Freelancing is on the rise to the extent that the employee of the future may not be an employee at all, but an independent contractor. It will take perhaps a decade before this trend fully evolves but it is well on its way. In this article, we track the development of this trend, corresponding regulatory backlash and innovative ways for companies, freelancers, and third party industry to create significant advantage now.
According to Wikipedia, “A freelancer, freelance worker, or freelance is somebody who is self-employed and is not committed to a particular employer long term.... In contrast, workers who are hired to create a work according to the publishers' or other customers' specifications are referred to as independent contractors.” For the sake of executive sanity, we will bring both of these types under the umbrella of freelance.
Anita Campbell at trendtracker.blogspot.com suggests that, “The U.S. is truly becoming a nation of people freelancing their skills and talents... The old-line ‘temp’ industry has already begun to morph into something new. Just what that something will become remains to be seen.” There was a time when temp agencies enjoyed a great market. Have you noticed that you do not see them around anymore? The demise of the temp agency model was step one as freelancing moved towards being the norm.
Campbell suggests that, “Consultant used to be code for ‘just killing time between jobs’.” We cannot ignore that freelancing may have been forced on many given the state of the economy. How many of those accidental freelancers will end up preferring the arrangement? Marth Retallick at FreelanceSwitch.com suggests there are two types of freelancers, “There are freelancers-for-now. And there are those who are in it for the long haul.... the freelancers who survive are those who are good at what they do, and are excellent at business.”
Wikipedia cites the Bureau of Labor Statistics as noting that, “Approximately 10.3 million workers in the US (7.4% of the US workforce) are independent contractors. In the past three years, companies have increased their outsourcing by 22% on the internet.” This is hardly surprising, however, the outsourcing boom created demand in the freelance market and the market responded. Freelancing is not a new trend, but one that has in recent years taken a turn towards becoming the norm and such outsourcing preferences have accelerated the evolution.
Maturity in the freelance model is a significant indicator of the longevity of this form of employment. According to Wikipedia, the most common fields for freelancing include, “journalism, book publishing, journal publishing, and other forms of writing, editing, copy editing, proofreading, indexing, copywriting, computer programming and graphic design, consulting and translating.” According to Hamesh Ramesha at Tonic.com, “approximately 63 percent of artists work as freelancers.” Add to that, “software development, website design, advertising, open innovations, information technology, and business process outsourcing,” all spurred by the increase in “e-lancing” via online freelance job sites. Sites such as Elance, Intota, ConnectionWorx, ifreelance, odesk, freelanceswitch, allfreelance, and many many more further increase demand for freelancers by acting as a dating service between employers and potential freelancers.
Wikipedia reports that, “Some sources claim that elancing is to become the dominant type of work organization. However, other sources recognize that this switch will take longer than expected to happen, as was the case with e-commerce.” One future issue, as elancing gains popularity, will be commoditization of freelance workers. The competition, however, can only be good for your business.
The next level for freelancers would then be partnership and that is exactly what many smart freelancers have done. According to Wikipedia, “Sometimes a freelancer will work with one or more other freelancers and/or vendors to form a ‘virtual agency’ to serve a particular client's needs for short-term and permanent project work.”
Campbell predicts that, “As large firms respond to tighter times by restructuring, they'll continue to replace employees with contract workers.” That is, this trend is not going away, it is only going to grow to the point that the freelancer is the normal employee and an actual employee is quite rare indeed.
Consider now the benefits to the employee given social media age work cycles: the boomer generation is retiring now and over the next two decades. They take with them the last of your workforce that believe in staying anywhere for very long. The average generation X employees stays in one job less than three years and the average generation Y employee stays for a year. Changing jobs so often, employees seek the convenience of independent benefits that they can carry with them, home offices that they can use no matter who their employer is, and the like. More money, tax incentives, better retirement investing options and so much more are increasingly enticing.
Of course, the freelance lifestyle is not all roses and sunshine. Being a freelancer takes self-motivation, organization and discipline. The freelancer has no company sponsored benefits, no paid vacation and they work for the worst possible boss in the world - themselves. The benefits, however, would seem to outweigh these nuisances as the percentage of freelancers continues to grow.
The benefits for any company in using independent contractors are so attractive that more companies prefer such an arrangement. Many companies believe that hiring freelancers may mean sacrificing availability, and possibly loyalty. That freelancer, if they are any good, may not be at your beck and call. For some employers, that is unacceptable. Many employers also worry that, because the freelancer is likely to have other clients, they may not be as loyal to the company as a full time employee. The reality is that if your company is not the type to engender loyalty, then you won’t engender it with your employees either. Of course, not having to pay the associated benefits and taxes usually required for employees is reason enough to farm out every position that you possibly can. It is precisely that reason that has prompted government regulatory backlash across the world.
According to Wikipedia, “In Europe, the perceived disadvantages of being freelance have led the European Union to research the area, producing draft papers that would, if enforced, make it illegal for companies or organizations to employ freelancers directly, unless the freelancer was entitled to benefits such as pension contributions and holiday pay.” This would make the benefits of hiring freelancers quite a bit less attractive to most companies. While it would be nice to believe that such regulation would stay on the other side of the pond, we are not so lucky.
Within the past decade, federal and state agencies within the US have increased their scrutiny of independent contractors who are “misclassified.” Contractors can be considered, via precedence (see AOL), to be misclassified if they work full time for one employer only. Federal and state agencies are naturally interested in the taxes and other revenues due the Government for employees that companies are not required to pay for freelancers. Increasingly, they are willing to regulate and legislate to get the money back.
According to Wikipedia, “A Massachusetts law states that companies can hire independent contractors only to perform work that is ‘outside the usual course of business of the employer’.” Although this law, M.G.L. c. 149, s. 148B, appears on the surface to target only the public construction industry, recent amendments and advisories less than two years old have broadened it to all industries. Disturbing does not begin to describe the feelings this law should engender in executives nationwide. What remains to be seen is just how far other states and countries are willing to go to ensure their share of your business profits.
In the meantime, new industry verticals are developing to cater to freelancers, and the companies that hire them. Freelancers Union and BOTH are two unique examples of an association and a company designed to help freelancers via support and assistance. As the trend evolves, and freelancers become the norm, we may well see the e-lancing website model also evolve to better serve companies and executives who seek a more virtualized workforce.
To create advantage from this trend, consider the following. Future employees may not be employees at all. As freelancing becomes the norm, your company is more likely to center around a smaller core of employees and a larger set of freelance talent. Finding that talent will be key. Use social media and e-lance trials to find the right freelancer. Working your network and trying out new talent via small projects, are both great ways to know that you are hiring the right talent for your company. Once onboard, build loyalty with your freelancers AND your employees. Freelancers can be great corporate cheerleaders and connectors so your time in building loyalty will be well spent. Along the same lines, hiring freelancers does not justify incompetent management. Just as you must manage employees, you must manage freelancers. Lastly, and not to deter you, but freelance regulation will get worse before it gets better. The evolution of freelance towards the norm will mean additional backlash from state and federal governments worldwide. Stay on top of regulatory changes and anticipate their next move as you go along. The advantage will be yours.
For further information, consider these sources along with your own:
Wikipedia - Freelancer
http://en.wikipedia.org/wiki/Freelancer
Wikipedia - E-lancing
http://en.wikipedia.org/wiki/E-lancing
The Trouble with Freelancing by Anne Wollenberg
http://www.guardian.co.uk/commentisfree/2010/jun/04/freelancing-benefits
The 411 on Freelancing for Artists by Hamsha Ramesha
http://www.tonic.com/article/the-411-on-freelancing-for-artists/
Your Guide to Freelancing Success by Grant Friedman
http://artbistro.monster.com/benefits/articles/9886-your-guide-to-freelancing-success
Trend: Freelance Economy by Anita Campbell
http://trendtracker.blogspot.com/2004/05/trend-freelance-economy.html
Spotting a Freelance Niche with Growth Potential by Shannon Belew
http://consulting.about.com/od/freelancing/a/SpTrend0405.htm
The State of Freelancing: 2010 by Martha Retallick
http://freelanceswitch.com/freelancing-essentials/the-state-of-freelancing-2010/
