Freelancers, Gig Economy Compliance, and Startups: The Hidden Freelancer Market

By Glenn Laumeister, AllWork CEO

This past year, the Gig Economy has progressed way beyond drivers for Uber or Lyft, and now consists of a more diverse and skilled workforce. With the pandemic, more than ever, the Gig Economy has gone mainstream. This includes companies of all sizes. With the opportunity to take advantage of a flexible workforce, hiring managers are turning to freelancers for hard-to-fill roles or ongoing projects that require specific expertise. But where are they finding this talent?

While freelancer marketplaces like UpWork and Fivver have been increasing their revenue rapidly, with UpWork even reporting a 41% increase in Q1 of 2021, they actually account for only a small percentage of freelancer spend in the US. Together, UpWork and Fivver did $572 million in revenue in 2020. That may sound like a lot until you consider the larger picture. Last year, companies in the US spent an incredible $1.3 trillion on the gig workforce.

What’s missing is a full understanding of this freelancer market. So, if only a small percentage of freelancers are being hired through a digital marketplace, where does the rest of the money go? As it turns out, most companies are hiring their freelancers directly. Companies want to seek out freelancers who can work on a more long-term, consistent basis. Traditional freelancer marketplaces are set up for more of a one-project, short-term transaction. Because of this, the vast majority of companies are choosing direct sourcing for their flexible workforce, revealing a hidden freelancer market.

What does this mean for my business?

Direct sourcing is the new trend because it offers companies significant benefits vs. using a staffing agency or recruiters to find their talent. Direct sourcing yields better-qualified talent that typically are looking for freelancer work and so they will be more likely to stick around longer, and, in addition, direct sourcing is much less expensive especially when you are thinking about acquiring large quantities of talent.

If you’re an SMB or a startup, going directly to freelancers to hire means you can build a pool of top candidates for flexible roles that are sourced and engaged as they are needed. Working with recruitment agencies comes with a high price and as the number of gig workers is set to rise, this cost will only continue to grow. The ability to source and repeatedly engage qualified talent directly greatly reduces this cost.

Once you’ve hired your freelancers, there are still a lot of additional steps to consider. Managing a freelancer is much different than 9–5 full-time recruiting, onboarding, and especially paying. Payroll and PEO providers like ADP, Paychex, Gusto, Tri-net, or JustWorks are just not designed for efficient or compliant freelancer management and payment. If you want to take advantage of this opportunity to leverage a flexible work model, you’re going to need the technology to do it.

This is exactly why we built AllWork. With our Total Freelancer Management and Payments Platform, you can direct source your freelancers and then have one centralized platform and system of record where you can easily pay each freelancer, track their spend, manage the work being done, and ensure that you are compliant with all state and federal laws.

Ready to learn more about how AllWork can help you classify, manage, and pay your freelancers? Get in touch to schedule a demo of our platform.