Founded in 1989, Staffing Industry Analysts (SIA) is the leading global research group for the contingent workforce industry. The Silicon Valley-based company provides independent insights on the latest trends and technologies in the space.
What is a contingent workforce? It consists of temporary employees and independent contractors who provide their expertise and services to a company on a contract basis. Depending on the type of engagement, they may work onsite, remotely from anywhere in the world, on an ongoing basis, or on a project-by-project basis.
In a recent report, SIA examined an emerging technology with the potential to radically increase efficiencies in the contingent workforce industry—the “Freelancer Management System.” Here are some takeaways from the report and trends poised to shake up the industry.
1. TREND: BUSINESSES ARE ENGAGING FREELANCERS AT A RECORD PACE
Companies are clearly facing a talent shortage today. According to a survey by CareerBuilder, 60% of CEOs said the inability to find enough qualified candidates limits their company’s potential. In response to this challenge, more and more companies are engaging freelancers as a smart and effective way to quickly find the talent they need for urgent projects, especially when it comes to specialized—and in-demand—skills like IT. A study by Edelman Berland found that there are 53 million independent workers in the U.S., or about 34% of the workforce.
2. Online Staffing Isn’t a Complete Solution for Enterprises
“Online staffing” or talent marketplaces have been around for more than a decade and are an effective way for companies large and small to find the talent they need quickly. They work particularly well on a project-by-project basis. However, they don’t provide the robust set of features enterprises need, such as reporting technology and worker classification compliance services.
3. A Disruptive Technology Is Emerging to Bridge the Gap
A Freelancer Management System (FMS) takes talent marketplaces to the next level by providing access to both talent sourcing and the operational and compliance solutions needed to work with independent talent all in one technology system. This cloud-based platform enables companies to source, classify, contract, communicate with, and pay their contingent workforce in one system. As an enterprise-level SaaS platform, it offers a customizable end-to-end solution that streamlines all processes needed to engage and work with a contingent workforce, from onboarding to paying them. It also provides classification compliance, real-time collaboration technology, and a trusted talent pool other teams in the company can leverage. It also makes it easy to onboard and pay existing contractors. And because it’s used company-wide, it helps ensure consistent processes and reporting requirements are being followed. Often, hiring managers may use online platforms to get around company policies or processes. This can lead to overspending and potential misclassification issues. An FMS like Upwork Enterprise has features built in that provide reporting capabilities and visibility into the contingent worker population and how much the company is spending on contractors. Companies are able to track, analyze, and control rogue spend.
End-to-End Freelancer Engagement
An FMS offers an end-to-end solution with a robust set of features to streamline processes and reduce paperwork for hiring managers, finance, procurement, and legal teams. Standard features for an FMS:
- A talent marketplace
- The ability to hire and pay
- Classification compliance services
- Agent of record and payrolling capabilities
- Payment processing and tax form issuance
- Real-time communication technology
- A system for contracts and documentation
- Reporting and analytics capabilities
The Talent Cloud
Another key differentiator of an FMS is the ability to create private networks or talent clouds of independent talent. Freelancers can be vetted and grouped based on a variety of factors such as their expertise, client ratings, security clearance, or location. Teams within the company can easily access talent clouds and find talent that best matches their needs.
4. The FMS Solves for Three Main Pain Points
There are three problems an FMS helps companies address:
- Access to Talent
From developers to web designers to digital marketers, an FMS provides a platform and marketplace for companies to find and engage a global pool of highly skilled talent.
- Greater Visibility and Efficiency
Many companies lack an efficient way to work with independent professionals. They may be using a variety of time-consuming processes and inefficient tools like spreadsheets and third-party systems. An FMS streamlines everything into one cloud-based platform with uniform reporting for analysis and greater efficiency and visibility.
- Mitigate Compliance Risk
Misclassifying workers can be costly. Independent contractors engaged directly by a hiring manager could leave companies open to risk. An FMS provides classification services to reduce risks.
Considering that the IRS has a 20-factor balancing test to determine if someone is an employee or an independent contractor and that there are different tests depending on location, classification of workers can be complicated. And misclassification can result in penalties, back taxes, and monetary damages. Recent lawsuits against large corporations are shining a light on the matter and prompting companies to be more cautious.An FMS platform uses technology to weigh the myriad factors to determine how to classify someone and reduce the company’s risk. A good FMS supports its technology with legal and compliance experts who know the applicable legal standards inside and out. The platform also maintains a paper trail, which can be easily accessed in case there’s an audit.
5. Key Takeaway: The FMS Is Evolving and Poised to Disrupt the Industry
The report points out that Freelancer Management Systems are an emerging technology and calls them a “new phenomenon, still evolving as this report is written.” So what’s in store for the future of the FMS?
As more companies turn to an FMS for their contingent workforce needs, the report predicts the number of enterprises, projects, and contractors on the platform will continue to increase. Similarly, as more talent decides to pursue non-traditional work arrangements, more companies will look for ways to engage them, especially when it comes to in-demand skills. Bottom line: look for this emerging technology to disrupt the industry as adoption grows.
Read SIA’s report The Rise of Freelancer Management Systems.
Upwork is a freelancing marketplace where businesses of all sizes can find talented professionals across multiple disciplines and categories. Upwork Enterprise is our most comprehensive offering combining technology with talent sourcing and compliance services.