Payroll, Here Are Your Articles for Wednesday, May 26, 2021
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Are Contingent Workers the Future?

 

Businesses are evaluating how they organize their infrastructures, their processes and their people. The traditional employed/self-employed divide has been blurring for years, but the pandemic is accelerating the process. Businesses are paying attention to the skills the freelance community can deliver to their enterprises.

COVID-19 has been something of a wake-up call for enterprises that shunned contingent workers. At the same time, the global workforce is adopting traits that freelancers have nurtured for years.

A recent report from freelance job platform Upwork notes that many companies are putting off hiring; they're looking to independent talent for help. As enterprises create their new hybrid workforces for a post-pandemic world, freelancers, contingent workers and contractors are all in the mix.

In fact, 2 million Americans have started freelancing in the past 12 months, according to the Upwork study. That has increased the proportion of the workforce that performs freelance work to 36%.

Taking more control of their incomes and futures is one of the core reasons people choose self-employment. But overnight, millions of employees were transformed into virtual workers. The coronavirus has accelerated a major shift to freelancing that's severing ties between companies and employees. Before the pandemic, many workers chose freelance or contract jobs because they preferred the flexibility and variety those jobs offered.

Now, there's evidence that many workers are turning to freelancing out of necessity, not choice. Employers have shed millions of permanent, full-time jobs. Freelancing, with its insecurity, lack of benefits and unpredictable income, has become a means to survival.

And as you'd expect, there's been a dramatic shift in job postings from permanent to temporary. Julia Pollak, a labor economist with the job site ZipRecruiter, notes that the prevalence of temporary job postings jumped from 24% to 34% almost immediately after the pandemic hit, and it's been stable ever since.

Part of the shift is predictable. When the economy is shaky and the outlook uncertain, employers are reluctant to hire permanent workers. However, that's not all that's going on. Tools such as Zoom have flourished, creating more flexibility in the workplace. White-collar jobs can be done anytime, anyplace, by any capable person with a phone and a laptop. Such jobs are untethered from the office, so workers don't build personal connections with their bosses.

Consequently, lots of companies are thinking, "Maybe we don't really need these full-time employees; having these folks at home is saving me money. I don't see these people. Do I really need to be giving them benefits?"

The early phase of the pandemic brought massive job losses in tourism, travel and restaurants, but as it dragged on, even white-collar workers suffered from the ripple effects. Some experts say many permanent white-collar jobs will be done by contractors from now on. Futurists have long predicted that America would become a free-agent nation, where workers offer their services independently, branding themselves to land gigs and deals as full-time permanent employment withers away. Before March 2020, the futurists could point to a gradual trend in parts of the economy, but it showed no signs of accelerating.

Now, though, the coronavirus has upped the pace. What some thought would happen in three years occurred in three months. Many professionals entered the freelance workforce for the first time. Businesses are benefiting from having their employees detached from the office and loyal only to the job.

The upside to the freelance model for employers is that the company retains a worker without having to provide training or benefits. The downside is that the labor force may not be as stable when it's needed.

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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