An estimated 58 million people in the U.S.—or 36 percent of the American workforce—worked as independent contractors (or "freelancers") in 2022, according to research from Statista.
It's a figure that's on the rise. Gusto, a human resources and employee benefits services platform, reports that the number of companies on its platform using freelancers has increased 28 percent since the start of the pandemic in March 2020. A Gusto survey found that the ratio of independent contractors to full-time employees in the U.S. is now nearly 1:5, a 63-percent increase since 2019. And the earning potential of those freelancers is growing: In the past two years, Gusto says contractor payments have risen 23 percent.
The ongoing rise in remote work, recent layoffs and the fear of a recession are also contributing to today's rapid growth in contingent labor use. "The impact freelancers are having on the workforce is huge, and they're being used in increasingly large numbers by employers across sectors," says Sam Smith, president of global client delivery at Magnit, a workforce management services firm that works to onboard and leverage freelance professionals.
Organizations most frequently tap independent workers for consulting, administrative and creative work. "Freelancers add more knowledge and expertise by bringing perspectives and experiences from outside the organization," says Brooke Lewitan, human resources manager at Empeon, a human resources and payroll software provider. "The freelance market also allows companies to target specific, hyper-niche needs—a particular type of animation or a specialized marketing expertise, such as influencer marketing, for example."
Managing a Freelance Workforce
It can be challenging to manage both full-time and contract employees who are working on the same team on common projects, particularly since any or all of them may be remote. Failing to fully integrate freelancers into your team can have a negative impact on both team cohesion and project quality.
Effectively onboarding, training and managing freelancers is essential for companies to realize a return on their investment in them. Abiding by the following guidelines can help build a foundation for the successful integration of freelancers into organizations of all sizes.
Know Where to Look
"In the case of a freelancer, you're likely looking for someone with a specialized skill set in a particular domain who will be ready to meet a particular need on a project or routine task," says Andrew Gobran, people operations lead at Doist, the remote- and async-first company behind productivity platforms Todoist and Twist. "This can help you focus where you choose to promote the freelance role to attract candidates who match that skill set."
For example, if you're looking for a graphic designer to create illustrations for a publication, "your efforts are best spent promoting the role within graphic design communities, job boards, and freelance websites like Dribbble or Academy UX," Gobran says.
Freelance project platforms such as Upwork, Fiverr, FlexJobs and Toptal are other virtual communities of independent contractors with specific skills for hire. Talent can also be found through word of mouth, professional conferences and employment agencies.
"When you begin engaging with freelancers, be up front regarding requirements about past experience, hourly rate or overall compensation, previous work sample requests, and general expectations," says Lana Marshall, chief operating officer at Trust Relations, a virtual branding and communications company. "That way, no time is wasted on the freelancer applying and being vetted."
When closing in on a freelance candidate, Marshall recommends putting together a short skills test to give you more insight into how a candidate works and thinks. "You aren't able to vet as you would a full-time employee, since working with freelancers is more of a 'proof is in the pudding' approach," Marshall says. "That said, try to gauge as much as you can about their work product ahead of bringing them on board."
Make sure the freelancer you hire knows your business, especially your core values, key differentiators, who you want to reach and what you want to provide your clients.
"Some onboarding material provided to full-timers can be repurposed, but overall, onboarding should be clear, concise and easy to understand," Marshall notes. "The freelancer should walk away from the onboarding with a strong understanding of company best practices, knowledge of team platforms, modes of communication, and important do's and don'ts. Also, don't forget to compensate any time spent onboarding—good freelancers will expect it."
Whether you anticipate a freelancer working for your company for the short- or long-term, it's important to communicate clear expectations for projects, milestones to reach, and when freelancers are expected to join and contribute to team meetings.
"Managers should work with freelance talent to develop a cadence for meetings and check-ins so freelance talent can share updates [and] get questions answered, and managers can provide any feedback throughout the project," says Tony Buffam, vice president of strategy at Upwork, which pairs independent contractors with companies looking for freelancers.
Just as you do with your full-time team, keep the lines of communication open for feedback from your freelancers. "If something is working well, and especially if it isn't, you'll want to know directly from your freelance talent to ensure you can make changes—especially as the demand for freelancers continues to grow," says Marshall.
Maintaining this communication can be challenging when freelancers and/or full-time employees work remotely. "Often freelance talent may be located in a different location than that of the manager, so it's important to be mindful of scheduling, time zones, and when to host meetings, and leverage asynchronous communication when immediate discussion is not necessary," says Buffam.
Create a Cohesive Team
It's important for managers to ensure freelancers feel like integrated members of the team they are working with and have access to the resources they need. Make sure your full-time employees fully understand a freelancer's roles and responsibilities and how your employees are expected to work with them, Marshall says. "The more seamless this is, the more valuable the relationship is all around," she notes.
That task is tougher when the freelancer or salaried employees are working offsite. "The best workplace systems are ones where freelancers are considered just as much a member of the team as salaried team members," says Buffam. "In the same ways that employees from companies all over the world worked together during the pandemic and continued to work remotely thereafter, today's managers can adopt online practices to connect with and provide feedback to freelancers on their teams."
Know the Law
There may be legal issues when working with independent contractors if managers aren't paying attention. Make sure you have signed, legally binding, freelance-specific contracts in place that clearly outline the scope of work, compensation, IP agreements, data protection, nondisclosure agreements and noncompete agreements. "Each factor, once addressed, can be used to resolve disputes should they come up," Marshall says.
Sam Smith at Magnit says modern technology has made it possible for employers to better understand how freelancers integrate into their organizations and impact the bottom line. "Employers that do this see financial benefits, but there are also other perks of having a flexible and agile workforce," Smith explains. "Integration is allowing them to not only recognize these benefits—like more productivity, fewer skills gaps and more effective labor spend—but also identify ways to maximize them."
The number of Americans choosing to work independently is expected to continue to rise. Seventy-eight percent of U.S. business owners responding to a 2022 survey by Fiverr said they are more likely to hire freelance talent to fill in gaps during times of economic uncertainty—which may mean even more freelancers on the horizon amid fears of a recession. Eighty-one percent of survey respondents said they currently use freelance talent to support full-time employees and fill skills gaps, and 43 percent said they have current plans to hire additional freelancers.
Brian O'Connell is a freelance writer based in Bucks County, Pa. A former Wall Street trader, he is the author of the books CNBC Creating Wealth, (John Wiley & Sons, 2022) and The Career Survival Guide, (McGraw-Hill, 2002).