Beyond Organizational Boundaries: Managing Freelance, Fractional, and Gig Workers

“The company” as we know it has changed for good. It used to be contained within physical walls, a building, a specific city or town. It used to be powered by full-time employees who would commute into that office–by car or train–and dedicate years of their careers to that business. 

Now, most employers (over 60%) operate on a hybrid model, allowing employees to work remotely from home or, sometimes, another state. 

And today, more and more workers are turning to contract work, freelance roles, and gig jobs to earn their income. Today, there are over 73 million freelancers in the U.S., which is forecasted to reach 90.1 million by 2028. 

Employers Are Turning to Gig Work, Too

Interestingly, organizations increasingly rely on external contributors to get the job done, largely as a response to America’s labor shortage but also due to the numerous other business benefits of hiring fractional employees. 

Those benefits include major cost-savings on salaries, employee benefits, office space, equipment, and insurance; time-savings on recruiting and onboarding (getting straight to the work instead); contributors with deep expertise in one category (rather than a broad skill set) to target specific solutions; and so much more.  

But, while the majority of companies have settled into their hybrid work policies and scaled up their remote work capabilities, it’s been more difficult for employers and HR departments to adapt to the new norm of managing a workforce across and beyond organizational boundaries. 

The Challenges of Employing Fractional Employees

Hiring part-time and fractional employees introduces a whole new host of challenges for HR teams and their employers. Those challenges include: 

• Strained commitment and loyalty. Fractional employees may not feel as committed or loyal to the company as full-time employees, which can affect their performance, productivity, engagement, and responsiveness—and pose a security risk. It also increases the likelihood of turnover.
  
• Communication and culture disruptions. Contracted employees are usually not as integrated into the company culture and communication channels, leading to potential misunderstandings and a lack of cohesion within the team. It also begs the question: to what extent do company values and expectations (like diversity, equity, and inclusion principles and practices) apply to external workers?
  
• Skill gaps and loss of institutional knowledge. Independent contractors are often deeply skilled in one specific category (for which they are hired), but might not have the same breadth of skills as full-time employees, which can leave holes in the overall company skillset. Plus, when employers hire gig workers instead of investing in full-time hires, they lose out on growing valuable institutional knowledge over time, which some experts have called “a company’s best asset.”
  
• Legal and compliance issues. Employers must know and comply with labor laws and regulations related to part-time or fractional employment, including wage and hour laws. Not following proper procedures increases your business’s exposure to risk—including, potentially, hundreds of thousands of dollars in penalties for employee misclassification.
  
• Performance management confusion. When a traditional, full-time employee signs an employment contract, that solidifies a mutual agreement with their employer to perform the roles and responsibilities outlined in the job description. It also means that the employee consents to being graded against that rubric and coached against those standards. Work agreements with fractional employees leave this area a little more gray, meaning managers can struggle to know when to step in. Plus, managing and evaluating the performance of independent contractor employees can be challenging due to their limited presence and varied schedules.

Best Practices for Employing Fractional Employees 

To avoid the problems outlined above and unlock the powerful benefits of hiring freelance, fractional, and gig workers, employers and HR professionals should factor in the following best practices to their employment practices: 

1. Create bullet-proof agreements. Creating a clear and detailed contract outlining the scope of work, payment terms, deadlines, expectations, and termination details is the key to a successful company-contractor relationship. It can also reduce compliance risk around misclassification by clearly stating that the hiring company and contractor are not in an employer-employee relationship. To reduce security threats and protect sensitive company information, employers should use the contract to clearly define who owns the intellectual property created during the engagement and what the freelancer is allowed to share.
2. Stay up to date on relevant laws. Employment law is always changing, varying from state to state. To remain compliant, employers must keep tabs on and adhere to relevant laws pertaining to gig workers—especially those around worker classification, taxes, and permits. Beyond properly classifying workers to avoid misclassification penalties, HR departments should also ensure they use the right tax forms (see: 1099-NEC vs W-2) and that contractors have the necessary permits and licenses to perform the work legally.
3. Perfect the onboarding process. Freelancers are usually at peak engagement at the start of a new project, making the onboarding process a critical window of opportunity for companies that employ part-time workers. Quality onboarding ensures that the contractor gets off on the best foot with the company; ultimately, they’ll be likely to produce high-quality work on time and more likely to stick with the business. It also makes the business more likely to see a return on its investment in the person. Beyond signing the necessary paperwork, contractors should be introduced to all relevant teammates, given the right tools to do their job successfully, and offered a run-down on company culture. Be sure to collect the necessary payment details and run through payment terms again during this time so they go into the project feeling confident they will get paid in full and on time.
4. Practice diversity, equity, and inclusion. Employers should provide equal opportunity for contract positions regardless of race, gender, religion, or other protected characteristic. Not only does this help companies stay compliant but it also fosters an inclusive environment where all workers feel valued and respected (resulting in a higher-quality work product).
5. Communicate consistently and clearly. Employers can nurture a positive relationship with the contractor over time by maintaining regular check-ins, providing consistent feedback, and communicating clearly at every opportunity. The result? They’ll be more likely to be receptive to the kind of feedback that can push the work–and the team–to the next level.
6. Choose the best tools. During the pandemic, team collaboration tools took center stage as remote teams needed more structured ways to work together from afar. Today, so many incredible technologies and platforms (think Zoom, Slack, Google) are designed to facilitate communication and project management––and they’re ideal for keeping projects with freelancers on track. Employers should leverage best-in-class collaboration tools to streamline work with fractional employees and keep company data secure.

By following these best practices, businesses can build successful relationships with external employees, ensuring that projects are completed effectively and efficiently while maintaining compliance with relevant laws and driving business goals.