outsourced workforce to their in-house full-time employees and processes. By taking advantage of these systems, companies are finding it easier to discover, hire, manage and compensate their contractors.

Although there are currently some providers who specialize in the provision of WIP services, such as Upwork Enterprise, Work Market Inc., and Shortlist.co, some businesses prefer to design proprietary WIP solutions.

For instance, PWC has created Talent Exchange, a system which makes it possible for highly competent freelancers to directly access the company’s staff who seek help for their tasks. This system serves a dual purpose, increasing work opportunities for external contractors and also increasing the in-house personnel’s versatility with their projects.

The Washington Post has also been engaged in a similar project, to better handle its outsourced labor. Using their “talent network” platform, they simplify the process of finding, hiring and deploying independent writers. What’s more, besides handling work assigned to them by the paper’s editors, independent writers can also propose story ideas to the Post as well.

  1. Automation of Administration

With massive freelancer hires, workforce management becomes increasingly complex. Businesses have traditionally used Excel and e-mail to handle their independent workers, but the recent rise of this “on-demand economy” has rendered this method of administration obsolete, requiring new, more efficient methods of working.

Work intermediation platforms (WIP) can streamline the whole procedure of freelancer hiring, which includes the collection of essential information, background checks of qualifications, certificates, and licenses, and cross-checking of customer references.

Following registration, contractor candidates are automatically grouped and assigned to several talent pools that form internally in the system, so that every member of the regular staff can access them on-demand. WIP systems are also capable of assigning work, collecting quotes and monitoring invoices. In many cases, invoice acceptance and payment clearance can be done directly from within the system.

These platforms achieve a degree of versatility and automation that equally benefit both the employers and the outsourced workers.

  1. Misclassification and compliance management

As the borderlines between the definitions of independent and full-time worker are becoming all the more difficult to guard, and although some businesses have attempted to exploit the limits of cooperating with freelancers for tax or benefit avoidance purposes, the risks far outweigh the potential gains.

Microsoft is a splendid example. In 2000 they were forced to pay the IRS $97 million because of a benefits case that started from a team of temporary workers with long-term employment status, that should have been registered as permanent personnel instead (W2 classification). The company was accused of illegally depriving temporary workers of benefits that permanent employees casually receive.

The problem emerges due to the clash between labor law that was forged in the previous century and the contemporary need for more flexibility in work. According to J. Rampton, an expert at Due.com who focuses on the freelancing market, it will be easier for employees to correctly classify their outsourced talent in the future since an increasing number of relevant platforms resort to external agencies to ensure their labor force functions in agreement with labor legislation.”

Companies can minimize their risk by collaborating with a WIP service and leverage their means to discover and onboard their freelancing workers. Most current WIP systems have the ability to monitor misclassification of freelancers, thereby preventing companies from falling into expensive loopholes.

“On-¬≠demand” Economy Expanding

The “on-¬≠demand” economy is continuing to expand as enterprises worldwide adopt the new way of working by increasing the percentage of freelancers they employ. However, the rapid adoption of the new model is destined to cause changes in areas that the company runs in as well.

This is an evolution in progress, and enterprises are changing their policies to keep drawing the best talent from the freelancing workforce.

Melissa Thompson writes about a wide range of topics, always revealing interesting things we didn’t know before. She is a freelance producer for USA Today, and a contributor at Technorati. She lives in Utah with her 2 kids and husband. Melissa Thompson can be reached via LinkedIn or Twitter @melthompson88. Please follow and friend her on either site.