Hiring freelancers boosts productivity and profit

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Date: 25 August 2020

A freelance designer works on a project

New research has found that skilled freelancers can significantly improve business performance for those that employ them.

Freelancers increase the opportunity to create more jobs in the UK, according to new research from Trinity Business School.

A survey of 1,028 SME owner-managers and senior executives in the UK found that when freelancers make up at least 11% of a company's workforce, that firm's productivity will increase.

This in turn generates greater profits, as the research shows that the average productivity of firms with at least 11% of their workforce being freelancers was £4,669 higher per employee than firms with less than 11% freelancers working for them.

According to the findings, when firms use freelancers to add to existing workforces and output, as opposed to simply using them as a replacement for someone else, there is a clear improvement in the performance of that firm. It means that, contrary to the traditional view that freelancers take jobs from others, employing freelancers can help to create more employment.

"People normally associate the use of freelancers with employment destruction as they are perceived as doing work that otherwise could have been done by employees," said Professor Andrew Burke, chair of Business Studies and dean at Trinity Business School.

"This view overlooks a different type of freelancer who works in sync with employees but brings expertise and innovation not available within firms and on a swift basis, thereby enabling these businesses to innovate, grow faster and ultimately create more employee jobs. Our research is the first empirical research to see which type of freelancing effect dominates. Using UK data, we find that there is a positive net effect of freelancing on employment creation but to generate these gains firms have needed to take a deliberate strategic initiative to adopt a freelance intensive workforce model comprising of at least 11% freelancers."

Marc Cowling, professor of Business Economics at the College of Business, Law, and Social Sciences University of Derby, said: "Our research was the first to debunk the view that freelancers are cheap, low-value workers who cause job losses by replacing core employees. Rather we found they add specialist skills and expertise that create value and profit and allow firms to increase their core workforce as they accelerate their growth."

Written by Rachel Miller.

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