The world is experiencing a profound and permanent shift in the nature of work—one that will determine which companies gain a competitive advantage for years to come.
The labor market is fractured and the economy is volatile. COVID-19 caused millions of people to leave the workforce for a variety of reasons, including health concerns and family caregiving. Now a secondary wave of burnout and reevaluation has hit the workforce, leading to the ongoing Great Resignation during which millions of American workers have quit their jobs. This has created record labor shortages, especially in areas like IT, software engineering, and healthcare.
Economists have been attempting to understand the full impact of these issues for months. But what has been overlooked so far is this: Conditions are ideal for a remote, freelance revolution. In fact, it has already begun.
Companies Are Using More Contingent Labor
What the Data Shows
Demand for skilled contingent workers is high and getting higher. In a 2019 survey of executives by SAP Fieldglass and Oxford Economics, 48% said that their companies would not be able to conduct their current business without contingent workers, and non-payroll workers made up nearly one-quarter of their human resources spend on average. “I can see a world where the external workforce makes up an even greater proportion of the workforce. That’s a future we anticipate for Philips,” Martin Thomas, Head of Total Workforce Management at Philips, told SAP Fieldglass.
Internal data from Toptal—which provides specialist, on-demand talent to clients like Hewlett-Packard, Airbnb, Calm, and Motorola—shows that contingent sourcing requests grew by more than 70% between September 2019 and September 2021. Fueling this growth was a shift toward fully remote work, in contrast to demand for on-site or hybrid engagements, which has gone down, says data scientist Erik Stettler, Chief Economist at Toptal and founding partner of the venture firm Firstrock Capital.
SAP Fieldglass predicts that, based on historic performance, non-payroll hiring will increase 7% by mid-2022—which could represent opportunities for tens of thousands more freelance workers. Meanwhile, 56% of human resources and C-suite executives say they plan to shift more roles to freelance, project, or contract work, according to a 2021 survey by Randstad Sourceright, a global talent acquisition consultancy based in Amsterdam.
Case in point: BMO Financial Group, the umbrella company of the Bank of Montreal, North America’s eighth-largest bank, which ranks 107 on the Forbes Global 2000 list of the world’s largest public companies. BMO saw a huge jump in the use of contingent labor in 2019—about a 50% increase compared to five to 10 years ago, Richard Wiskin, BMO’s Contingent Workforce North America Lead, External Talent Solutions, tells Toptal Insights. Non-payroll hiring slowed a bit during the peak of the pandemic, but “we are seeing signs of the growth in using contingent workers coming back for 2022,” Wiskin says. The banking giant is bringing on hundreds of freelancers as it expands its digital channels program, one of three divisions at the company that leans heavily on contingent labor. Wiskin estimates that BMO currently spends about 5% of its revenue on external labor.
Why This Is Happening Now
“Historically, disruptions and black swan events like COVID have been a catalyst for unleashing change that has been bubbling under the surface for a long time,” says Stettler, who in addition to serving as Toptal’s Chief Economist is also a contingent talent in Toptal’s network. “Profound change is often triggered by something bad, but the outcome includes important changes and advancements.” A 2021 report from the International Labour Organization, a UN agency that sets labor standards for member countries, predicts increasing demand for contingent labor coming out of the pandemic, noting that COVID-19 accelerated changes that were already starting to happen. Companies are increasing their use of cloud computing, virtual collaboration platforms, and contingent staffing firms for sourcing talent.
In the early days of the pandemic, contingent workers in the software development, IT, and project management sectors helped businesses scale the technology solutions needed to continue doing business. Freelancers also filled sudden gaps left by employees who were forced to quit due to illness or childcare responsibilities.
One of the most-touted benefits of contingent labor is cost savings versus hiring, training, and providing benefits for full-time employees. It’s arguable, however, that today, the agility and flexibility of contingent workers is key to businesses surviving an increasingly volatile marketplace. As JP Stadelmann, Head of Purchasing for the External Workforce at Swisscom told SAP Fieldglass, “For us, the value of the external workforce has never been cost. It’s flexibility. It’s strategic.”
More Skilled Workers Are Going Freelance
What the Data Shows
A 2019 analysis by the Freelancers Union found that about 35% of the workforce was contingent at the time, and predicted that by 2027, freelancers would make up about half of the US labor force. In an interview with Toptal Insights, Peter Miscovich, Managing Director of Strategy and Innovation at the Fortune 500 professional services firm JLL, says he thinks that number will be much higher. Contingent workers could make up as much as 80% of the labor force by 2030, he says, given the strength of current trends.
In the first nine months of 2020, Toptal saw the volume of applicants wanting to join its freelance network increase by 55% compared to the same period the year before. These specialists in business, design, and technology—after months of sudden remote working due to COVID-19—were “deciding to take ownership of their career paths and value in the labor market,” Taso Du Val, Toptal’s Chief Executive Officer said at the time.
Why This Is Happening Now
Knowledge workers have experienced the benefits of working a flexible schedule from any location and don’t want to give it up. “People see freelancing as an opportunity to restructure their lives into ones with more financial freedom and personal fulfillment,” says Stettler. “Flexibility and constant learning—that’s what COVID showed us are really important ingredients for job satisfaction and security.”
The ongoing Great Resignation stands to increase the number of skilled professionals who choose to go freelance. Roughly 1 in 3 workers are now considering leaving their jobs, while almost 60% say the pandemic has caused them to completely rethink their careers, according to a recent survey conducted by Qualtrics.
Before COVID-19, “there was pent-up demand on the part of talent to have more freedom and control over their lives; to escape the rat race and begin living the life they’d always envisioned,” says Stettler. “We can expect a shift to contingent work to be much more structurally permanent.”
Contingent work lets people scale their workload up or down to suit their schedules; gives them more control over their work hours, income, and career paths; and enables them to build robust client networks across geographies and industries. Freelancing can also help diversify income, providing cash flow for people as they pursue riskier undertakings like building a startup or writing a book, says Stettler. Another big attraction is the flexibility to relocate to more livable and affordable areas, a phenomenon that has helped lure US talent away from overpriced metropolises like San Francisco to secondary cities, small towns, and even abroad.
Stettler made the shift to contingent work himself more than three years ago, when he joined the Toptal talent network as a finance expert. “In many ways, I had the perfect life in New York: a job in finance, an apartment in Greenwich Village,” he says. “I realized, through the people I knew at the time who were living more independent lives, that there was something greater out there, and that’s freedom. I was successful but still part of a machine, with limited control over my own life.”
Now is the time for talent to embrace the freelance transformation, says Jennifer Kahnweiler, author of The Introverted Leader and a career development consultant for clients such as Amazon and Merck. The career ladder has been replaced by a lattice in which networking and diverse experiences are key: “You become more employable the more experiences you have,” she tells Toptal Insights. “It’s a seller’s market. You build more strategic partnerships and relationships when you step out. There are so many wins to doing it.”
The Role of Contingent Talent Networks
Digital labor platforms like Toptal are playing their own role in transforming the world of work, notes the aforementioned International Labour Organization report. The external workforce they help create has been credited by some researchers with helping to build efficiencies that drive strategic recovery and success.
Beyond that, robust contingent talent networks can give skilled freelancers as much, or as little, work as they want and offer a choice of projects, rather than the worker having to advertise their services and seek clients themselves. Joining an international staffing platform can be life-changing for skilled workers who live in developing countries or far from traditional economic hubs.
Global staffing companies are able to give businesses access to the best talent, wherever they’re living. Some platforms vet candidates and put custom teams together on demand. “If you’re a larger business, it’s just not scalable to try to find the exact freelancers you need on an individual basis, from all over the world,” says Stettler. “Important projects require many types of professionals in key areas such as engineering and design—and they all have to coordinate with each other to make it work.”
Welcome to the Contingent Workforce Revolution
Disruption and change will continue as the global economy and talent marketplace recover from the events of 2020. One of the best ways companies can protect themselves and plan for future growth is to invest in a more flexible workforce—one that can be brought in, on demand, to shore up unexpected skill gaps and help businesses pivot and thrive.
“This is a moment in history that unleashed profound changes in the nature of work,” says Stettler. The remote, freelance revolution “was there, waiting to happen—it needed the catalyst. And the catalyst finally came.”