By Rachael Grinnell
The landscape of the workforce is changing at an unprecedented pace. People entering the workforce are looking for flexibility, freedom, work/life balance, and independence. This is a major shift from previous generations whose goals were stability, conformity, and lifelong employment.
From a company’s standpoint, this move toward freelance and on-demand labor is perfect for decreasing overhead and liability. It also presents an opportunity for increased profits, expanded services, and a limitless talent pool. In fact, companies today have very little incentive to hire full-time employees.
It is estimated that one-third of the current American workforce is made up of freelancers. As companies reap the benefits of on-demand labor, freelancers now have a host of opportunity for work. It seems like the perfect formula for success.
But with any shift in cultural or business norm, there is uncertainty and a period of transition. Right now, the freelance market is booming but with very few systems in place to support the freelance economy.
There are several challenges that freelancers face in the current economic and business environment. These challenges come with the territory of the freelance business right now. But eventually these are the kinds of kinks that will be worked out of the system.
Immediate Challenges for Freelancers
Healthcare benefits are one example of an issue that all freelancers face. This issue was partially tackled with the advent of the Affordable Care Act. People without healthcare benefits now have better access to individual plans. This issue is only partially addressed because the plans are still cost prohibitive for many freelancers.
Competition is also becoming a big factor for freelancers. As more people enter the freelance economy, the competition increases. As a result, the wage level will eventually drop, making it even more difficult for freelancers to make a living.
Payment in the Freelance Economy
Perhaps one of the biggest challenges in the freelance economy is the issue of payment. Employees who work for a company have channels to file complaints if they are not paid properly. Freelancers have no safety net or no guarantee of payment. Their only option is small claims court, which is likely to cost more than the payment was worth.
But the landscape is continually changing, and there are more companies and services to help freelancers not only with payment issues, but also with cash flow problems.
Positive cash flow is critical for any business to survive, and the freelance game is no different. Freelancers need on-time payments not only to keep their business going, but also for a paycheck.
As technology and demand catches up with the freelance market, more and more companies are offering services to help freelancers get paid on time and maintain a steady a cash flow from their billed services. One of the biggest challenges of the freelance economy is waiting 30, 60 or 90 days for payment from a client.
Online services like FundBox and BlueVine help small business owners and freelancers by funding the amount of outstanding invoices upfront. For a fee, freelancers can use this service to get an advance on invoices immediately to help maintain a steadier flow of cash.
The catch for freelancers is the fee. With FundBox, for example, the freelancer pays the advance back in weekly installments that include fees. Payments are withdrawn directly from a bank account, so payment is automatic and easy. But freelancers have to decide if the value of the invoices is worth paying the advance fee.
The Future of Freelancing
If freelancing and on-demand labor is the workforce of the future, then technology and services will catch up with the demand of the freelancer. One example of just that is company called WeWork. This organization offers office space and an office “environment” for freelancers who don’t want to work from their kitchen table. The service comes complete with coffee and donuts and weekly happy hours for members.
These are the types of services that freelancers of the future will be looking for. The stability and routine of a 9 to 5 office job are quickly fading. The flexible, work-anytime model is catching hold for both freelancers and businesses. It will just take a little time to get the systems and processes in place to support an on-demand labor economy.
Rachael Grinnell is a lifelong entrepreneur that helps small businesses alleviate their cash flow problems through creative financing. She is currently the co-founder of EquipMyFinance.com, which aims to make equipment financing more obtainable for small fleets and owner-operators.