Demand for freelancers continues to grow

There is a curious paradox happening in major cities around the western world. While billions of pounds are being spent every year planning and constructing towering office blocks designed for large groups working in one place, the workforce itself is quickly becoming diffuse.

Better communications technology is enabling more people to work at home, with clients or in desk-share spaces, while a favourable tax regime for micro-businesses and a brighter spotlight on the work-life balance means more and more are making the move to self-employment.

The impact of this is huge. Falling unemployment – the cornerstone of the government’s proud record on the British economy – would look less impressive were it not for the million-fold explosion in micro-businesses that has taken place since 2010.

Self employed workforce

The genie is out of the bottle – clearly also a fan of working remotely – and it’s hard to see a future where everyone falls back into old patterns of daily commutes and nine-to-five desklubbing. In fact, the opposite scenario is much more likely, with even more people waving goodbye to the boss, only to wave hello again as an untied contractor.

It’s happening across all sectors from the creative industries to health and contractors are needed for a broad range of tasks, according to Thomas Bridge, operations director at Russam GMS, a UK interim management firm.

“The biggest rise we are seeing is in the public and charity sectors. Large central government departments are going digital by default,” he says. “Once it’s done, there’s no need to keep all the developers, so interim IT experts are going in for anything from six to thirty six months. In the charity sector, because of the recent problems, we’re seeing lots of finance and fundraising interims required.”

Pros and cons of going freelance

The question whether or not the trend is a good thing has many parts to it. For individuals it’s empowering as they call the shots and the money they earn correlates directly with the work they do, unlike the poor grunts who slave away for a fixed salary every year.

Conceptually, at least, they can take days off at the drop of a hat. Pick the kids up from school, go to the dentist guilt-free and, if work piles up, they can cram over the weekend to clear the books. Contractors tend to get better rates of pay per job too.

But weighing against these pluses are a few minuses. Freelancers are responsible for all the machinations of their business. They are the business developer, the book-keeper and the office manager, as well as the doer of work.

Billable hours are reduced by the need to chase up invoices and file tax returns. Any form of downtime, through ill health, childcare or a lack of work, is dead space. Freelancers don’t get benefits, expenses are tax deductible, but you still have to pay them, and your pension is your own responsibility, as is insurance.

Giving employers more flexibility

It’s a mixed picture and for employers it is no clearer. Many bosses celebrate the rise of the freelancer because it offers access to a rich vein of talented individuals minus the liability of keeping them on the payroll full time.

They can pay a £150,000-a-year consultant £12,000 for a month’s work, then shake hands and walk away. But here too there are questions, data security, reliability and loyalty among them. Can you guarantee that a freelancer will give you the same commitment as a full-timer?

One of the contributing factors to our growth success is we used freelance skills for very specific, finite pieces of work

Watching contractors come and go is giving PAYE employees ideas too, leading to a major upheaval in the working patterns of employees. It’s potentially a great motivational tool, but also a situation that must be organised and regulated.

James Poyser, founder and chief executive of inniAccounts, used freelancers when he started his businesses and says business owners should take a strategic approach that incorporates all the benefits of a flexible workforce.

Home workers in the UK

“One of the contributing factors to our growth success is we used freelance skills for very specific, finite pieces of work – work that simply does not justify headcount,” he explains. “In the early days we built a virtual team with wide-ranging expertise and it gave us access to talent we wouldn’t otherwise have been able to afford. Of course, I was aware that I might not be able to attract the skills as a startup too.

“Our model was to hire ten specialists part time rather than one generalist. It really paid off and I see a lot of small businesses growing their businesses this way. It provides a fast start to creating your brand and the infrastructure you need to make the idea a reality.”

Managing a freelance workforce

Julia Kermode, chief executive of the Freelancer and Contractor Services Association, says the growth in freelance numbers is positive overall, but a mixed blessing for employers.

“It gives them the ability to flex their workforce in ways that permanent employment doesn’t allow, but they are having to reconsider how to attract freelance skills, and how to juxtapose their employee value proposition and the proposition they use to attract freelance skills,” she says.

“Thereafter, they are having to learn how to obtain and retain visibility of the sum of employed and non-employed workers, and to manage them as one workforce, which is a new phenomenon that the vast majority of employers are yet to grasp.”

David Knight, associate partner at KPMG who advises businesses on how to optimise their workforces, agrees that businesses will benefit if they can build structures that blend the separate needs of employees and freelancers.

“If a freelance workforce is managed effectively, through a focus on early induction, productivity management and skills migration to permanent workforce, then there shouldn’t be any major issues. Many organisations, however, fall short in these requirements and thus can experience some issues. Comparable rates of pay, if transparent, can also be disruptive.”

So what’s the best advice for employers looking to take advantage of the freelance revolution without falling into the traps? Jason Kitcat, micro-business ambassador at Crunch Accounting, has a few ideas.

“If you haven’t employed freelancers before, take baby steps. Outsource a small project to get a taste for it. Debrief with the freelancer once the project is over to see how they think it went and use that to inform how you manage your next project,” he says.

“Remember a freelancer has other clients and they have to manage you as much as you have to manage them. If you hire the right freelancer, the actual work shouldn’t be a problem, so ensuring a successful outcome is purely a question of effective communication.”

New freelancers entering the market every day present an opportunity for organisations to complete work in a flexible no-nonsense way. But they should invest time and effort in creating the right blend to deliver flexibility without sacrificing consistency.