With Gallup reporting that only 13% of employees worldwide are actively engaged at work, costing companies $450 – $550 billion in lost productivity in the US alone, employers are desperately seeking ways to improve employee morale. Work friendships, a sense of purpose, and an empathetic corporate environment can all significantly boost employee happiness and productivity. However, a more unusual solution can be found in entrepreneurship. If an employee is unhappy for whatever reason, the employer can encourage them to start their own business. This way, instead of the company taking responsibility for improving the employee’s work life, the latter can take control themselves. This can be highly beneficial for both the new entrepreneur, and the employer.
The worldwide trend of permanent employees moving into freelancing has been on the rise for years, and is set to continue. According to Kalido’s own research, a staggering 50% of the UK workforce will be classified as freelance by 2020; 64% of UK businesses rely on freelancers in some capacity; and 39% of business owners expect to hire more freelancers than permanent staff in the next 5 years. Hardly surprising when 79% of freelancers report enjoying better work/life balance; and 42% of freelancers get to work on projects they actually believe in, all while making a very attractive £50 an hour on average.
But while much has been said about the benefits of freelancing for the freelancers themselves, what about the former employer? With a slight shift in mindset, employers can come to understand that this could be a win-win situation.
1) A better type of ‘employee’
When an employee leaves, it costs the company between 100%-300% of the person’s base salary to replace them. This includes the costs of offboarding, recruiting, on-boarding a replacement, lost productivity, and training. And that’s not even including the costs incurred by the company to train the person in the first place. Additionally, while a replacement may be able to perform the functions of the leaver in time, the original employee’s relationships with staff, employees, suppliers, and other stakeholders are lost. Skills have to be redeveloped, and relationships have to be rebuilt.
Instead of losing an employee’s expertise completely, employers can rehire them in a different capacity. As a freelance consultant, the person will bring all their previous experience, training, and history with the company. And they’ll be able to give fresh insights based on their experiences in the outside world with other clients. Far from being a less-available employee, the consultant will be a much more valuable resource. They will retain all the benefits of heritage, while bringing external perspectives and knowledge too.
2) Control over results not process
As an employee, a person’s time, place, and manner of work is controlled by the employer. The individual is required to show up at 8am at the office, regardless of how terrible the traffic is, and how unmotivated the person may be in the morning. Work/life balance is often hard to achieve in the presence of such strict company policies. But, as we note in our blog ‘how principle-based management can stop your employees leaving’, controlling the process of work is no guarantee of the outcome of work. Strictly regulating how the work gets done is not the optimal way of ensuring it does get done. In fact, giving someone more freedom and allowing them to exercise personal responsibility (such as through entrepreneurship or Agile teams) leads to much more productivity.
Which is why freelancers often deliver better quality work than employees. Their service is result-based. They are paid when your desired outcome has been achieved. Unlike employees, there are no prizes for ‘just showing up’. As a client, rather than an employer, you exert much more control over the result. Because while an employee can’t be instantly let go if they fail to perform on a project, a freelancer can. Which means when you need results, and fast, you’re more likely to get them.
3) Need-based service
A freelancer does not require a permanent office, a monthly salary, health insurance, or paid sick leave. And when business is slow, a freelancer is not paid to show up at the office to YouTube cat videos. As a need-based service provider, the freelance consultant is only there when the company needs them. And they’re only paid for actual work done. This can work out to be much more affordable than having someone permanently on staff.
It also means that the employer can find someone fit for purpose. The business can find someone with the exact skillset it needs for that particular project. For example, Kalido can find ‘an expert in Chinese law based in Vancouver’ in a matter of minutes, negating the need for the in-house lawyer with no prior experience in Chinese law to scramble together some research.
Additionally, artificial intelligence can already replace 50% of today’s work activities with currently available technology. This means that in 6 out of 10 occupations, 30% are already automatable. This trend of technology taking over functions from people is only set to continue, and rise. So, for the employer of the future, paying for obsolete skills becomes a real danger.
If only 70% of a person’s skills are up-to-date and relevant, the employer should not have to pay for the redundant 30% (more about upskilling and retraining current employees here). That’s where having a freelancer is more optimal. The employer need only pay for the skills they need.
Many countries are revamping its laws regarding freelancers, and consultants should be offered the full protection of applicable company, labour, and human rights law. But within this framework, their expert skills can often be obtained for less than the cost of permanent staff.
A company should place employee morale and happiness high on its list of priorities. It can do this through improving company culture, encouraging good relations between colleagues, and giving employees more freedom and personal responsibility. In this regard, encouraging employees to take the leap into freelancing and entrepreneurship could be significantly rewarding for both parties.