The Difference Between Freelancers And Traditional Employees Is Shrinking Fast. Here’s Why

by Dr Jon Younger

As well as writing my posts for Forbes, I spend a fair amount of my time these days giving webinars and zoom talks about the freelance economy.

One of the typical questions corporate clients ask is this: “How should I decide between hiring a freelancer or a permanent employee? How big of a performance difference is there?”

In just two decades, freelancing pioneers like Upwork, Toptal and others have conjured a new industry, a new career path for many categories of independent professionals, and a path to financial freedom for many in developing economies. 90% of big corporates say freelancers are a meaningful part of their work ecosystem. And, many of these companies are taking it further and evolving a more flexible, blended workforce, like Gazprom Neft, the energy and chemicals giant.

To the question posed above, my answer, as a former HR executive, is that the regular employee premium we pay in time, cost, and mindshare provides less and less worth it. The value gap between a top employee and a top freelancer or freelance team is shrinking. Freelance solutions are popping up in every industry, and most and more professions, because they offer a realistic and attractive alternative to traditional staffing.

Here’s why:

1. Can you attract and fully utilize equivalent full-time talent?

If you are able to attract, afford, and fully utilize a top talent, a full-time hire may be the right solution. But, top talents, particularly in high demand areas like AI, ML, and robotics are widely sought after. If your brand is weak, your industry is struggling or uninteresting, your future is uncertain, or your projects aren’t cutting edge, you may not be able to attract a top full-time employee or keep them for long. And, it will take several months longer than the one to two weeks needed to contract with a top freelancer with the right background and experience. In many situations, a part-time freelancer or term interim is a better decision: more expertise part-time at lower overall cost may be the better move. One helpful data point: Upwork found that two thirds of independent professionals were busy through 2020, making as much or more than in 2019.

2. Are freelancers just people in between jobs?

It’s difficult to find consistent statistics on freelancers world-wide, or the distribution of full vs. part-time (“side giggers). In January 2020 I would have estimated 15-20 million full-time freelancers in the US, and a larger population doing side-gigs.

But Covid-19 turned the world upside down, and it will be some time before we can write the history of freelancing during and following the pandemic. There are certainly many freelancers who are looking for full-time work. But, according to research by Emergent Research, in the US at least, they are fewer than 20% of freelancers . Upwork surveys pointed out that 12% of the US workforce began freelancing in 2020 for the first time, that 48% have experienced it as both a full time and long-term career opportunity.

3. Is there a large productivity differential between full-time employees and freelancers?

A recent Inc article mentioned: “Research suggests that in an eight-hour day, the average regular employee is only productive for two hours and 53 minutes.

That's right—only three hours a day of productive work for 8.8 paid hours. By contrast, remote working employees (and freelancers) were consistently found to be more productive, the result of fewer distractions, remote work arrangements that save significant commuting time (and cost), and the benefit of flexible hours. An Upwork survey found a similar result.