Freelancing: The future norm of employment

Freelancing: The future norm of employment

Nowadays, people may not be surprised to see their neighbours drive their cars to pick up passengers or host strangers in a spare room at their home.

Our attitudes toward those who work as a freelancer (such as Uber driver, Airbnb host, or a stay-at-home programmer, writer or consultant) have also changed. The freelance economy has become an increasingly popular trend throughout the connected world, thanks to the rapid growth and adoption of technology. According to the latest survey conducted jointly by Freelancers Union and Elance-oDesk, there were 53 million Americans – 34 percent of the U.S. workforce - working as freelancers in 2014.[1]

In general, there are five different types of freelancers: independent contractors (non-permanent full-time workers in a company), moonlighters (people who have full-time jobs but also work on side projects at night), diversified workers (those who hold two or more different types of jobs at the same time), temporary workers (usually part-time workers), and freelance business owners (self-employed small business owners). With such a broad diversity of workers, the “freelance” workforce has many different entry points. This survey found that the two most common reasons for “going freelance” were to earn extra money (68 percent) and increase flexibility in their schedule (42 percent). Surprisingly, more than half of those surveyed began freelancing by choice, not necessity. Most freelancers are millennials, many of whom have spent their entire career working as freelancers.

Technology is the driving force behind the increasing proportion of freelance workers. The easy access to the internet (including mobile through tablets and smartphones) has made it easier to find freelance work. For example, nearly 42 percent of freelancers surveyed have performed an online freelance project, meaning they found and completed the project entirely online. 31 percent of the survey respondents said they could find a freelance project online in less than 24 hours. Besides improvements in communications technology, as human capital management software evolves, the major drawback of the work - inconsistency - could be tackled. For example, there are a few companies that now specialize in freelance management system (FMS), which is a cloud-based workforce software that helps businesses manage their independent contractors and freelance workforce. Analytics engines within FMS software will even allow businesses to optimize various aspects of their contract labour strategy and dramatically improve decision-making across the entire enterprise. Lastly, the growth of data-driven metrics in hiring and managing freelancers will improve the freelance structure by providing background checks, as well as crowdsourced marketplace ratings and reviews of freelancers’ performance. As a result, companies can access a myriad of data about the quality and background of the workers they hire, allowing them to become more sophisticated about finding and managing freelancers.

The industry is mitigating the risks of job instability by adding new features on their online platforms. For example, an Ontario-based platform, JobBliss, works like a matchmaking service for freelancers and companies. It helps freelancers manage time between multiple employers, establish long-term relationships with hiring managers, and views freelance work as a long rather than a short-term solution. More recently, JobBliss added new features on their platform, such as time tracking invoicing for paycheques and healthcare benefits, all to enhance the freelance experience and make it more akin to traditional full-time employment.

Large companies are increasing their involvement in the freelance economy. Large companies are regarded as the main contributors who generate full-time jobs; According to a recent survey from Upwork, more than half of the 30 companies on the most valuable brands list were regularly hiring freelancers through its online marketplace. Freelancers are predicted to become a larger and more consistent component of firms’ strategies.

The freelance economy is booming and showing no signs of slowing down. MBO Partners estimates that, by the year 2020, more than 50 percent of the private workforce in the U.S. will be independent contractors. According to John Ruffolo, the Chief Executive Officer of OMERS Ventures, the number could be higher in Canada. At the same time, the economy is experiencing significant shifts in the labour market, and the rise of freelance work is followed by concerns about labour protection and job security. This creates challenges for government. As an example, freelance workers do not qualify for many of the benefits a typical permanent employee may receive. This means that many freelance Ontarians are not required to pay into and may not receive key components of the social safety net, such as Employment Insurance and the Canada Pension Plan.

Further, insufficient data on freelancers means that it is difficult to demonstrate whether freelancers are properly reporting income taxes. Some tax experts believe that a significant amount of economic activity in the freelance economy goes unreported. Under the current taxation system, there is some grey area between professional services and personal services, and the lack of accurate tax data in the freelance economy can threaten the integrity of Ontario’s and Canada’s tax system.

The growth of the freelance economy should be regarded as an opportunity to create new ways of looking at regulatory and tax systems as a whole. Ontario should be proactive and consider innovative approaches to pilot the new policies where possible, as well as embrace the freelance economy.

 

[1] The independent contractors are treated as freelancers in this survey. The sample size of the survey is relatively small. 

Photo Credit: Bplanet, Getty Images 

Category: Employment, Innovation, Productivity