On-demand employees have become crucial components of business success, especially as skills gaps widen and competition for talent rises.
Indeed, more than 90% of hiring managers say working with freelancers and independent contractors is important to meeting their business goals, according to our research report. Among those, 67% of senior managers in tech companies rely on more than 30 freelancers in their department, and 81% expect that number to grow by at least 10% in the next year.
With a robust and vetted roster of qualified on-demand talent, you can position your business to remain agile, productive, and competitive, even amid rapid strategy changes or unexpected skills gaps.
This article is part of our guide on the future workforce.
What is an on-demand employee?
An on-demand employee is a freelancer or independent contractor that you hire on an as-needed basis for short-term or long-term work.
Despite being called “on-demand employees,” these workers are not really employees. Instead, they are self-employed, though they can contribute as much value as employees and serve as important contributors.
Freelancers and contractors possess the talent, skills, and experience you need to execute work. While some only work in specific industries, others perform a variety of work across different fields. For example, you might come across a content writer who specializes in the field of cybersecurity, while a web designer you met works with all kinds of businesses.
In the past, freelancers were often individuals who left full-time jobs in favor of owning their own careers to gain more control over their work schedule, compensations, and having the ability to pick and choose work according to what matters to them. However, due to new generations entering the market and technology advancements enabling people to learn new digital skills on their own, an increasing number of workers kick off their careers as freelancers from the get-go.
You can find on-demand talent for virtually any task, project, or work you need, regardless of the level of expertise required to get it done.
On-demand employees vs. traditional employees: What’s the difference?
As we mentioned, on-demand employees are not actually employees.
Although they must sign a contract with your company, they are not on the employee payroll. You are not required to withhold income taxes from their pay or provide them regular employee benefits and protections.
Unlike regular employees, freelancers and contractors determine their own compensation rate and method, and are commonly paid by the project, per hour, or on a retainer. And in most cases, you cannot dictate how or where they perform their work.
Finally, they don’t require a W9 tax form. Instead, you are required to provide them with a 1099-NEC each year.
On the other hand, traditional employees refer to the permanent workers that you hire. You pay them a yearly salary or an hourly wage, pay income taxes on their earnings, provide healthcare insurance, vacation days, and other benefits, like retirement savings plans.
Traditional employees require proper new-hire onboard. They receive company-issued equipment, undergo performance reviews, and require a W9 tax form each year.
Despite these technical differences, both traditional and on-demand employees have the potential to offer similar value. Ultimately, it’s their skills, knowledge, and expertise that will benefit your company, not their job status.
How on-demand talent evolved
The evolution of on-demand employees directly corresponds to the booming freelance economy. One of out every three Americans are doing freelance work. Therefore, it is clear that alternative workforce is becoming mainstream.
As companies’ need for more advanced technological and technical skills increases, the skills gap has widened. The competition for top talent has heated up, with prestigious companies routinely offering six-figure salaries, signing bonuses, unlimited vacation days, and a myriad of other benefits in a bid to win them over.
However, not all companies can compete on this level. On top of that, many have recognized that they don’t actually need to employ all of the workers that possess the skills they need. For many companies, enlisting freelancers—even on an ongoing basis—is enough.
As a result, these strategic companies have expanded their recruitment efforts beyond the traditional talent pool to include freelancers, independent contractors, and gig workers.
As the demand for talent rises, so has the demand to get skilled.
The emergence of platforms like Udemy, Coursera, Skillshare, and more has ushered in a new era of talent building. They allow anyone—with any level of education or prior experience—to develop advanced skills that help them compete in the talent market.
Many people who were first introduced to their trades on these platforms have become qualified on-demand employees for many companies.
5 benefits of hiring freelancers, contractors, and gig workers
Here are just some of the benefits of working with on-demand employees.
1. Quickly fill skill gaps
When a skill gap arises—whether that’s because of a vacant position or your strategy requires tapping an unmet capability—on-demand talent can help.
Instead of spending months searching for the right talent, interviewing candidates, hiring, onboarding, and getting new hires up to speed, freelancers are used to quickly learning about new companies and diving into work.
And, because they need to keep their skills sharp in order to compete, many freelance talents can offer valuable skills and capabilities.
2. Boost organizational agility
When skills gaps and talent vacancies aren’t holding you back, you can more easily face changes, pivot your strategy, and overcome challenges that would normally thwart progress. An on-demand workforce helps your organization be more resilient and adaptable to change.
3. Execute work faster
Most freelancers and contractors are project-focused. That means instead of having to spend significant portions of their time sitting through meetings or creating reports, they simply do the work that’s asked of them. With more talents dedicated to just doing work, your projects will move faster and more efficiently.
4. Lower costs
Businesses can save as much as 30% on human capital and related costs by hiring freelancers over full-time staff. Since companies aren’t required to pay taxes on behalf of self-employed workers, contribute to workers’ comp or unemployment insurance on their behalf, or provide healthcare benefits, working with freelancers can be much less expensive.
However, that doesn’t mean freelance talent comes cheap. The most experienced and in-demand freelancers will charge a premium for their services.
5. Less commitment
To put it bluntly, you have no obligation to continue working with a freelancer if they aren’t performing or the work relationship isn’t working well. You can part ways and find someone who is better suited for the role.
Making a clean break with employees who underperform is harder. The risk of hiring an employee and it not working out is much greater.
Succeed with on-demand workers today and in the future
Ensuring you have access to the talent you need is among every leader’s top priorities today. Now that you understand how on-demand employees can help boost your workforce and execute more work, you will know when to hire them. From there, all of the benefits of building up a qualified on-demand workforce will come.