Businesses hiring more and more freelancers are seeing the benefits of this practice, especially from a financial perspective. Obtaining and retaining quality contract talent can save companies millions of dollars in the long run, with advances in technology making the home office more than viable. Let’s look at some of the major cost benefits of a gig economy for businesses.
Salary – The first and most obvious benefit of a freelance workforce is the money saved on salary payments. According to the Bureau of Labor Statistics, 70% of an employee’s salary goes to the wage itself, leaving 30% to account for benefits. As freelancers are technically self-employed, companies theoretically save 30% for each hire. Obviously that’s not a concrete correlation, and steps can be taken to use part of that 30% to incentivize other freelance benefits, but it’s a distinct savings that effects a financial bottom line.
Another salary aspect to consider is location. If you’re based in New York and are able to remotely hire contract workers in more affordable cost of living areas, they’ll cost you less in wages. You’re still paying a competitive salary based on location, but actually saving money when compared to hiring locally.
Space – Businesses large and small know that office space isn’t cheap. And an expanding workforce used to mean finding a bigger space, or new construction costs. But the gig economy means that expansion doesn’t have to be as unwieldy a process financially as before. Freelance hires save on real estate costs that can cripple the growth, and sometimes even existence of a company. Ancillary costs such as utilities and travel are also cut when remote employees are utilized. Saving space can also mean cashing in: IBM has sold 58 million feet of their office space since 1995, at a tidy $1 billion.
Hiring – Companies spend great resources in hiring full-time employees. Interviews, training and other expenses can add up, and even after the process of hiring it takes some time for the employee to ramp up to full speed. Hiring a freelancer negates this cost and process, as they have the skills to hit the ground running. This “plug-in” option for personnel means projects are completed quickly and competently, which benefits financially. Freelance utilization also saves on costly employee turnover rates, which starts the whole sordid process of hiring all over again.