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SMBs Fueling the Rise of the Career Contractor, Report Says

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New data released today by online work marketplace oDesk shows that small-to-medium sized businesses (SMBs) are making use of freelancers in record numbers. Tapping the global workforce was once limited to only the very largest of enterprises, but now — thanks to the Internet, a proliferation of inexpensive online collaboration tools, and various online work marketplaces — it’s possible for much smaller firms to reach out to, and work with, a much broader talent pool.

According to the SMB Trends Report, since 2008, the number of SMBs using more than 10 contractors at any given time through oDesk has grown by 214 percent, while at the same time, the number of contracting assignments lasting longer than six months has grown by 540 percent. oDesk says this points to an increasing number of SMBs using contract — rather than in-house — staff to grow their businesses.

This demand for highly-skilled freelancers has led to the emergence of  the “career contractor.” The oDesk data shows demand for contractors with management experience has grown by 489 percent since 2008, and also, the number of “highly-paid” contracting assignments paying at least $20/hour has grown 162 percent. While I’d question whether $20 per hour counts as being particularly highly paid, it does seem that the type of work being sourced through sites like oDesk is moving away from being primarily smaller, cheaper projects that can be carried out in a very short period of time, to more longer-term positions.

As always with such reports, it’s wise to look at the figures with a healthy dose of skepticism. The data comes from just one marketplace (albeit a fairly large one) and the company clearly has an interest in making contracting look like an attractive option. However, looking at it in tandem with other data — the Bureau of Labor Statistics agrees that there’s been a long-term trend of an increase in the number of contract workers, with a higher proportion of them being highly-skilled, for example —  it does seem that there has been a shift in the workforce in the past few years, perhaps precipitated by the downturn, with a growing number of people moving away from regular long-term employment and becoming contractors.

As I’ve pointed out before, this represents a significant change to the way that we work, and it will have implications for workers, the businesses that employ them and policymakers, particularly in terms of healthcare benefits and retirement planning. Additionally, if oDesk’s report is correct and many SMBs are now preferring to using contract staff in lieu of employees, employers will need to consider both legal and taxation issues. If, for example, the IRS (and similar agencies in other countries, like HMRC in the U.K.) can determine that contract staff should be classed as employees, it will charge back taxes.

Photo courtesy Flickr user Ross Hill.

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One Response to “SMBs Fueling the Rise of the Career Contractor, Report Says”

  1. Simon – Thanks for covering these trends and referencing the oDesk SMB Trend Report.

    In regard to your point about legal and taxation issues, we’ve seen significant adoption of oDesk Payroll. This service, in which oDesk’s staffing agency is the employer of record, offers employers added protections for W-2 classified workers. Details are available here:

    Brian Goler
    oDesk VP Marketing