Common Misconceptions HR Has About Independent Contractors

The state of the gig economy

The “gig economy,” which refers to the large group of individuals who choose to work as independent agents, has been growing rapidly since the mid-2000s. Actually, it’s exploding. According to a 2023 Fiverr survey of 2,000 US workers, “73% said they will either start freelancing or continue freelancing in 2023”. Here are some more amazing statistics to note:

  • In the US, there are currently 73.3 million freelancers. By 2028, that number is expected to reach 90.1 million. (Statista)
  • 70% of small and medium businesses in the US have at least occasionally used freelancers. (Demand Sage)
  • 65% of freelancers make more money than they would in regular employment. (Pew Research)
  • 61% of freelancers have two to three areas of expertise. (Demand Sage)
  • There are over 1.57 billion freelancers in the world as of 2023. (Statista)

It appears that the freelancing and independent contractor market is not going away anytime soon. In fact, more people will find opportunities to take on side gigs and even venture out as entrepreneurs as a result.

The benefits of hiring independent contractors and freelancers

Companies that hire freelancers and independent contractors often do so because this arrangement provides plenty of benefits. One of the biggest benefits is having access to unique talent that may be difficult to find in the candidate pool. Other pros of hiring independent contractors and freelancers are:

Near zero overhead costs.

Contract workers generally cover their own expenses for computers and office equipment and software, utilities, and internet. They don’t expect benefits like health and life insurance, retirement savings, or paid time off. This can save a great deal on the costs of maintaining a large office space and all the perks that you provide to employees.

More Knowledge.

The McKinsey American Opportunities Survey revealed that freelancers are 1.4 times more likely to focus on improving their skills than traditional employees. They cannot afford to allow their knowledge to stagnate or become outdated by new technology. Freelancers are also more inclined to pursue career advancement opportunities in the projects they take on.

Greater Productivity.

There has long been a debate about whether traditional employees or independent workers are more productive. An Inc article shares, “Research suggests that in an eight-hour day, the average regular employee is only productive for two hours and 53 minutes.” Freelancers, who most often work remotely, have been shown to work as much as 4 to 5 hours more per week when compared to in-office employees. Consider that freelancers have to work smarter, not harder, because they have to focus on billable hours vs. employees who just watch the clock.

Adaptability and flexibility.

The whole idea behind the gig economy is to have talent ready to work on a wide range of tasks without having to go through the expense and time of hiring a standard employee. Freelancers and independent contractors offer a great deal of adaptability, and this supports the ups and downs of organizations. It’s perfect for growing organizations and those that are adding new solutions to their product and service lines.

Why are some HR and Recruitment pros concerned about hiring independent workers?

With all these benefits in mind, why would any human resource leader be worried about bringing independent workers on board?

For some, it comes down to concerns over trust. Since a freelancer can come and go as they please, what’s stopping them from moving on to a competitor? Or worse yet, sharing company secrets? The use of contracts with non-compete agreements can help reduce risk. Creating secure systems for sharing and storing information can also help control how it is used.

Concerns may be related to payroll and tax matters, which are managed differently for independent contractors and freelancers. The IRS sets forth rules that determine what type of 1099 must be provided to report income paid to independent contractors. It is up to contractors to pay their own self-employment and income taxes. Organizations are responsible for reporting payments made to independent contractors over $400 annually. This is 10x easier than dealing with the hassle of paying employees’ taxes.

Lastly, some feel there is a lack of control over hours worked, performance, and accountability with contract workers. Understanding that there is a different relationship with ICs and avoiding having the same requirements as employees can help prevent issues from coming up. Treating freelancers with respect, paying them promptly, and giving them regular work can set any organization up for success when utilizing independent workers.

Let’s address the elephant in the room, shall we?

Something may be causing your organization to avoid hiring freelancers or independent contractors. It may be the nature of the business or the industry to not view ICs as a viable talent alternative. Yet, companies are utilizing freelancers to take care of specific tasks where they lack certain employee skills or for short-term influxes of work.

In order to successfully hire freelancers and independent contractors, have a clear written policy in place that addresses these concerns and sets expectations. Select independent workers who have the right skills for the project and treat them respectfully. Have a system in place to assign tasks, track progress, and provide a communication channel. Pay your ICs promptly, and remember they are not your employees.

By taking these steps, you will find it more pleasant and efficient to hire freelancers and independent contractors for your organization. Plus, you’ll be one step closer to attracting a larger candidate pool to your job postings.

Write A Comment

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.