The free agent marketplace is growing—and so are the ways to manage and leverage these workers.
By Debbie Bolla
As the contingent labor market expands, the types and classifications of part-time workers continues to evolve as well. Organizations have finally realized the benefits of a contingent workforce—flexibility, scalability, and access to key skills—and are beginning to rethink their strategy. One specific area experiencing a big growth spike is independent contractors (IC). Also known as freelancers, these on-demand workers deliver specific needs and skills for organizations looking to tackle a project or initiative. Data from the Bureau of Labor and MBO Partners forecasts that freelancers will make up nearly 16 percent of the workforce in 2020, up from just 6.5 percent nearly 10 years ago.
“Independent contractors are an easy way for companies to bring on important skill sets without the cost and administration associated with hiring full-time employees. This makes companies more flexible and agile, as they can respond to changing market or organizational needs quickly without the complexities of disengaging with employees,” says Gene Zaino, president and CEO of contractor services management company MBO Partners. “It can also be faster to bring on a subject-matter expert for a particular project or market strategy while determining or re-aligning your long-term organizational needs.”
Several types of talent in the marketplace find on- demand work appealing. Workers from all generations can appreciate the flexibility project work provides, as well as the access to a variety knowledge leaders as their roles change. Plus for younger workers, being employed on a project basis offers opportunities for career exploration. Research shows that Millennials are likely to have between 12 and 15 jobs during their career. And baby boomers are facing their own set of unique challenges. People are living longer—which is a good thing—but they are also working longer. For the majority of the populace, retirement might not come as soon as it did in the past. According to Gallup, the expected age for retirement is 66; just 10 years ago, it was 59. All of these factors are having a great influence on the on-demand workforce.
“The dynamic of every job persona over the next several generations is going to have some degree of on-demand,” says Stephen DeWitt, CEO of technology solutions provider Work Market. “In the ecosystem of talent, all companies will begin to participate in some fashion.
Managing on-demand talent is a bit different than other types of contingent labor. Organizations that leverage managed service programs (MSP) are looking for third- party help to oversee a network of sourcing vendors and suppliers, says Zaino. The programs also include management of workers’ onboarding, invoicing, and billing. Zaino says that ICs live outside of a MSP’s network since organizations typically source ICs on their own and engage with ICs directly.
The management style of on-demand talent can vary as well. Work Market offers a technology platform—a freelancer management system—for organizations to manage and develop networks of ICs. It also offers a user interface for independent workers to locate jobs and to create a “retail storefront” for their worker brand. The platform also tracks and handles the details on the administration side.
Mike Harris, CEO of Patina Solutions, says that all external resources that are placed for project work by his company are W-2 employees of Patina’s network. The model is also unique since the network is made up of only seasoned baby boomers, and placements are most often at the senior level.
On-demand talent comes with its own set of challenges. Topping the list is risk mitigation, says Zaino, since the onus of paying taxes falls on the worker. “Tax authorities want to make sure that people working as ICs truly qualify to do so,” he explains.
Tax anxieties are eliminated with Patina’s model. “The IRS is concerned about how workers are classified and they have strict guidelines that come with potential fines,” says Harris. “Our network is W-2 employees that we vet so potential issues are taken out of the picture.”
How to engage with ICs can also be an obstacle for organizations. Executives need to readjust their viewpoints of ICs: They are highly talented workers, not tools or commodities, says Zaino. Organizations should have a management system in place in order to reengage with proven workers. “This will help them become a client of choice for this community that can pick and choose their engagements,” he says.
Is an on-demand workforce the wave of the future? It certainly seems that organizations of all sizes will at least look at how independent workers could impact their business strategy. “When the walls come down on open labor, the effect of on-demand talent is going to be profound,” says DeWitt.
Best-in-class companies understand that ICs are an important segment of their talent marketplace, says Gene Zaino, president and CEO of contractor services management company MBO Partners. He recommends organizations follow these three best practices for managing ICs:
• Institute a culture and policies that attract top-tier consulting talent and that can be adapted for businesses of one. For example, net-90 payment terms may work for large-scale vendors, but for an independent business they can be onerous. ICs who are treated well can become brand advocates for your organization and become a steady stream of reliable project work.
• Have a process for identifying and recruiting top-tier IC talent and keeping them as part of your network. A private network of proven independent talent can include former employees and top-performing ICs. It’s an extremely cost effective solution for engaging qualified, go-to resources for project work without tapping traditionally more expensive routes like specialized staffing firms.
• Develop and adhere to a documented compliance and engagement program. Creating an attractive recruiting environment is great, but properly engaging ICs the only way to guard the organizations against IC reclassification, co-employment lawsuits, FLSA violations, Affordable Care Act transgressions, and more. Be sure to involve key stakeholders—including HR, purchasing, legal, and business unit managers—and develop a policy that everyone in your company can follow.