The gig economy got its name from the short-term contracts and freelance projects that are gaining prominence in the labor market.
For gig economy workers, also known as freelancers, contract workers, or digital nomads, the benefits are apparent: more flexibility, more choices in interesting projects, unlimited vacation time, and more freedom to do what they like. According to recent research by Upwork, over 57 million people worked as freelancers in 2017. The freelance workforce grows at a rate 3 times larger than the US workforce since 2014, and at this rate, the majority of the American workforce will be freelancers by 2027.
More companies are recognizing the benefits of the gig economy and taking advantage of this growing trend. According to a 2018 Ernst & Young survey, 56% of businesses say that freelancers can offer expertise beyond the capability of their existing workforce.
Five ways your business can benefit from the gig economy.
Save cost
Besides a base salary, businesses often pay an additional 25% and 40% for benefits (such as health insurance and paid time off) and taxes. However, since freelancers work on a per-project basis, employers can eliminate benefit costs and reduce employment tax to a minimum.
For positions that require advanced technical skills, filling a full-time position requires recruiting expenses such as hiring headhunters and setting up company accounts on recruiting websites. According to Glassdoor, the average US company spends about $4,000 and 24 days to successfully hire a new full-time employee. Hiring contract-based workers and freelancers can swiftly eliminate all of these costs.
Having fewer full-time employees also reduces the overhead cost of renting an office, buying office supplies and equipment, and insurance.
Save time
The onboarding process for full-time employees can take from one week to two months, depending on the company. When a new employee first joins, businesses need to familiarize them with the company’s culture, policies, and working processes. According to one research, it takes from 8 to 26 weeks for new employees to be up to speed.
Hiring a freelancer on a contract basis can help your business get the job done in a shorter amount of time since the time-consuming onboarding process can be reduced to a short document or phone call to introduce the company and the project.
Meet seasonal demand
Some businesses only get busy during certain times of the year – wedding season, holiday season, travel season. Due to fluctuating needs throughout the year, staffing full-time employees can be wasteful, since during low seasons, there are not enough tasks for everybody. According to E&Y, 42% of large and medium-sized companies use short-term workers during their peak season.
In the past, companies can use temp agencies to support seasonal needs, but these agencies also charge additional service fees on top of the compensation for temp workers. However, with the gig economy growing at an exponential rate, companies can easily source freelancers during peak seasons.
Hire experts on a budget
Hiring experts in certain areas can be costly. Does your company need a lawyer to review one or two contracts? Do you need a photographer for an event you are hosting? Or do you need your website designed? In all of these examples, it does not make sense to hire a full-time in-house lawyer, photographer or web designer for a one-off project.
Fortunately, more and more industry experts are dedicating their time to freelancing. According to a Buffer survey, 38% of freelancers are industry professionals who can offer their expertise on a variety of projects. Hiring contract-based experts is a great way to reduce the cost while still getting the quality that your business demands.
Experiment with new things at a low cost
Entrepreneurship requires a certain degree of risk-taking and experimenting with new products, services, and offers. E&Y said that more and more companies are using freelancers to help “integrating new products, services, technology and more into operations, without having to expand full-time equivalent headcount.” Therefore, if you are uncertain about the return on investment of a new product or service, piloting with a team of freelancers is a great way to minimize costs and risks.
How can you reap these benefits?
Despite the aforementioned benefits, the freelance workforce isn’t without any shortcomings. To reap full benefits from this emerging trend, below are a few of our recommendations:
1. Streamline hiring process
Despite the prevalence of gig workers, 21% of organizations surveyed by E&Y did not know who has primary responsibility for the recruitment of freelancers in their organizations. A streamlined hiring process saves time and minimizes confusion.
Most organizations currently source freelance workers via staffing agencies, in-house recruitment team or independent contractor networks.
A streamlined hiring process saves time and minimizes confusion. Most organizations currently source freelance workers via staffing agencies, in-house recruitment team or independent contractor networks.
2. Standardize onboarding
After finding a freelancer with the right profile for your project, the next important step is onboarding to help them understand the background of the organization and the requirements for the project.
A standardized onboarding process removes miscommunication between your business and the freelancers, saving you time while still achieving the desired quality.
3. Freelancer management
Nearly 2 in 5 organizations do not have a specialized plan to manage their freelance workforce, but this is the key to retain quality performers and eliminate bad apples to save costs for your business. Having a freelancer management strategy, including performance review and refresher training for your retainers, also ensure accountability and ensure that they consistently meet your expectations with their work.