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BFS Capital Blog

The Freelance Economy: A Revolution in the World of Work

February 26, 2014

Nobody needs to tell you as a business owner that it’s a whole new world out there. But unless you’ve experienced it, you might not be aware of the extent that freelance employment is transforming the workplace. Call them “independents” or “contractors” or “temporary workers,” freelancers aren’t permanent employees and are technically neither full- nor part-time. Their employment ebbs and flows with the work, and businesses that hire them don’t pay any benefits. Instead, freelancers buy their own insurance, pay higher taxes and contribute to their own retirement accounts.

While there have always been freelancers in certain creative or service sectors, the headline now is that one in three, or 42 million Americans, now work on a freelance basis, according to Sarah Horowitz, Executive Director at Freelancers Union. “The future is now,” she said in a Bloomberg BusinessWeek
interview. ”People…are working on ‘gigs’ and ‘projects’…and are now in every sector, from finance to real estate to security guards to nannies. It’s across the board.”

On the surface, the freelance explosion may look like another shift in an economy that’s becoming nearly unrecognizable to those who remember the old one. But underneath the trend are pretty far-reaching social and employment issues. And it’s more like a revolution. Is the growing population of freelancers a good thing? It comes down to two core issues: Choice (workers) and intent (businesses).

Many choose to freelance, Horowitz says, for the autonomy and flexibility, with free time to do what they love. For companies, especially in uncertain times when there are dramatic peaks and valleys in business, a flexible workforce with casual employment arrangements makes sense. For these two groups, freelancing works.

But that’s not the whole story. Millions doing freelance or temporary work want and need to be full-time employees. For many of these, Horowitz says, “…when they’ve been looking for jobs, there have been no jobs.”  Although freelancing can sometimes turn into permanent, full-time employment, it’s more typically a stop-gap strategy for workers who instead need at least 40 hours a week and benefits.

For some companies, not all, hiring freelancers is a strategy for keeping employee-related costs down. Some have been reluctant to add permanent staff given the uncertainty of the economy and use freelancers as a temporary solution. But others are seen to be taking advantage of a desperate workforce: Taking on contract workers, staffing up with them as though they were full-time, but at the same time, paying no benefits—and most importantly—refusing to make the commitment to permanent employment.

So, the “freelance economy” continues to grow. But is it good business? asks contributor Brian Patrick Eha at He reports that more than 60 percent of mid-size corporations in the U.S. expect to hire more freelancers in the coming year, according to a study commissioned by Elance, the largest online freelance platform. With more and more work moving online, it’s easy for even the smallest businesses to hire the services they need for short (or long) periods of time. And business owners say that one of the biggest benefits is being able to terminate the relationship if it doesn’t work out—much easier than it would be with a permanent employee.

As with so many other trends, the verdict is still out on whether this is a good thing. Whether you’re a business owner or freelancer, it all depends on why you’re doing it, how you go about it and what you want out of it.

Have you used freelancers or contract workers in your small business?