Enterprises and their Freelancers: What Does Upwork’s Recent Study Tell Us?

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In recent years, various studies have indicated that freelancing is on the rise. That is, an increasing number of knowledge workers (ranging from graphic artists to data scientists) are choosing to work as independents (full-time, part-time or moonlighting). According to a 2017 Upwork study, “The U.S. freelance workforce is growing faster than the overall U.S. workforce, outpacing overall U.S. workforce growth at a rate 3x faster since 2014.” At the same time, little is understood about how and to what extent enterprises utilize such independent contract workforce.

In this article, we rely on data from Upwork’s recent study, “Future Workforce Report: Hiring Manager Insights on Flexible and Remote Work Trends,” to glean a number of insights into the enterprise use of freelancers. The study was conducted by the reputable independent research firm Inavero.  To help us to gain some insight into larger enterprises, Upwork provided us with a cut of the data that consisted of responses of managers from U.S. firms with over 1,000 employees (mid-sized to large enterprises).

Enterprise Use of Freelancers

It is well established that mid to large-sized enterprises are increasing their use of--broadly speaking--contingent workforce (including agency temps, independent consultants, freelancers). While the enterprise use of contingent workers supplied by staffing agencies has been quantified and analyzed, the enterprise use of freelancers (independent knowledge workers) is not as well understood.  While there are various indications that the use of freelancers by all businesses is increasing, information about the use of freelancers within medium to large enterprises is limited and ambiguous.

One significant reason for this is that much of that freelance workforce is not being tracked within enterprises by procurement or HR.  Consequently, the answers to many questions lie in the minds of the hiring managers that use them.

The Upwork/Inavero Survey Data

Inavero received survey responses from 1,005 managers at companies of different sizes and in different industries. Upwork’s reported findings were based on the full data set, which consisted of companies ranging in size from fewer than 100 employees to more than 5,000 employees. In effect, the findings represent an average of responses from very small to very large companies. Because we were interested in what was happening within larger enterprises and we assumed that survey results would vary according business size, we analyzed a cut of the data for companies with more than 1,000 employees, which accounted for 40% (or 400) of all responses. (Note: The Small Business Administration defines “medium-sized and large enterprises” as those having more than 1,000 employees.)

According to the U.S. Census Bureau, there are fewer than 10,000 businesses in this category, representing less than 1% of all U.S. Businesses with five or more employees. Therefore, the overall distribution of the Upwork survey responses is — relative to the Census estimate of the actual number of firms — disproportionately skewed toward mid-sized and large enterprises. Moreover, comparing the distributions of Upwork survey responses and Census estimates of the number of firms, the Upwork distribution is even further skewed toward the largest firms.

Accordingly, when we assess the hiring manager survey responses of firms with 1,000 or more employees, we should have some confidence that they represent attitudes and perceptions within larger firms.

We chose what we considered the most relevant survey questions from the study and compared the survey responses from firms with 1,000 or more employees with the survey responses from firms with fewer than 1,000 employees to identify variation of attitudes and perceptions.

Findings for Medium-Sized to Large Enterprises

We found—contrary to our expectations--that there were few significant differences in the survey responses from firms with 1,000+ employees (mid and large-sized enterprises) and those with less than 1,000 employees (smaller businesses).  This finding might lead us to conclude that manager attitudes and perceptions with respect to freelancers at mid-large size enterprises are similar to those of managers at the smaller firms, which are generally considered to use freelancers much more liberally than in larger firms (in other words, that freelancer use in larger companies may be more extensive than may have been thought).

Mid to large-sized enterprises: Use of Contingent Workforce

Over 50% of surveyed managers believe that, during the next 10 years, the workforce environment will be changing in the following ways (% that agree with statement):

When asked about the key drivers for their organization adopting a more flexible (contingent) workforce (i.e., freelance, agency or temp workers), surveyed managers pointed to the following:

Managers reported 59% of departments in the company used contingent workforce (e.g., temporary, agency, freelance workers), up from 50% in the preceding year. And 50% of managers agreed that companies are embracing more flexible teams as compared with three years ago.

Based on manager survey responses, on average, 7% of total departmental workforce consisted of contingent workers of various kinds. And managers expected that 10 years from now the percentage would grow to 26% (an increase of about 300%).

Mid-Sized to Large Enterprises: Use of Freelancers

When managers were asked about the changes they saw with regard to freelancers (compared with three years ago), they reported as follows:

In contrast to 47%–55% managers indicating that the use of freelancers has been increasing over the past three years, only 27% said that the use of freelancers has been declining.

Forty-seven percent of managers at enterprise organizations report they are currently using freelancers. And 39% report that they will be using more freelancers in the coming year, while only 16% expect they will be using fewer of them.

Forty-six percent of managers said they planned to increase their use of freelancers in the next 10 years, versus 56% of managers at smaller businesses. And 66% of managers that already work with freelancers said they planned to increase their use of freelancers in the next 10 years, versus 74% of managers at smaller businesses.

Managers that have been using freelancers indicate they use freelancers in a variety of ways:

Managers who have recently hired freelancers identify the following characteristics:

Indicating a range of reasons, managers that were already using freelancers, reported the (single) primary reason for using more as follows:

Quite notably, 84 % of managers said they would consider hiring a freelancer instead of temporary worker supplied by a staffing firm. Managers pointed to a number reasons for this attitude:

Conclusions

The Upwork/Inavero data supports the idea that the use of freelancers is increasing and taking root in medium-sized to large enterprises. For example:

  • While 55% of managers said the use of freelancers has been increasing over the past three years, only 27% said it was declining
  • Of the managers that said they were already using freelancers (nearly half of all managers), 39% said they will increase their use of freelancers in the coming year, while only 16% said they intended to decrease their use
  • A surprisingly large 84% of managers said they would be open to hiring freelancers rather than temporary workers through a staffing firm, while only 16% said they would not be

While this is happening, medium-sized to large enterprises may be slow to respond to facilitating the sourcing and managing of freelancers. As we have discussed elsewhere, adequate practices, processes and infrastructure have generally not been established.  The absence of these would seem to have only downsides. For example:

  • Constraining the beneficial use of freelancers to close talent gaps and deliver work in short projects or on short notice
  • Allowing freelancer use to grow in the organization without establishing crucial oversight and optimization guard rails.

There should be little doubt that the use of freelancers is (and should be) increasing in mid-sized to large enterprises. The most important question now for procurement and HR is how to maximize the benefit.

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