Gig economy: the challenges of managing a freelance workforce
In this five-part series to understanding the gig economy, we'll look at a number of topics:
- What is the gig economy?
- How to integrate freelancers into a talent acquisition strategy
- The challenges of managing a freelance workforce
- Address skills shortages with talent pools and the hidden workforce
- Gig economy: what's its place in the future of work?
So far, in our series on understanding the gig economy, we have explored what the gig economy is, dispelled some common misconceptions and looked at some ways of including the gig economy and freelance workers in an integrated talent strategy.
In this third part, we'll address some of the challenges HR will need to overcome when managing a workforce of freelancers, contractors, consultants and interims.
As an HR team, charged with managing your freelance workforce, you'll identify two types of challenge: visibility challenges and management challenges.
The visibility challenges
There are some immediate and obvious issues inherent with managing the freelance element of a workforce. These challenges are all connected to HR leadership not having complete visibility of the freelance engagement across the business.
Visibility challenges, as discussed in the first part of this series, are typically a result of it being possible for any part of the business to engage a freelancer directly. As soon as a line manager engages a freelancer directly, bypassing HR's processes, it creates an unseen, unchecked risk.
The first visibility challenge created by an unseen freelance worker is cost control: Freelance payroll cost can be charged to department credit cards or coded as any number of expenses.
Without visibility of your true freelance cost, it is not possible to apply good HR practices, like standardising day rates, or make informed recruiting decisions - for example, if a specific department has a high freelance spend, it may suggest there is an opportunity to reduce costs by creating a full-time, permanent role.
As you'll appreciate, IR35 is a complicated piece of legislation. It uses many factors to determine whether a contractor/freelance is for all intents and purposes an employee.
The visibility challenge with IR35 is the risk of having freelancers or contractors on long, rolling contracts fulfilling 'employee-like' duties without there being HR checks and balances to mitigate any regulatory risk to the business.
HR teams are an important element in maintaining an organisation's security. Access to systems and information, whilst managed elsewhere, is usually set during the HR onboarding process. If a freelancer or gig worker bypasses the usual HR processes, it is possible that security protocols can be bypassed as well. A simple example is team or department email distribution lists. These are often used to distribute sensitive internal updates and information.
Freelancers hired directly may end up being added to these email distributions list, but without visibility from HR, they may never be removed after their contract is finished, which creates a security risk.
Another element of an organisation's security is its intellectual property. HR teams strictly enforce contracts to ensure all permanent employees defer ownership of any intellectual property to the organisation. Of course, it is crucial to ensure all freelance and gig workers are bound by the same agreements around intellectual property, which can be missed if the contingent workers are not going through a standardised process.
Overcoming visibility challenges
There are two steps to overcoming visibility challenges: consolidation and reporting.
The first step is consolidation. Mandating that all freelance and contractor engagement goes through HR ensures captures all the management information required.
The next step is reporting. Using an effective freelance management system, HR leadership can create reports and dashboards to make the best resourcing decisions.
The management challenges
In addition to visibility challenges, a freelance workforce also creates management challenges for HR teams to overcome.
Engaging a freelancer, being self-employed and able to choose where and when they work, creates an integration challenge if the permanent employees they collaborate with are confined to a set location and time slot.
The short-term solution could be to include location and available hours in your freelancer requirements. However, considering 30% of the workforce will be freelancing in just three years, it may be prudent to look at supporting remote and flexible working practices for all workers - regardless of whether they are a freelancer or a permanent member of staff.
Progression and development
HR teams, where there is not a separate L&D function, will also have goals to ensure the organisation's people develop, progress and provide succession options.
As the freelance percentage of an organisation's workforce increases, it presents a challenge for HR to maintain the level of progression, development and succession planning required for business continuity.
As freelancers are self-employed, they cannot be mandated to attend training courses or to learn new skills.
The solution for HR is the CVP. As discussed in the second part of this series, the Contingent Value Proposition is key to attracting the right kind of freelancer. In addition to communicating what's in it for the freelancer, a CVP should be explicit in the what they are expected to contribute.
HR's role in ensuring business continuity with a freelance workforce is continuously review and refine the freelance network it engages with to ensure there are an adequate number of vetted freelancers with the skills required to fulfil business critical operations.
The final management challenge we'll look at is availability.
Freelancers with in-demand skills typically work with a number of clients in parallel and have new opportunities presented every day by freelance marketplaces.
The business functions will look to their HR teams to ensure the right people are available at the right time to get work done on schedule. With permanent employees, this is very easy to control. However, when the workforce are self-employed freelancers, and have no mutuality of obligation, it becomes more difficult to ensure there are skilled people on hand when the business needs them.
Managing availability and filling skills gaps is the topic of the next part in our series on understanding the gig economy.