A changing job market

So how did we get here? Some point to generational changes, some note the influence of technology; whatever the reason, people are thinking about work differently. Jon Younger, managing partner of the Agile Talent Collaborative, says the workplace is evolving in a way that promotes freelance work, or what his company refers to as “agile talent.”

“More and more people are interested in some form of participation in the freelance economy,” Younger said. “A lower percentage [of workers] than ever before want to be a full-time, career employee of a large corporation. A growing number are saying, 'that's not what I'm interested in,' for any number of reasons.”

It's not hard to understand why workers want more flexibility, but why should employers shift their business practices to use this agile workforce? Younger said the ongoing tightening of the labor market creates a dynamic that favors companies that meet talent halfway. “Organizations that can do that well will be at a significant competitive advantage when it comes to talent management, talent acquisition and reputation management,” he said.

Younger said that it's important for companies to sit down and think out how they want to use freelance or contract workers. “It's very important for senior management and HR to work together to be clear about the philosophy going forward,” he said. Areas like recruiting and compensation may have to be restructured if a company begins using freelancers in large numbers.

The next step, he said, is training managers to oversee both full-time, permanent workers and freelancers.

Engagement and communication

One of the big challenges presented by freelancers is how to communicate and stay on target with projects and assignments. Obviously, regular check-ins are important. But a strategy to keep freelancers engaged may require more work than just a weekly phone call. After all, this is a different breed of worker. Many freelancers don't have the kind of benefits that full-time workers enjoy; and they don't feel as tied to the company. Managers should recognize that there is some groundwork to do in bringing freelancers onto the team.

“Freelancers come with specific skills, but they still need to understand the company, the culture, the product, the customer, the team, the project—the way stuff actually works inside the walls,” writes Jason Averbook, CEO of the Marcus Buckingham Company, in Human Resource Executive Online. “Progressive HR leaders will give team leaders the ability to be highly accessible, expert coaches.” He also notes that companies who use freelancers frequently will need to find the best technology for monitoring and communicating with workers who are usually offsite.

Younger agrees that there's a new set of skills required from managers who oversee both permanent, full-time workers and freelancers. “There's an additional set of challenges when managers manage both full-time permanent staff and contract or agile talent,” he said. With freelancers, he adds, “It's a different relationship. It's more of a partnership.”

The challenges of regulation

Christine Walters, author and founder of the FiveL Company, says that employers face significant challenges in compliance with both state and federal regulation when it comes to freelance workers. Regulators, she notes, are trying to ensure that companies do not exploit workers who are classified as contract or freelancers.

“There are employers who are intentionally using workers whom they're not classifying as employees, to get around paying for benefits or paying for unemployment,” she said. “In my experience, those employers are rare; it's the few-bad-apples-syndrome.”

But the bad apples are making things tough for other employers, despite efforts to do due diligence, Walters added. “The greatest challenge is trying to remain compliant in an environment where compliance is defined by myriad sources,” she said. “There are regulatory and statutory definitions of an employee; an IRS test; state tests which do not follow the IRS test; state workers' comp and unemployment insurance codes that use different definitions of employee; and more.”

The regulatory requirement minefield has led some companies to reject the idea of using freelancers; others only use them in limited circumstances. Walters recommends companies look at state regulations first; if they don't pose too big a problem, the IRS test should be next. “If you pass the IRS test and your state requirements … I believe that's a clear demonstration of good faith and due diligence to try to comply,” she said.

Walters added that more discussion between regulators, legislators, and business owners is urgently needed to work out the many difficulties that current regulations pose for companies. “I think it's critically important for business owners and HR professionals to have a conversation with elected representatives,” she said. “Together we should be able to come up with policy that works well for businesses as well as the employee.”

Younger said that even with the challenges, companies that can manage multiple workforces as a “total workforce,” will do well in bringing the best talent onboard. “The organizations that figure this out are going to be a step ahead,” he said.