Contract work is becoming the new normal. Consider Uber: The ride-sharing startup has 160,000 contractors, but just 2,000 employees. That’s an astonishing ratio of 80 to 1. And when it comes to a focus on contract labor, Uber isn’t alone. Handy, Eaze and Luxe are just a few of the latest entrants into the “1099 Economy.”
Though they get the most attention, it’s not just on-demand companies that employ significant contract workforces. Microsoft has nearly two-thirds as many contractors as full-time employees. Even the simplest business structures, sole proprietorships, have increased their use of contract workers nearly two-fold since 2003.
Four trends are converging to make contracting more attractive for both employers and workers, and reshaping how businesses and employees look at the traditional full-time model.
Pick A Platform, Find Customers
Historically, contractors have needed serious hustle to get referrals, early customers, and a stream of repeat business. For local services, platforms such as Homejoy and Handy upend that dynamic. These platforms take on much of the marketing, job finding, payment and management costs necessary to run a small business.
Local service contractors join the platform and are quickly plugged into a stream of consumers. One Homejoy cleaner says, she’s “never been busier.” She just needs to say when she’s available, show up for jobs and do the work.
For knowledge workers, platforms such as Upwork fill a similar gap. Workers around the globe get access to a pool of potential customers. Payment collection and reporting are handled by the platform, which means contractors, whether working from their kitchen or a beach in Thailand, can focus narrowly on doing the work they do best while the platform handles the less glamorous parts of the business.
Businesses themselves are benefiting from this simple, streamlined way to source contractors, as well. With flexible human capital, they seamlessly develop the ability to rapidly scale up and down. By becoming less of a “within these four walls” entity to something that’s much more amorphous, they can focus on assembling the right talent at the right time to accomplish a given project.
It’s similar to a movie set: A director assembles the people with the skills necessary to create a complete movie (casting, lighting, grips, sound, etc.). They come together and focus intensely on one project and then disperse when it’s complete. It’s very different from a business world that’s typically described with a rigid org chart, but still highly effective.
The people entering the workforce today value flexibility and autonomy; they choose location over career and job rotation over promotions. According to the Bureau of Labor Statistics, the average 55-year-old spends 10 years on a job while the typical 25-year-old spends three. This younger cohort will even choose flexible schedules and remote work over increases in salary. The idea of lifelong employment with a pension no longer applies (and those pensions aren’t sticking around, either).
Recognizing these trends, Google and Facebook offer rotational development programs specifically designed to attract young talent. Reid Hoffman, co-founder of LinkedIn, advocates for employees to sign up for two-year “tours of duty” to accomplish something significant for the company before moving on to the next thing.
Contractors can focus on finding work that matches their skills and will pay them well. But the timeframe changes — instead of working as an employee for a two-year stint doing largely the same thing, one- to six-month projects for various employers are becoming the norm.
Within the on-demand economy, it’s accelerated even further. Many contractors work for multiple companies in a given week — with some working for as many as 10. The “9 to 5” has all but disappeared.
While the downside is less job security, the flexibility afforded is desirable to many.
A Healthcare Safety Net
People are terrified of losing their health benefits — and rightly so. The risks of going without health insurance are high — a single accident could be financially catastrophic. Therefore, many would-be entrepreneurs delay leaving their employers.
The Affordable Care Act (ACA) is changing that. Contractors can go to their state’s marketplace and apply for coverage. They don’t need to be dependent on an employer for that benefit. “The ACA is a good thing for independent workers, especially those with low-to-moderate incomes,” says Steve King, a leading researcher on the future of work with Emergent Research. “It will lead to more people becoming independent and fewer independent workers without health insurance.”
Protection For Contractors
It’s not all sunshine and roses. Contractors don’t have many of the legal protections that employees have — they’re vulnerable, wages can be suppressed and individuals can become little more than cogs in the machine.
Fortunately, dozens of services are popping up to fill this void and support the growing contractor class. Freelancer’s Union offers insurance tailored to the needs of independent workers. Peers.org provides a community to better understand what wages contractors can expect to make. QuickBooks Self-Employed offers financial and tax tools. And there are even digital nomad communities popping up around the globe for those who don’t need to be tethered to one spot and apps like Teleport to help contractors find them.
This burgeoning ecosystem is closing the “benefits gap” between employees and contractors. When a person can get insurance, community and financial help without traditional employment, it raises the question: Why be traditionally employed?
The Future Of The Workforce
Technology platforms make it easier for contractors to get customers or work from around the globe. Health coverage can be acquired. Communities and tools exist to help contractors get the most out of their finances. That’s why it’s projected that over 40 percent of the workforce will consist of contractors just five years from now.
Individuals are looking at their job options and choosing contractor work—essentially starting their own businesses. For these people, it’s not so much about “taking the leap” anymore. It’s about taking the next step.
For businesses, the changes are just as significant. Ultimately, businesses will consist of owners, talent assemblers, and contract workers for everything else. Platforms will spring up that know what contractors have certain skills, what they’ve done, and whether they’re available. Contractors will get instantly matched with talent assemblers. Entire teams could be hired with the click of a button.
The implications are profound. This shift will cause discomfort and dislocation as all shifts do. But, in the long-term, as the support scaffolding for both businesses and workers is put in place, a more dynamic economy will emerge.