Why employing freelancers boosts business productivity, profit and employment growth

When at least 11% of freelancers make up a business’s workforce, productivity increases, a recent study has found.

Research by Trinity Business School and the University of Derby has found that companies who have 11% or more of freelancers and contractors in their workforce, get more work done.

This productivity generates higher profits, with each employee bringing in an extra £4,669 on average, for their organisation, than businesses working with fewer freelancers.

As well as increasing profits, the research also found a correlation between the number of freelancers in the workplace and the number of new jobs created.

914,000 new jobs in total have been created by businesses using an 11% freelance workforce, equalling 1.2 new roles, per company.

The findings come following a survey of 1,028 UK SME owners, managers and senior executives.

Freelancers add specialist skills and accelerate growth

Professor of Business Economics at the College of Business, Law, and Social Sciences University of Derby, Marc Cowling, 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.” (1)

Professor Andrew Burke, chair of Business Studies and Dean at Trinity Business School, said: “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”.

“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.” (1)

Are freelancers the key to economic recovery?

For any freelancers reading, this research won’t come as a surprise. Freelancers and contractors up and down the country make a valuable contribution to businesses each day, bringing sought after expertise and new perspectives that make a lasting impact.

Without the security that employees have, freelancers push themselves harder to make sure they’re of high value and to keep clients coming back.

This research reaffirms that freelancers and contractors will play a pivotal role in helping the economy get back on track in 2021. Not only by offering their excellent skills to fill gaps following the pandemic, but also by facilitating employment growth and profitability for businesses.

Hopefully these findings will make businesses reassess any hasty blanket IR35 decisions before 2021’s IR35 private sector changes and realise that their contractor workforce are too valuable to lose.

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Related articles:

What is the impact of COVID-19 on freelancers and contractors?

What are the changes to self-employed tax and how will they affect you?

Why freelancers need professional indemnity insurance

 Sources:

https://www.startupdonut.co.uk/news/hiring-freelancers-boosts-productivity-and-profit

https://bdaily.co.uk/articles/2020/08/26/freelancers-could-be-the-key-to-boosting-employment

Author Katherine Ducie, Marketing Executive