The hidden downsides of freelancing

The job market is a pretty active place these days. With unemployment low and many businesses opening up to new and unconventional ways of doing business, the world of work is abuzz with the idea that it’s a worker’s market.

Skilled freelancing (that is, services such as programming and marketing rather than Uber driving) is making up a growing part of that market. From 2019 to 2021, freelancers offering skilled services grew by 8 per cent.

Satisfied freelance workers do often cite the greater flexibility and control they have over their work, as evidenced by findings from Slack's research consortium Future Forum, and younger workers have come to view freelancing, with its potential for diversified clients and income streams, as more stable than a full time job. Freelancers can also pivot their skills to profit from trends more easily than full time workers. "We have seen a lot of graphic designers on [freelance marketplace] Fiverr start to offer NFT art services," says Fiverr's VP of public policy and community engagement Brent Messenger. "Many folks have doubled, tripled and even quadrupled their income."

But not everyone chooses freelancing because of its upsides. Almost 40 per cent of freelancers say they’d prefer to have a traditional job. Many skilled professionals opt for freelance gigs not because they are running toward something - but because they are running away.

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A BambooHR survey found the top reasons people left their jobs included dissatisfaction, mental health, poor compensation, or unethical leadership. Additionally, Harvard Business School found that 32 per cent of workers left a job because they had to prioritise caretaking responsibilities. If these working conditions improved, would we still be seeing highly skilled workers flocking to freelance platforms?

Health insurance

In the US, 84 per cent of workers cite health insurance as the benefit they care about most, followed closely by sick time off at 83 per cent. "Many Americans lose their health insurance if they leave their full-time job," says Upwork's VP of talent solutions Margaret Lilani, "and that is a much more fragile situation than when a freelancer has the power to choose."

Still, the self-employed lifestyle does not come ready-made with benefits like a healthcare plan and family leave, which raises the stakes for would-be freelancers. Is freelance flexibility so attractive that those perks are worth giving up? Or is full time work just dismal enough to justify it? Freelancers also miss out on “soft” benefits such as free office snacks, subsidised gym memberships and corporate discount programmes.

“Access to affordable healthcare is one of the top challenges freelancers face,” says Messenger. Fiverr partners with a healthcare company to offer healthcare coverage to freelancers who use the platform.

Freelancers also miss out on “soft” benefits such as free office snacks, subsidised gym memberships and corporate discount programmes. Without regular payroll, it’s common for freelancers to struggle with getting paid on time, or at all. And being your own boss can be isolating – without a workplace, it’s more difficult to find advice and mentorship.

Nevertheless, business leaders are enticed by the idea of an “on-demand workforce”. A recent Harvard Business School study found that three out of five leaders said they would increasingly prefer to “rent”, “borrow” or “share” talent with other companies, and that their full-time staff would be smaller as a result. Those surveyed cited better productivity, efficiency, and lower costs as motivations for using freelancers instead of full time employees. Plus, leaders who are angling toward a more freelance-heavy business model feel they are giving workers the flexibility they want. But why does “flexibility” translate so readily into “hourly worker with no benefits”?

Valid reasons

There are certainly valid reasons for businesses to use an on-demand model. Maybe a company wants to experiment with a new venture before deciding to invest in full-time hiring, or it wants to contract with consultants in order to bring something to market quickly - or maybe a company just needs a stopgap to ease the current supply and demand issues in the labour market.

Hiring freelance workers instead of full time employees means the employer doesn’t have to pay for their healthcare plans, sick days, holidays, or training. But just because the business isn’t footing the bill doesn’t mean the cost disappears. Freelancers themselves have to cover them.

About 75 per cent of leaders surveyed by Harvard Business School said they thought it was likely that freelancing platforms will take on a greater role in providing benefits, training and other services to freelancers. Some freelancing platforms like Fiverr offer online courses in addition to other programmes and services for its userbase, but freelancers pay for those courses individually.

Businesses can’t fully escape the costs of skills development. Remaining staff will have to hone the skills and workflows necessary to get things done in a “blended” workforce that relies more heavily on freelancers. Less tangible but no less important is that, by moving to a more on-demand model, businesses lose the institutional knowledge that’s historically held by tenured employees, and it’s unclear how that knowledge will be shepherded from one project to the next if such ventures are staffed by “rented” talent.

Internal talent sharing

Some companies are experimenting with internal talent-sharing platforms that advertise discrete chunks of work, such as Deloitte's "MyGigs" system, which features projects that employees can "bid" on. Built in collaboration with Freelancer. com, Deloitte plans to open the system to external freelancers in the future.

Many workers are getting what they need from the gig economy: the flexibility to choose their own schedule and location, the control and autonomy to choose their own projects, and the leeway to devote their energy toward caretaking responsibilities. But a better future exists in which full time employees are afforded these conditions, too. Workers shouldn’t have to choose between stability and flexibility. – Copyright The Financial Times Limited 2022