According to a new study by HRreview, a growing number of UK companies are turning to independent contractors to fill in skills gaps and to respond to changing workforce requirements.
The State of Freelance Work Report by Remote, an employment specialist for remote workers, revealed that 53 percent of UK businesses have increased their use of independent contractors over the last three years.
Nearly half of UK businesses (43%) cite the difficulty in hiring full-time and part-time staff as their main reason for using freelancers. Many companies are turning to freelancers for access to specialist skills and to reduce costs. This is especially true in light of increasing Employer National Security contributions as well as new employment laws.
Businesses in the UK are becoming more aware of the value that freelancers bring to their team. Around 74 per cent of employers think that hiring freelancers enhances their internal capabilities because they bring in new knowledge and expertise. The top freelance recruitment areas are IT, engineering and creative roles. Customer support, marketing, customer service, and customer support are also popular.
In the report, 42 percent of UK companies reported an increase in freelancers over 55 years old. The report also noted that employers valued older freelancers because of their experience, dependability, and ability to mentor within teams. In total, 43 percent of respondents said they preferred to work with older freelancers.
Classification and compliance issues
The growth of freelance hiring presents new challenges to HR departments, despite the benefits it brings. Nearly half of UK businesses (49%) admitted that they use basic tools within their own company to manage freelancer contracts and billing. Another 32 percent use spreadsheets and emails, which can lead to mistakes and delays.
Late payment is a major problem. Inefficient internal processes are responsible for 32 percent of freelancers not being paid on time, according to the report. Manual systems increase the risk of accounting mistakes and missed deadlines in tax reporting and compliance.
A second area to be concerned about is the correct classification of freelance workers. A misclassification of contractors could lead to legal penalties or damage to reputation for 36 percent (or more) of UK firms. The management of international freelancers is more complex, especially when hiring in areas where the company has no physical presence.
The use of freelancers is a global phenomenon
Globally, 37% of businesses hire freelancers based in another country. It is common for this to involve coordination between multiple time zones and different languages. However, only one quarter of employers have reported problems with communication. This indicates that freelancers from around the world are successfully integrated into company workflows, despite geographic barriers.
Pedro Barros said that freelancers are now used all over the world.
He said, “All evidence indicates that numbers will increase in the next few years in IT and Customer Support.” However, many companies lack the necessary structure, processes, and tools to effectively manage their freelance employees. They risk falling foul of the regulations, which can result in fines and reputational harm.”
Freelance Demand Reflects Digital and Operational Needs
Digitalisation and changes in the operational strategy are also driving up demand for freelancers. 37 percent of businesses cite IT and engineering as the most common freelance roles. This is in line a growing focus on artificial intelligence, automation and optimising digital customer experiences.
Freelancers have been hired to help address skill shortages, but also support strategic transformations projects. This is especially true in sectors that are tech-enabled. Freelancers are used by businesses to gain access to highly specialised expertise without the financial commitment that comes with permanent hires.
HR professionals have been urged to review the management systems and processes they use, as freelance work is set to become a more important part of workforce planning. Investment in contractor management infrastructure could become necessary as legal and financial risk increases along with the rise of demand.
