In recent years, businesses of all sizes have turned to burgeoning numbers of freelancers and independent contractors to fill gaps in their organizations. This trend is often called the “gig economy” or “part-time economy.”
If your business needs talent but lacks the infrastructure or budget to hire full-time staff, freelancers or contractors may fit the bill. However, it’s essential to understand the part-time economy and current employment trends to handle these workers properly and forge meaningful relationships that benefit your business.
The part-time economy is a labor market where independent contractors, freelancers and part-time workers dominate hiring trends. Today’s employment trends point to a part-time economy in full force.
Statistics vary and are hard to nail down since there can be less reporting of contract work than other types. However, Statista reports 70.4 million freelancers in the United States in 2022 and projects there will be 86.5 million by 2027 — comprising more than half the workforce. Additionally, there were nearly 24 million occasional contract workers in 2021 who freelanced in addition to holding other jobs.
You may consider freelancers or contractors if you’re just starting a business and need talent on a limited budget or if you have an established company and are wary of hiring full-time and part-time employees.
Here’s what employers should keep in mind when participating in the part-time economy.
Contract workers and employees have key differences and must be classified correctly:
Businesses must classify workers properly. Misclassifying a contract worker can cost you money and get you in hot water with the IRS, resulting in back taxes, fines, penalties and legal disputes. When contractors meet classification guidelines, they’ll fill out an IRS W9 form and you’ll send them a 1099 for tax season.
It’s essential for freelancers to understand their freelance tax responsibilities, including self-employment taxes and the tax forms they must complete and avoid overpaying freelance taxes.
“Full-time” is generally thought of as a five-day, 40-hour workweek. “Part-time” is a little murkier. Part-time position listings can include various compensation rates, time frames and schedules. For example, a company may offer a flat per-project fee or hourly pay over a defined period —
sometimes operating on a traditional full-time schedule. This can be confusing for businesses, contractors and employees when it comes to considerations like healthcare requirements for full-time workers.
The Affordable Care Act defines a full-time employee as someone who works at least 30 hours weekly, so employees working fewer than 30 hours would technically be part-time. It’s essential to check local, state and federal regulations regarding your employees’ status to comply with health insurance and other regulations.
Regardless of your staffing needs, be clear and upfront about your expectations in job listings. If the position you must fill is an open-ended job for 29 hours or less per week, call it a part-time job. Otherwise, supplement with more specific language, such as “temporary” or “contract.”
Some businesses offer benefits for part-time employees to help improve employee retention, boost morale and create a positive workplace culture.
Businesses may be able to get the best of both worlds with contract-to-hire situations. For example, say a company is unsure whether hiring a permanent, full-time staff member is the right move. They could start someone as a temporary or freelance worker and move them to a full-time position if everything works out and both parties feel good about a more permanent situation.
Contract-to-hire scenarios are a low-risk way to find out if a candidate is a good fit for the position and company culture. If you expect staffing needs to increase in the future, consider hiring long-term contractors with the potential to transition to full-time status.
If you’re unsure about bringing contractors and freelancers into the fold, consider the following advantages and drawbacks.
Pros of hiring contractors and freelancers include:
If you hire remote freelancers and contractors, ensure they implement remote cybersecurity measures like enabling multifactor authentication, using strong passwords and agreeing to confidentiality.
Cons of hiring contractors and freelancers include:
If you’re ready to start working with contractors and freelancers, consider the following best practices:
One upside to the growing part-time and gig-worker economy is that more highly skilled and talented people want to work part-time or on contract. The pandemic prompted millions of workers to reevaluate their relationships with their jobs — and found them lacking.
Businesses have an enormous talent pool to tap into. It’s a good time to make use of that availability and to decide where these workers could fit into your organization.
Nicole Fallon contributed to the reporting and writing for this article.