The future of the job market lies in non-employee workers, according to a study from Fieldglass, a software company that provides vendor management systems, in partnership with Ardent Partners, a research and advisory firm.
The study, which surveyed 210 business professionals at small, medium, and large businesses, found that as of 2015, "nearly 35 percent of today's total workforce is comprised of non-employee workers," which includes temps, freelancers, contractors and statement of work-based labor. As a result, 95 percent of businesses now view this new workforce as a key element to developing and running a successful business, which means big changes for hiring trends in the coming year.
"The changing needs of today's workers, the war for talent and the globalization of the workforce are just a few reasons that today's technology is evolving so rapidly. All of these forces are driving workforce management to the top of the business agenda, especially as talent becomes a true differentiator for organizations," says Arun Srinivasan, senior vice president of Strategy and Customer Operations of SAP Fieldglass.
The study notes that this is a relatively recent trend, because just a few years ago the bulk of a business' employee base was made up of full-time workers, while non-employees were used less often. But thanks to online hiring platforms, more businesses have found it easy to connect with and hire temp workers.
In search of gig workers
The biggest sources that companies use to find this new class of talent includes online labor marketplaces, freelancer networks, job boards, "in network" talent and social media. "By understanding where this talent exists, how it can be engaged, and the general parameters of how it should be managed, they will be able to drive additional value from the wealth of skillsets available in the on-demand talent marketplace," the study reports.
Thanks to the "on-demand" nature of these services, it's only helped intensify the popularity of freelancers, contract workers and other non-traditional hires. Employers can search profiles, post opportunities and quickly connect with candidates without much effort or expense.
These networks also offer employers a resource to find workers with specific skills they need for a project. The study points out how easy it is for employers to go online, post a job opportunity and list specific skills to find the right person. Instead of having internal employees work on something they might not be interested in or qualified for, businesses can get short term hires for highly specific projects.
When it comes time to get results from these non-employee workers, businesses can often just use the same website that they used to hire a freelancer or contractor. The study emphasizes the capability to not only manage projects through many of these websites, but also to safely and securely send payment. This ultimately eliminates any concerns employers might have about hiring a remote worker who isn't necessarily a permanent part of the team or who is working virtually.
A common term for this new workforce is the "flex economy," or the "gig economy," but whatever you call it, it's certainly non-traditional. As of 2015, the average business' workforce consisted of 20 percent contingent workforce and 54 percent traditional full-time employees. The other 26 percent are a grey area of people who fit into both categories; perhaps remote workers or part-time employees. Fieldglass predicts that by 2017 that will change to 25 percent contingent and 41 percent traditional workers, while the remaining 34 percent will exist in that grey area.
"Utilizing an external workforce can offer a variety of benefits for employers, whether an organization is focused on keeping down costs, finding the highest quality workers or under time constraints," says Srinivasan.
Full-time workers are safe … for now
However, anyone concerned about the state of fulltime work doesn't have to worry just yet. The study predicts that while nontraditional workers are starting to edge out traditional workers, it's a slow progression. Srinivasan says he foresees a 50-50 split down the line, but that businesses will always rely on full-time traditional workers in some capacity. "For a company's core competencies, employees will always be needed and an important part of the overall culture and business operations. That said, we do see more organizations exploring ways that a flexible workforce makes sense and can help them achieve their goals."
And although this trend is increasing in popularity, there are also challenges with the reality of contingent workers. In the study, 48 percent cited a lack of visibility and intelligence into the ultimate ramifications of the gig economy. For example, it's difficult to ensure these freelancers are up to speed on compliance, training and their overall impact on the business; all things you can easily teach a traditional worker.
Of those surveyed, 46 percent specifically stated concerns around compliance with federal, state and regulatory labor guidelines as they start hiring people from other states or countries.
There are also concerns around spending, with 45 percent citing a pressure to reduce costs and improve savings. Businesses have to consider the cost of hiring individual talent for new projects and initiatives. There will need to be a focus on creating realistic cost evaluations and budgets around nontraditional hires.
One of the last concerns that 37 percent of businesses cited was the ability to grow its workforce. With a traditional workforce, businesses can focus on on-demand training and growth opportunities, but that isn't as easy with freelancers or contract workers.
As the gig economy grows, businesses can expect more support. Similar to the websites that help businesses hire, manage and pay these workers, more software and products will be developed to support the gig economy. For example, companies are adopting Freelancer Management Systems (FMS) that make it efficient to manage this new load of non-traditional employees. Just as the hiring trends shift, businesses simply need to readjust and innovate around their current talent management strategies.
Ultimately, what companies are realizing about the gig economy, says Srinivasan, is that "It affords companies access to pre-screened, pre-trained workers with niche skills, who can get to work quickly and stay on only for as long as they are needed. And, as a company's needs change, an external workforce can be scaled up or down quickly."
This story, "Hiring trends for 2016: Welcome to the gig economy" was originally published by CIO.