The share of freelancers at U.S. businesses increased by 15 percent from 2010 to 2019, according to the ADP Research Institute. More than 57 million professionals are building businesses doing what they love as companies prioritize expertise and benefit from cost efficiencies that freelance talent offers.
Employers are solving specific problems and meeting particular needs with freelance talent rather than filling seats. Further, when employers use freelance professionals, they save money in multiple ways:
Leveraging freelancers can eliminate recruiting and onboarding costs.
Recruiting, hiring and onboarding a full-time employee can cost a company dearly in time and money. Not only are there direct expenses, such as fees for advertising openings, but there are also indirect costs, such as lost productivity when team members depart without redundancies or backfills in place. Jobs often go unfilled for weeks as an employer narrows a large number of applicants down to the eventual hire.
But companies can fill positions with the right people faster through managed marketplaces that match pre-vetted freelance professionals to employers based on business needs. Some of these marketplaces can now match the right freelancer to meet the business’s needs so quickly that the professional could start within hours of the company’s initial outreach, keeping organizations productive while minimizing hiring costs and lost time.
Freelance talent also eliminates the costly ramp-up period that full-time employees require. A freelance professional is positioned to produce right away because they bring extensive functional and industry-specific expertise, in addition to being a professional remote resource. This expertise helps businesses maintain productivity while also avoiding paying for the time that a less experienced employee would spend learning.
Paying for production rewards performance.
Unlike an employee who gets paid for unproductive time, such as breaks, lunch and vacations, a freelancer only gets paid for pure production. The company also gets more of its investment back because it pays for focused expertise instead of general effort. The chance to earn more work by performing well drives a freelancer to excel beyond an employee who collects the same paycheck regardless of the quality of their work.
Also, with freelance talent, a business defines its need first. Then it picks the ideal professional for that specific opportunity. It does not hire a broadly qualified employee who may not be best suited for the work required.
And, if for some reason a professional does not do as well as anticipated, the business can go back to the managed marketplace that provided the freelancer and ask for a replacement who may be better suited for the assignment. Switching freelancers is quicker, easier and less expensive than replacing a full-time employee.
Reducing overhead saves money.
Freelance talent does not come with the same overhead costs as a full-time employee. A company does not have to pay for employee benefits or cover payroll taxes, for example. Additionally, a company is not obligated to provide a freelancer with office space or technology that it would have to provide a full-time employee.
The savings on benefits alone can be significant. As of June 2020, benefits accounted for 30 percent of the average private industry employer’s costs for employee compensation, according to the U.S. Bureau of Labor Statistics. Private industry employers paid employees an average of $25.18 an hour in wages and salaries and recognized another $10.79 cost for benefits, including $2.73 per hour for health insurance.
Payroll taxes also add to an employee’s cost. In addition to state employment taxes, a company pays 7.65 percent for the employer share of Federal Insurance Contributions Act (FICA) taxes and 6 percent for federal unemployment tax.
All told, according to the U.S. Small Business Administration, an employee costs an employer 1.25-1.4 times their salary in total. Multiplying those extra expenses among many employees creates a significant financial burden for a business, much of which can be avoided when leveraging freelance talent.
No overhead, no downtime, no recruiting—companies are saving money in many ways when they use freelance talent. And professionals are seizing new opportunities to grow their careers—and businesses—further.
If your company is ready to take some next steps in supercharging your business financials, Paro is here to walk you through the whole process with our part-time financial experts.