On April 18th in a private dining room tucked away on the Lower East Side of Manhattan, a group of NYC Talent Acquisition (TA) leaders joined TALiNT Partners and Worksome for a deep-dive exploration of the US freelance workforce.
In 2023, there were 64 million US freelance workers which added a whopping $1.27 Trillion to the US economy – with numbers like this, and at nearly 38% of the US workforce, this was a hot topic which needed to be unpacked.
A few key questions repeatedly came up from our TA leaders such as: What are the key reasons an employer would leverage a freelance worker/workforce? How does an employer ensure a freelance worker/workforce is compliant? What is an Independent Contractor Management System (ICMS), and can it layer into a larger, more complex tech stack?
With increased numbers of employers seeking new talent channels, the freelance worker/workforce appears to be a no-brainer. However, one key factor, which shouldn’t be overlooked, is the potential cost benefits, as freelancers, typically, do not require benefits – which leads to a cost-saving as compared to a full-time hire. Another reason is the scalability of the freelance workforce which gives employers the ease of ramping up, or down and reacting accordingly to the ever-changing business landscape.
Beyond cost and scalability, another key factor employers are considering a freelance workforce is the access to a wider talent pool – especially with skilled professionals, allowing employers to find exactly who they need. In addition, because a freelance worker can be anywhere at any time, employers can get projects done quicker and hire globally. David Weiss, Senior Vice President of Revenue at Worksome emphasized that whatever an employer is trying to achieve by tapping into a freelance workforce…it’s important to understand the needs of the business and the project at hand to get the best outcome.
Is compliance really that important?
The answer from the dinner table was a resounding ‘Yes’! But what does “being compliant” entail and ultimately mean to an employer? From legal regulations to worker/employer relationships, this can be a minefield for employers.
Building a successful freelance workforce requires a proactive approach to ensure compliance and avoid being weighed down with legal issues. This means understanding the legal distinction between employees and independent contractors (ICs) in different US states/regions. Weiss also commented that partners such as Worksome can offer guidance and provide a compliant/non-compliant answer within seconds, which avoids any future issues with the worker.
Once you have identified the freelancer, formalizing the working relationship with a written Independent Contractors agreement is important, unless leveraging a partner who handles this for you. This type of agreement should outline; the scope of work, payment terms, confidentiality obligations, and intellectual property ownership. Depending on your location, an employer might also need to collect tax forms from freelancers and maintain clear records of their work. By following these steps, employers can build a compliant and successful freelance workforce.
What is an IC Management System, and does it integrate?
Employers who rely on freelance workers, also known as ICs, can benefit hugely from using an Independent Contractor Management System (ICMS), using it as a technology partner targeted to manage an employer’s freelance workforce.
An ICMS helps in several key areas: Firstly, it streamlines the onboarding process, making it quicker and simpler to bring freelancers on board. It also helps ensure companies are following the rules by classifying workers correctly and keeping track of tax forms. Equally important, especially for larger freelancer populations, ICMS automates time tracking and payments for freelancers and even integrates with payroll systems for a smoother financial flow. ICMS partners, like Worksome, can facilitate the entire process from project creation through to freelancer payment – easy, efficient and compliant. According to Weiss, when considering an ICMS it’s important to understand and evaluate all aspects of the technology offered, and whether it can grow with you as your freelance workforce matures.
The ICMS is incredibly versatile and includes features for project management and communication, allowing in-house teams to collaborate directly with freelancers. The system can even generate reports, providing valuable insights such as freelance worker activity, project costs, and overall program performance.
The real power of an ICMS comes from its ability to integrate with other technology partners such as an employer’s HRIS, VMS and/or LMS. The systems can communicate with each other and provide a 360-degree view of the workforce. By providing a more data-driven approach to talent management, an ICMS helps companies make better decisions when it comes to utilizing freelance workers.
After hearing several thought-provoking discussions, the TA leaders agreed that the freelance workforce shows no signs of abating with forecasters expecting a projected leap to a staggering 90 million by 2028. With this level of growth, we are likely to see the implementation of additional regulations and legislation to protect all parties involved, and the consensus is this needs to come sooner rather than later.
