An increasing amount of studies and research are showing just how much of the workforce is made up of self-employed workers including those that freelance and work in the gig economy. With a boom in freelancing comes interesting implications for small businesses, which my colleagues and I have been musing over. Here are some of the takeaways we’ve uncovered on how freelancers can make a living as independent contractors, what’s behind that extraordinary growth, and how you can leverage this trend for your own business.
1. Full-time freelancing is a career choice, and it is growing fast.
Eleven percent of the workforce is full-time freelance. That group has doubled in the last ten years, and the growth projections are 3.5 percent per year.
Implications: About 1 in 9 of your former employees aren’t at another company; they went solo.
2. Your employees are side hustling.
About 25 percent of the workforce are W-2 employees who have done some kind of freelance work at least once in the last year. Some of them are doing that out of financial necessity, but a growing share of them side hustle because they want to build their skills and experience.
Implications: Your current employees are learning the advantages of freelancing . . . and how to do it.
3. Your employees are looking for other opportunities.
Lifestyle issues and engagement are driving the growth of freelancing. Only 30 percent of employees say they are engaged at work, and most say their work/life balance is out of whack. More than half of employees say they have their eyes open for other opportunities.
Implications: Your biggest challenge to employee retention isn’t a more attractive employer; it’s self-employment.
4. Freelancers aren’t coming back to the traditional workplace.
In the past, freelancers may have been “between jobs” or returned back to full-time traditional work if freelancing didn’t pan out for them for steady paychecks. Now, 80 percent say they strongly prefer this way of working, and more than half wouldn’t go back to a W-2 role at any price.
Implications: Traditional employment is becoming less attractive; 11 percent of the total talent pool isn’t interested in reading your job description.
5. The next generation will be born freelancers.
The first generation was made up of refugees from the traditional workplace. The next generation will be made up of freelance natives. Millennials are moonlighting at much higher rates than older workers and they strongly express the desire for flexibility and engagement. And guess what? Gen Z workers coming up behind them continue the upward trend in those surveys.
Implications: Young professionals will be even harder to find for W-2 roles.
Not a threat but an opportunity
If your hiring practices are automatically centered on W-2 roles, then the growth of the freelance workforce is going to sound like a threat to your business. But if you leave that way of thinking to your competitors, then this is an opportunity to have a strategic advantage.
Nimble companies will develop talent strategies for a hybrid workforce made up of internal W-2 employees and outside freelancers. They’ll be good at engaging and retaining employees and their contractors.
If you can find ways to source this talent, onboard them, engage them and to maintain a relationship with them between projects, then you are will do four things that have incredible value for your business:
- You’ll draw from a prospective talent pool 11 percent larger than what your competitors are drawing from.
- You’ll get access to talent with more diverse experience and with a lot of ambition and creativity.
- You’ll get all the advantages of flexibility and scale that come with outsourcing.
- You’ll be an employer of choice for these freelancers, getting the best work out of them.
Easier said than done? Well, if you haven’t looked at the growth of freelancing lately, you might be surprised at how quickly the market is growing to serve them and their clients. The tools you need for sourcing and managing this workforce are out there. There is a growing ecosystem of talent management platforms, payment platforms, legal services, etc. that are designed to reduce friction between employers and their independent contractors.
Eleven percent may not sound like a big number, but if you count the self-employed as belonging to one employer, it would be the largest employer in the U.S. — bigger than Walmart and bigger than the federal government. Working with this population is going to be inevitable for most businesses. The trick is to do that effectively be seeing it as an opportunity rather than a threat.