How to Tell If You Should Hire a Freelance or Full-Time Employee

By Kate Rockwood

The gig economy and the increasing prevalence of freelance work is changing how companies do business. Some 55 million Americans, or 35 percent of the U.S. population, worked as a freelancer last year — more people than ever before, according to research from contract-based jobs site Upwork and the Freelancers Union. That follows a 2015 Intuit study that found non-permanent employees have grown to 36 percent from 17 percent of the workforce over the past 25 years, and is expected to hit 43 percent by 2020.

Employers are generally seen as the big winners as workers rush to take short-term jobs coordinated through mobile apps and websites. In an unpredictable business environment, contract assignments let companies better manage their labor needs more flexibly, avoid hiring mistakes and find niche talent quickly.

Ken Kanara, a managing director at Ex-Consultants Agency in Miami Beach, Florida, said HR professionals come to him to hire people with top-tier management consulting experience for short-term assignments when they have discrete projects “that are either outside the scope of ‘business as usual’ or need to be done at a more rapid pace.” Clients also hire short-term workers to fill temporary gaps in their full-time employee ranks, such as when people take maternity leave or sabbaticals. They also may do so when considering a full-time hire but first want to test an employee with project-based work, Kanara said.

On the other hand, the move to a freelance economy can also benefit workers who find security in diverse revenue streams. “In a world of at-will employment, it can be more secure and sustainable to be independent than to have a full-time job,” Leif Abraham points out in a blog post on 42Hire.com. “If you lose your full-time job, you’re ‘out of a job.’ But if you lose a client, well, you lost a client,” writes Abraham, co-founder of And Co., a New York City company that provides billing and tech support to freelancers.

But as the flexible workforce evolves, some companies are rethinking the strategy. In 2015, the app-based courier service Shyp made headlines when it reclassified its contractors as employees, which made them eligible for workers’ compensation and other benefits, in the face of a lawsuit filed by two workers.

Kevin Gibbon, Shyp’s CEO, told TechCrunch the change wasn’t a response to the lawsuit, but rather a strategic quality-control move. “Operationally, we get a lot of benefit from it,” Gibbon said. “Our service doesn’t just involve dropping off an item; our customers need to be comfortable with [the person] who is picking up their $10,000 painting.”

Jimmy Fabiano, general manager of OnForce, a freelancer management software system based in Lexington, Massachusetts, said many companies are moving to a “blended” workforce. While many use short-term workers to ramp up when demand spikes, companies with steady demand are better served by hiring full-time employees. Profitable businesses that sell services — which span everything from accounting and banking to landscaping and cleaning — can meet their labor demands most efficiently with a workforce that’s comprised of 80 percent or more full-time workers, Fabiano said.

Some human resources executives worry they lose access to the best and brightest talent when they don’t offer a traditional position with benefits. There’s also concern that gig workers lack the commitment to an employer that’s required to deliver truly dazzling performance.

At StartupBros LLC, a Tampa, Florida-based company that helps entrepreneurs launch their companies, CEO Will Mitchell said he employs contract-based virtual assistants who handle bookkeeping and database management. But it’s a different story for jobs that require customer interaction.

“We’ve found it’s much better to hire internally for customer-facing positions,” Mitchell said. “Our customers are our first priority.” As a result, Mitchell hires full-time workers to manage customer support, social media and content production.

Another deterrent for employers is the potential loss of intellectual property, said Thomas White, a corporate attorney who specializes in human resources management at the Rimon law firm in Chicago. Employers “may expand contractors’ bodies of knowledge that could ultimately help their competitors,” White said. “It may be intentional; it may be through negligence, but it’s very difficult to police.”

Ultimately, each employer needs to examine the potential upsides and downsides of contract labor based on their needs, White said. “You gain flexibility but you lose loyalty.”

The question, then: Which do you value more?

AUTHOR: Kate Rockwood is a freelance journalist based in the Chicago area.

Reprinted from TALENT ECONOMY

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