10 Questions CFOs Have About the Freelance Economy
by Michael Burdick, on Aug 28, 2018
Paro recently hosted a webinar with CFO.com and panelists from Microsoft, Sage, and Staffing Industry Analysts on how finance executives can prepare their teams for the future of finance work [replay available here]. We didn’t get a chance to answer all the questions posed by the finance and accounting executives in attendance, so we are doing so in writing here!
1. How is freelancing defined? What’s the human cloud?
The freelance economy, also known as the gig economy, is defined as any work that is short-term in nature. So, it covers a broad range of work--from contract work to individual consulting assignmenys, on-demand drivers, cleaners, chefs, etc. Some freelancers choose to freelance full-time, while others have a full-time job and freelance for extra income.
The human cloud is the mechanism for engagement--how freelance projects and gigs are leveraged, sourced, managed, and paid through an online environment/platform. Online staffing models, freelancer management systems, marketplaces that connect freelancers to projects--these are all part of the human cloud.
2. Who will manage all of these gig workers and projects? Will management roles increase in demand?
Hiring managers will manage freelance workers and projects. Because these managers are hiring for a specific skill or experience to execute a specific project, they are manging people who have experience doing exactly what they need so it’s likely not the type of hands-on management required to manage an existing employee who is spinning their wheels trying to tackle a new project.
That said, the idea of managing is shifting, as companies turn to a more project-based model. Information sharing and communication will become even more critical than they are today, as freelancers and employees tackle different sides of a single project or different projects all together. Managers will need to become much more diligent about outlining expectations, providing relevant context, and challenging their own beliefs about how a project should be executed.
From a logistics perspective, vendor and freelancer management systems will make structuring, monitoring, and paying for projects easier.
3. What about time conflicts because multiple 'bosses' want projects completed quickly?
The beauty of online labor marketplaces is that each manager can find the specific resource they need for a project within 24-48 hours, rather than the 75+ days it takes to find and onboard a new hire. And, managers don’t need to compete for the same resource because there are many available freelancers to choose from.
On the freelancers’ side, there are systems and tools for them to manage their book of business so they only accept projects they know they have the bandwidth to complete.
4. What is your point of view on the value propositions for internal stakeholders at a large organizations to sell gig-work internally?
One consistent message we hear from finance teams is how difficult it is to find and retain great talent. The value proposition for internal stakeholders is that freelancers can help solve this uniquitous challenge. How?
- “Freelancing up” during crunch times limits team burnout. Burnout, primarily caused by unreasonable workload and too much after-hours work, is one of the primary reasons finance and accounting employees leave jobs. So, by engaging extra sets of hands during busy times, employees can have a more consistent workload.
- Hiring freelancers to tackle niche requests keeps your team focused on the top priorities rather than trying to run in 100 directions at once as is often the case and which often leads to frustration and negativity.
- Instead of rewarding your best employees with more work (and risking burnout), reward them with more challenging work by using freelancers to take discrete, repetitive tasks off their plate.
- When a team member does leave, don’t let the rest of your team bear the burden of the workload; hire a freelancer with the same skill set and industry knowledge to fill the gap quickly and seamlessly.
5. How does the freelancer structure their business model to avoid the issue of independent contractor vs. employee?
Freelancers typically have their own business entity, but often use online labor marketplaces (like Paro) as a business development tool. These labor marketplaces also make the freelancers’ and companies’ lives easier by serving as a third party settlement organization, which means they process all payments.
This independent contractor vs. employee question is the subject of much discussion currently with certain states looking to require companies to employ freelancers rather than treat them as 1099s. However, it is expected that the majority of the U.S. workforce will be freelancing in the next decade, so we believe regulation will continue to evolve to accommodate this shift.
6. On average, how does the cost of freelancer compare to employee?
Generally, freelancers will cost you more on an hourly basis than a full-time employee, but when you take into account all other employee-related costs such as insurance and other benefits, full-time employees are more expensive.
What also isn’t taken into account with a simple cost-benefit analysis is the cost of losing your top employees when they are overworked and how freelance support can help mitigate that. Or, the cost to the business and your existing employees of the 75 days on average it takes to recruit and hire non-executive finance and accounting positions or 150 days on \average it takes to recruit and hire executive positions.
There are many factors that go into making the comparison, and there are several scenarios--when an employee leaves or when you only need someone part-time--when the only thing that makes sense is bringing on a freelancer to fill those gaps.
7. Have you considered the concept of the freelancer being "on retainer" like attorneys?
We believe in transparency, and the hourly model has served both clients and freelancers well; freelancers execute on specific deliverables and clients know exactly what they are paying for.
However, we are seeing demand both from clients and freelancers for a retainer model, so we will be testing it out with select clients and freelancers.
8. At Paro, how do you find your talent?
We find our talent through various channels, including social media and referrals. We put them through an intensive vetting process, which includes a skills assessment, project, and interviews, and only accept 2% of finance and accounting professionals who apply. Read our blog post, How We Vet Our Finance Talent, for more information on our process.
9. How will freelancing affect companies that need educational competency such as CGMA and CPA that were often subsidized by the employer to increase company competency?
According to the Freelancing in America survey, more than half of freelancers have updated their skills in the last six months, compared with less than a third of non-freelancers. Freelancers are also more realistic about the effects of AI and automation, and 65% say they are updating their skills to ensure they are marketable going forward (compared to 45% of full-time employees).
Point is: freelancers are continuing their education even without the support of companies.
10. How is using a freelancer different from using a temp and staffing agency?
In short, temp and staffing agencies typically place people in location-based, full-time but interim roles while freelancers typically work on a remote basis for only the hours you need their support. And, because there is no location constraint, clients get the best resource with the right skill set, industry experience, and tech stack expertise when they use a marketplace like Paro. Read our blog post, Who's Who? Temp Agencies vs. Freelance Marketplaces for a deep dive into the differences.