The gig economy, currently accounting for 12% of the global workforce, keeps expanding. The compound global annual growth rate of the gig jobs industry is estimated at over 16%. In more specific numbers, this could mean that by 2027, roughly half of the US workforce will be engaged in some sort of freelance work, according to Statista. Based on the same source, in 2023, over 64 million US professionals offered freelance services, contributing trillions to the US economy – and both figures keep rising.
In other developed countries, the situation is similar, with about a third of global freelance work carried out in Europe. In the meantime, Asia and Asia-Pacific regions, renowned for their affordable outsourcing staff, are stepping up a notch as freelancer rates in the region keep increasing by roughly 40% a year.
These numbers clearly indicate that the freelance workforce is a power to be reckoned with, implying that the full potential of gig jobs hasn’t been fully explored yet. For a company, collaboration with freelancers can offer the kind of flexibility an in-house team could never provide – both in terms of more flexible financing and the potential for skill variation. At the same time, the bias towards freelancers (lower quality and reliability) still persists, implying that freelancers could quickly become a double-edged sword for a business.
In this post, we analyze the main pros and cons of working with freelancers and offer some actionable tips on making the most of this collaboration.
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Top Benefits of Hiring Freelancers
The benefits of working with freelancers will vary slightly depending on the industry and business specifics, but the truly universal advantages any company can leverage include:
Financial and administrative savings
The most obvious benefit of hiring freelancers is the cost savings compared to maintaining an in-house team. Notably, a fair share of those savings is derived from project downtime – as freelancers are essentially independent contractors who work on a per-gig basis, this benefit is usually a decisive factor for companies who cannot guarantee a steady full-time workload on specific tasks and projects, and so, cannot afford to compensate for downtime. When translated into hourly rates, freelancers in some industries may charge higher fees compared to in-house staff – but again, it’s the downtime that’s the primary consideration because, based on the annual average, in-house staff is almost two times more expensive than gig workers.
In addition, collaborating with remote professionals (or entire teams), if necessary, often translates into indirect savings. Usually, freelancers manage their own taxes, which is another expense point for any company. Besides, there are hidden infrastructural savings – no need to rent more office space, hire additional managers, or replenish the office supplies.
Global access to a diversified talent pool
Besides financial flexibility, hiring freelancers allows employers to access a wider pool of hard and soft skills, which keep gaining ever more importance in today’s fast-paced landscape. Typically, freelancing professionals can manage their own time, work with minimum supervision, and are highly result-oriented. Plus, to stay competitive in today’s market, freelancers need to stay updated on the latest skills and technologies necessary for their jobs, which is why employers can benefit from the latest knowledge at a relatively moderate cost.
Promoting diversity and spurring innovation
Depending on the business specifics, collaboration with freelancers can also boost creativity and innovation through the influx of new ideas, especially when hiring people from different cultures. As a side bonus, such a policy promotes inclusion and diversity, something GenZ professionals expect from their employers. And since GenZ makes up a large share of today’s workforce already, ignoring this group’s expectations is a poor strategic decision.
Finally, employing people from different time zones can seriously increase the company’s availability hours, which could be a huge bonus for some businesses. While this perk does not always apply, it still deserves a mention.
Potential pitfalls of working with freelancers
Besides the obvious advantages of working with freelancers, there are several risks employers should carefully consider before making any decisions.
Inconsistent work quality
Often, it is difficult to evaluate someone’s professional capacity from an online portfolio – that, in the case of freelancers, often features very different work. The obvious solution when screening freelancers is to start with a test; that, however, is not always 100% effective. Since freelancers can often juggle different projects and clients, their focus of attention may suffer, which also affects work quality. Of course, this largely depends on the professional a company hires and the negotiated terms, but the risk exists nonetheless.
Lower loyalty to the company
Another potential disadvantage of working with freelancers that may affect overall job quality and execution timeframes is the lack of genuine commitment to the company they work for. Gig economy workers do not have the same security as full-time employees, which is why they often agree to any work that comes their way without actually committing to any of these projects. Besides, short-term contractual work, especially in a disengaged, remote mode, does not immediately inspire genuine interest, which could become a deal-breaker for many employers.
Security concerns
Often, working with independent contracts poses additional security risks – both on a purely technical level and intellectual level. As far as technical threats are concerned, cybersecurity is the first thing that comes to mind. Employers have zero control over the hardware, software, and internet networks freelancers use – and if they’re not careful, companies risk losing sensitive information. A threat of losing sensitive information exists on the intellectual level as well – most often through failed (or non-existent) NDAs and ambiguity in intellectual property laws.
Regulatory & management challenges
Another potential pitfall is the lack of international laws on employing freelancers, which could pose many regulatory challenges. While freelancers often handle their own taxes, employers might still need to navigate complex labor laws, internal taxation, and other corporate reporting challenges. Besides, when working with someone from a different jurisdiction, NDAs we already mentioned above, copyright, and other data protection laws may simply not apply. All of these factors could also lead to misunderstandings and other managerial challenges.
Solutions: How to Make It Work?
Even though the risks of working with freelancers are not inconsiderable, choosing the right candidates and ensuring proper guidance can alleviate most, if not all, of the above challenges. The first tip is to treat your freelance contractors the same way as regular employees, keeping in mind that they simply work remotely. Besides, who knows? Choosing the right freelancers can help businesses nurture long-term, mutually beneficial relationships with highly qualified professionals, so some freelancers may stay onboard longer than in-house employees.
Now, what are the best strategies to attract and retain freelancers? While there is no one-size-fits-all approach, the following strategies have already proven effective in choosing and managing remote employees:
- Screen as attentively as you screen in-house staff: with recurring projects, a collaboration can prosper into a long-term partnership, so it makes sense to carefully evaluate all candidates.
- Communicate regularly: freelancers aren’t mind-readers, so it’s important to clearly communicate project guidelines and requirements.
- Offer support: even though most freelancers can work independently, it may not be the best strategy for some projects. Make yourself available for questions and suggestions because it’s always teamwork that makes dreamwork.
- Provide feedback: and not just critical one when something goes wrong. Acknowledging someone’s work is the kind of incentive that does not cost employers a dime, but it can go a long way in building trust and inspiring loyalty.
- Encourage interaction with colleagues: even if freelancers work remotely, they’re still part of your team. Most misunderstandings happen because many freelancers work in isolation, often without access to important project data or a basic exchange of ideas with colleagues.
- Don’t micromanage: many professionals who choose freelancing work can manage their own time and value flexibility above all else. If you would like to receive regular updates, it’s best to negotiate when and how these updates will happen rather than fall into the micromanagement trap.
All in all, the most important tips on screening and managing freelancers are not that different from handling in-house staff– because if you really think about it, both are company employees, and both deserve fair treatment. And in both cases, building trust and preventing employee burnout can go a long way.
Conclusion
In the last few years, the professional landscape did surprise everyone with a series of sharp turns, but it certainly seems that the gig economy will keep securing its position in the global services market. And while working with freelancers is associated with certain risks, the advantages of collaborating with independent contractors are also plentiful. Besides, proper screening and adequate management can help nurture meaningful relationships for all parties concerned.
So, keep in mind that all of your colleagues, no matter if they are part of an in-house team or independent contractors, deserve the same respect. We have already written about the direct correlation between a positive corporate culture and employee engagement – give this article a read because these strategies are equally effective for in-house and remote employees.
Plus, you can stay tuned for more posts on our blog because we regularly analyze the best HR strategies and offer tips on leveraging human talent to ensure steady business growth.