Companies see the potential of the freelance economy and with it, they are adapting to the technology needed to manage freelance contracts. Cloud-based Freelance Management Services (FMS) are being implemented in corporations to help HR and hiring employees with the paperwork needed to manage the administration of their new workforce.
Changing Workforce Landscape
Today, companies understand the resourcefulness of hiring freelancers. Freelancers are specialized in a field, they take care of their own employment taxes and they are motivated to work. Companies hiring freelancers can be more flexible with the fast changes in the business world now that they can go online and contract a professional when they need one.
Corporate executives worldwide are open to the fact that the trend of hiring freelancers and the future of work will change how their organisation deals with their workforce. In 2018, the BCG and Harvard Business School conducted a survey of 6,500 executives worldwide. The results showed that roughly 40% of respondents “expected freelance workers to account for an increased share of their organization’s workforce over the coming five years.” Another 50% stated that they recognize the use of gig platforms as a real trend.
The gig economy still remains relatively small as a primary source of income, but this is changing. In the same survey, developing countries demonstrated a rise in primary income from freelance platforms with the U.S and some countries in Europe following suit (Exhibit 1).
Adapting to Freelance Administration
Companies can choose from a pool of talent to make up a contingent workforce. But how are companies managing their freelance contracts? Individual contractors are not usually included in the same system as employees making admin work complicated for those assigned to the task. A whole different process needs to be done in order to manage freelance paperwork for onboarding, payments, GDPR and expense reports.
Implementing a standardized process is difficult. Some companies do not have a process for managing freelance contracts at all. This leaves hiring and managing employees to store files in different spaces where paperwork is unorganized and unaccounted for. Paperwork becomes complicated and every year, files need to be sent to accounting. It is imperative that all invoices and payments are recorded in expense reports. A Freelance Management Service automates the paperwork and stores all the data in a designated space.
Freelance Management Service
A Freelance Management Service (FMS), an end-to-end Cloud-based solution, enables businesses to self-manage their admin work with freelancers. An FMS can reduce geographical, informational and administrative barriers in the hiring process. It can also streamline the process of engaging a candidate, assigning projects and invoicing and paying freelancers.
A report from Staffing Industry Analysts shows that companies' familiarity with FMS grew to 72% in 2016, up from 60% in 2015, and the percentage of companies using, or considering using an FMS is 36%, up from 18% in 2015. Moreover, another 2017 study by the University of Oxford, projects sourced by Fortune 500 companies through an FMS grew 26% between 2016 and 2017.
Cloud computing has transformed how businesses and individuals interact with computers. According to Forbes, cloud computing revenue is projected to be $411B by 2020. The shift from traditional employment to “talent-as-a-service” (TaaS) - or gig - is forecasted to have a similar impact on the way businesses and individuals interact with the workforce (Exhibit 2).
Differences between Freelance Management Services
There are different variations of FMS. Some online platforms provide a space where clients can find and work with freelancers while others focus on the automation of freelance administration.
The first of the two is a platform where hiring individuals post a job, freelancers apply and they agree to the terms of payment and project delivery dates. Once the project is delivered, the payment is processed. Platforms that connect employers and freelancers take a hefty percentage as a reward for providing the service. Upwork, for example, takes a 20% service charge from freelancers on the first 500 dollars they make with a client. Clients are also charged a 3% payment processing and administration fee on all payments.
Other freelance management systems, such as Flime, focus on automating freelance paperwork and simplifying global payments for companies leaving clients free from time-consuming admin work. Flime provides a service where clients can invite the freelancer to work with them via email. When freelancers register, they automatically go through signing the contract, completing a KYC process and sharing bank details for payments. Once the client receives the invoice from the freelancer, clients can pay freelancers instantly, at lower costs across the globe; track invoices and expenses and benefit from a cost-saving VAT process. With the use of a robust API system, companies can connect Flime FMS directly to their IT infrastructure.
Paperwork: GDPR, Expense Reports and Cash flow
Flime FMS provides automated expense reports for clients to file each year as well as cash flow management. Expense reports are important for annual taxes. It is a record of costs that can be tax-deductible. Clients must add their funds to the platform at the start of the contract. This ensures the freelancer's immediate payment after delivering the service.
Hiring many freelancers- short term and for specific jobs - increases the risk of not being GDPR compliant, not filing expense reports correctly and not having the money to pay freelancers when the time comes. Flime FMS stores the data and removes the risk of paying large fines for information-sharing at the company.
Save Money With Automation
Flime FMS contracts freelancers and pays the VAT added on their invoice. Clients do not need to declare VAT payments or pay the extra charge. This removes the extra step of budgeting for VAT payments and personnel needed to take care of accounting.
According to KPMG, successful process automation saves companies 40% – 75% in costs with payback that varies between several months and several years. With a freelance management service, you can eliminate administrative problems such as onboarding, GDPR, paying invoices, writing expense reports, dealing with international VAT.