Over the last decade there has been a global surge in the number of people leaving full-time employment to join the ranks of the self-employed freelancers creating a new gig economy.
And this group isn’t made up exclusively of stay-at-home parents or college students on summer vacation. Rather, professionals at all levels of the organizational hierarchy have opted out of the 8-6 in favor of the flexibility, mobility, and compensation control that self-employment offers.
In the US alone, as much as one third of the workforce earns some or all of their income by working as an independent contractor for businesses.
Often referred to as the “gig economy” due to the pay-for-performance compensation model, this shift in how people do work has everyone up in arms – some out of celebration, and others out of frustration.
The movers and shakers of the gig economy
Thanks largely to the connectivity and opportunities provided by the internet, self-employment has become easier, and more profitable, than ever before.
Although freelancers can find projects and clients on their own, several platforms have sprouted up to facilitate transactions between these two parties. By streamlining the process of finding, hiring, and managing independent consultants, these platforms have played a dominate role in the recent growth of the gig economy.
The online freelance market is broken into two unique categories.
First, there are a series of websites that provide a marketplace platform. These are websites where freelancers offer to accomplish a specific project at a specific rate. Buyers can browse through the available jobs and pay a set price for a clear deliverable. The leaders in this market are Fiverr.com and PeoplePerHour.com.
The second type of freelance platform uses job boards – where employers list projects that they need accomplished and freelancers bid on these projects. As with a traditional job, the employer looks at the potential applicants and hires the one who seems to be best suited based on quality and price. The dominate player in this market is Upwork.com, with Freelancer.com and Guru.com coming in close behind.
Regardless of the platform, through a series of verifications and reviews, both freelancers and employers are able to evaluate each other to determine if working together would be mutually beneficial.
The benefits of the gig economy for freelancers
The gig economy has opened up a whole new world of opportunities for individuals working on their own, and small businesses interested in lower-profile projects. Some of the leading benefits of the gig economy include:
1. Access to projects from anywhere in the world
Whether you live in NYC, Singapore, or Stockholm, you have access to the exact same projects. Although this may make the marketplace more competitive, it also lets skilled freelancers find high-profile projects from their home office in the suburbs, rather than pay for an expensive office downtown.
2. Flexibility to organize your own schedule
Because most projects are smaller in scale, freelancers can stack as few or as many projects together to fit their financial and scheduling needs. For example, a stay-at-home parent may want to work while the kids are in school, but keep the summers free to spend time with the children. Meanwhile, a designer with a full-time job can earn a bit more on the side, but scale back when he needs more personal time.
3. All projects, portfolios, and reviews are kept in one place
One of the biggest challenges freelancers have had in the past is finding clients, and then convincing those clients to work with them. Now, these online marketplaces allow for freelancers to find projects, share their portfolios, and develop positive reviews – all in one place. This has substantially reduced the time involved in finding and managing clients.
The benefits of the gig economy for SMEs as employers
Not only does the gig economy provide opportunities for SMEs to find additional clients, but it also gives them access to a massive, global pool of employees.
Because freelancers expect projects to ebb and flow, employers are able to scale up and down as needed, without causing undo stress to their workforce. While a traditional employee must either be paid or terminated, freelancers can be tapped for projects anytime they’re needed – keeping costs low and morale high.
Additionally, the freelance marketplace allows employers to access top-performers that they would never be able to afford as full-time employees. Using websites like Upwork, you can hire a star-performer for the critical pieces of a project, and hire more affordable contracts for the less-skilled pieces of the job.
Finally, because freelance projects often follow a pay-for-performance model, a clear budget can be assigned to each task. By paying for deliverables, rather than time, an employer can often receive more value for their investment. This allows the company to increase productivity without substantially growing costs.
In short, the gig economy allows businesses to take on more projects and try new ideas while minimizing the risk involved in these ventures.
The challenges of the gig economy for SMEs
Despite the many benefits, the gig economy is not without its difficulties – particularly for small firms that were used to having exclusive access to the clients in their region.
In the past, if you owned the only graphic design shop in a small town, you received all of the business. Now, however, you’re stuck competing with talent from around the world.
Furthermore, your firm is no longer competing against other firms charging competitive rates – you must now outshine the stay-at-home parent or college student who does freelance work as a hobby for extra spending money.
For SMEs hiring freelancers, one of the last challenges is ensuring that you find the best freelancer for your projects. Despite the review systems most platforms have in place, it can still require several hires before finding the perfect candidate for your position.
Regardless of these challenges, if you provide decent quality and exceptional customer service, you should experience more benefits than drawbacks to this freelance gig economy.
Closing thoughts
The gig economy is here to stay. And it’s a positive development that brings new jobs and opportunities to SMEs – if they’re willing to take advantage of them.
As productivity continues to become a focal point of business, finding ways to maximize output and minimize costs is critical. By using freelancers, and maximizing the use of productivity apps like ERP and HRMS, SMEs can remain competitive in this constantly changing landscape.
Whether you’re interested in growing your team, or increasing your client base, becoming a part of the gig economy may be the next step to grow your business and improve productivity.