The new organisational structure: Why businesses are hiring contractors over employees

There’s a tonne of articles out there about why owning your own business and working as a ‘freelancer’ (ugh… that word…) is becoming more popular with younger generations.

You know the drill: the benefits of a life-first mentality, freedom to travel, work the hours that suit you, be home with kids… yada yada yada. It’s not hard to see see why 47% of millennials freelance.

But what about the benefits to businesses?

Well, it turns out there’s a reason why they’re including contractors as part of their hiring strategy, and why, according to PayPal, 70% of Australian businesses are using freelancers.

The workforce is changing

With an increase in automation, AI and machine learning, jobs of the future won’t be the same as they are today (let alone what they were 10, 20 or 30 years ago).

In this technological age, the skills required by teams need to adapt with the changing environment: meaning businesses are looking outside of their organisations for skill sets that will help them keep up with the new world.

They’re actually hiring less core full- and part-time staff, disrupting the traditional organisational structure by building a team of freelancers who they can call on whenever they need.

According to this article on Upwork, CEO Stephane Kasriel says:

“Businesses are scrambling to adapt and keep up with the rapid pace of change in our world. In just a few years, a third of the skills needed in the workforce will be brand new…Traditional models of hiring no longer provide the agility businesses must have to access in-demand skills when and where they’re needed.”

Project-based work is on the rise

Nowadays, we live in a world that’s ‘agile’: projects are being expected to be delivered quicker and teams are expected to be more flexible. This has lead to a need for workers with specific skill sets to meet project demands.

For employers, the rise of freelancers creates greater ability to leverage remote teams and to hire for these specific project skills.

Hiring just sucks

Numerous reports reveal that hiring is just, well… it’s getting bloody hard these days.

According to Upwork’s report (Future Workforce: How Companies Embrace Flexible Teams to Get Work Done), 41% of hiring managers feel like it’s become harder to hire for nearly all roles.

Tech roles are understandably the hardest, but coming in close behind were marketing, operations and legal talent.

By diversifying the ‘office’ with a mix of remote contractors with particular skill sets and part- or full-time staff, the pressure is taken off organisations to wear the brunt of a bad hire (not to mention the costs are massively reduced too).

Save the moolah

The average business is allocating a budget and spending roughly $53,000 on freelancers per year. Compared to the average cost of a failed hire (which is reportedly a third of the employees first-year salary according to the US Department of Labor), it’s not hard to see why.

It saves money because businesses can hire top talent without an ongoing commitment to keep paying for months or years in the future. With a freelancer, the payments stop when the project ends.

Harder workers

There’s no commitment for businesses to stick with a contractor if it’s not working out (unlike a bad employee). When hiring employees, it is completely possible that they will just do the bare minimum to not get fired. C’mon, those of us who’ve worked in the corporate world have seen this so. many. times.

While yes, there’s those unicorns who strive to achieve their best every day (sometimes at the lure of a promotion or raise), others are more than happy to coast along until retirement hits.

As a contractor / business owner, I’m motivated to do the very best work possible on every single project. In a way, this makes me more effective than an employee. (And hey, it goes without saying that if us ‘freelancers’ are being well paid, you know you’ll get a great result).

My skills are my responsibility

As business owners, we don’t rest on our laurels. I think I’ve mentioned it before but I have never worked harder in my life since stepping out and taking on clients of my own (I’ve never been happier, either).

I’m constantly upgrading my skills, staying on top of tech innovation and actively seeking opportunities as they come up.

There doesn’t seem to be many downsides!

There’s two sides to errr’thang

Yep, it’s mostly benefits to having us on your side.

However, leaders need to get much better at leading diverse teams and leveraging talent to achieve the results they need if they’re wanting to cash in on the benefits of hiring contractors / freelancers / experts / business owners.

You can’t expect to hire someone who’s a specialist in a field and have them work like an ‘employee’ if it’s not within their contract.

There needs to be mutual understanding and respect on both sides for it to work. Luckily, I’ve been fortunate enough to work with some absolute legends in business and my experiences have been mostly positive since starting this thang in 2016.

What about you?

Are you a business owner with questions about how to work with contractors? Or are you a ‘freelancer’ who has experience of your own? Let me know in the comments below!

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