How Businesses are Adapting to the Independent Contractor Economy
There is no question that freelancing, the ‘gig’ or ‘sharing’ economy and the trends of making work structured on a contingent basis are profound, both for business and employees. The upheavals in today’s workplace mean that concepts like organizational commitment and the psychological contract between employer and employee are changing and perhaps disappearing. All of this has enormous implications for the future of work and how people are managed, and what management of people means in the freelancer economy. To learn more, checkout this infographic created by Rutgers University’s Bachelor of Arts in Business Administration program.
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There is an Increase in the Number of Freelancing Americans
The current American freelance workforce has reached 53 million. This represents 34% of the total U.S. labor force, which is currently pegged at 157 million. This figure has risen by 4% since 2006 when it stood at 31%. Out of the 53 million freelance workforce, 21.1 million (40%) are independent contractors. 14.3 million (27%) are moonlighters holding multiple jobs while 9.3 million (18%) have diversified into different business opportunities. 5.5 million Freelancers (10%) work under a Temporary appointment agreement. There are 2.8 million freelance business owners representing a mere 5% of the freelance workforce.
The Future of Freelancing
By 2019, the freelance workforce is expected to reach 40 million due to the current growth rate of the sector. This is because of the increasing popularity of freelancing. Today, freelancing is highly respected as a standalone career path compared to three years ago. This is according to 65% of freelancers. Furthermore, a whopping 80% of traditional workers are open to the idea of engaging in additional work that is outside their current employment. This is dependent on the condition that such secondary work is available and that it increases their income stream. 20% of employed personnel would not consider engaging in contractual work. Another 67% of workers expect to continue freelancing for more than 10 years.
Demand for Freelancing Services
32% of freelancers reported an increase in demand for services they offer within the past year while 15% reported a decrease. When it comes to working hours, 38% of freelancers are of the opinion that their hours will increase going into the next year compared to 12% who expect to work fewer hours than they are currently putting in daily. 43% of freelancers are confident that their income base will increase in the next year as opposed to 11% who expect it to drop. Another 77% report that they just break-even compared to before they got into freelancing. 42% report that they currently make more money in freelancing than they did before they got into the sector.
Popularity of Freelancing: Employers and Workers
Why do people freelance?
Flexible Schedule: Today, 45% of Americans hold the opinion that they have less time on their hands for personal activities. This makes freelancing sound quite appealing to them. 38.7% of freelancers cited a flexible schedule as the number one benefit of working in the sector. Freedom to Select Interesting Projects: Only 31.5% of the U.S workforce is actively engaged in their current employment with a majority of workers citing the need for more exciting projects. Freelancing is an avenue that provides the freedom to select interesting projects. This is the top perk for 24.6% of freelancers. Diversifying Income Base: About 60% of freelancers enjoy multiple income sources. 19% of the total freelancers in America hold part-time or full-time jobs. The ability to diversify is the top benefit of freelancing according to 9.8% of freelancers. Working from Home: 18.7% of freelancers rate working from home as their top benefit. Over half of the American workforce (54%) report that they prefer to undertake important work-related assignments from home. 19% prefer to work at their office during working hours. 18% did select the office as their favored working area but during outside working hours.
Reasons Why Businesses are Hiring Independent Contractors
The U.S Economic Recession: Employment in the U.S private sector increased steadily between 1980 and 2000. From 1980 up to 1990, it increased by 21.6%. While from 1990 up to 2000, it held at 21%. This figure rapidly decreased between 2000 and 2010 (2.9%) due to the recession. From 2010, it resumed its upward trend recording a 10.8% increase. Increasing Compensation Costs for Permanent Workers: The cost of health insurance has risen drastically in the last 10 years to reach an all-time high. Annual employee health premium contributions increased by 81% from $2,661 in 2004 to $4,823 in 2014. On the other hand, employer contributions have increased by 69% from $7,289 in 2004 to $12,011 in 2014.
Recommendations for Businesses Concerning Freelancing
Accept the Trend
Today, employers are increasingly embracing freelancing by hiring independent contractors. 46% reported plans to hire temps and contract workers in 2015, a 3% increase from the previous year. A growth rate of 3% in temporary employment (75,384 jobs) is expected between 2014 and 2015. Furthermore, this growth rate will hit 13% (354,877 jobs) by 2019.
Embrace the Benefits
Lower Overheads: 20% of U.S workers would agree on a 10% pay cut in favor of flexible work options while 80% would not agree to a pay cut. A further 22% would forego health benefits as opposed to a 78-percent majority who would not. 18% of workers would agree to put in more hours. A happier and Productive Workforce: 61% of people think that working from home is more productive as opposed to working from the office and cited office politics as a hindrance. Another 59% of Americans confirm that fewer office interruptions from colleagues would inevitably increase their productivity. 56% say that a home working environment has fewer general distractions. In general, 79% of freelancers enjoy their independence.
A large number of freelancers (65%) say that it is easier to find work online. Likewise, 42% report that they have done at least one online freelance project. Another 31% say that they have been able to secure a gig online in less than 24 hours.
Coming Up with New Business Models
Protean corporations have the ability to rapidly adapt and shape-shift in response to market forces. They utilize contracted talent in the process. These businesses retain core operations for their permanent staff and outsource other functions depending on their immediate needs. This allows them to efficiently run their daily operations while still upholding their mission and core values. They utilize crowdsourcing to meet staffing needs. Freelancing is an opportunity for many businesses and should be utilized effectively.