I'm a firm believer in the notion that a business is only as good as its people. But, in today's economy, those people don't necessarily need to be full-time employees.
Emerging technology, stagnating incomes, the rise of millennials, and other factors, are driving a fundamental shift in how workers in the U.S. find and earn income. Instead of sticking with one company for a decades-long, full-time career, we continue to see people across the workforce turn to online freelance platforms to find contract-based "gigs."
Indeed, according to a recent study conducted by my company, Xero, about 11.4 million workers - or nearly one-third of the full-time labor force in the U.S. - are using platforms like Uber, Upwork, Freelancer.com, and others. Given the explosion of these platforms, as well as the broader economic trends, we expect the amount of work generated by the on-demand marketplace to grow by 15 to 20 percent.
For small business owners, this represents a tremendous opportunity to quickly access a broad pool of talent without the limitations of other expenses like insurance and perks. But it's important to realize that on-demand work isn't right for every task or for every business.
Before you dive into the deep end of the on-demand marketplace, here are five things to consider.
Make sure you actually need a freelancer - not a full-timer
Do you need extra hands to keep up with seasonal demand? Or specialized knowledge for project with a clear deadline? If so, hiring an on-demand worker might be the right move for you.
Before you start hunting for talent online, make sure you've weighed your options and really understand your need.
"A lot of companies think they need contractors, but what they really need are individuals they can direct and set times for," said Omar Qari, co-founder of Xero partner and customer Abacus, a startup that helps businesses process expenses incurred by part-time and full-time employees.
A good rule of thumb is to consider how much direction a potential new hire will need, he suggested. If the task can be completed relatively independently with a set of instructions, it could be a good project for a part-time contractor.
But if the project requires ongoing direction and the workflow will be more integrated into other products, it may make more sense to hire a full-time employee to manage it.
Do your homework
Once you've decided that a freelancer is your best option, invest the time to identify the appropriate online marketplaces. The booming universe of on-demand platforms spans a wide range of industries, from driving and delivery to design and data processing.
If you need a knowledge worker, Upwork, Upwork.com or Freelancer.com might be a good bet, whereas Fancy Hands could pair you with a part-time assistant and TaskRabbit could help with handyman-related projects.
Once you've identified the best platforms for your project, look at a few job postings advertising work comparable to your needs. Make sure you're using keywords familiar to ideal candidates and offering compensation in line with the market.
Freelance doesn't mean freewheeling. While an ideal contractor will be able to work independently, you need to provide structure that can make that happen.
"One of the biggest mistakes companies make is they don't plan and put a structure in place before giving a project to a freelancer," said Qari.
Before handing over a project to a freelancer, be able to clearly communicate the deliverables, expectations, anticipated workflow and timeline. Vague direction may not only make a freelance project more expensive, it can lead to frustration on all sides.
Choose your tools
A key benefit of hiring a freelancer is that it frees up time for full-time staff to focus on the big picture and efforts that can move the business to the next level. Don't let the minutiae of managing an on-demand worker become a distraction.
It seems simple enough, but properly classifying part-time contractors can stump plenty of small business owners.
Many people assume the difference is in the amount of time an individual works for the business. But the IRS and the Department of Labor are actually more concerned about the level of control exercised over a worker, said Sarah Maxfield, co-founder and manager of Xero partner ArtsPool, an administrative co-op for nonprofit arts organizations.
"The distinctions between contractors and employees are often misconstrued in the workplace," she said. "People get tripped up because they're not aware of how the government makes their determinations."
If you hire someone under a freelance contract, but end up providing necessary materials, asking her to work out of your office or giving constant direction over the work, the government might consider the worker to be an employee.
If you're unsure about the proper designation, be sure to review the IRS website, as well as the Department of Labor websites at the federal and state levels, particularly their materials on distinguishing independent contractors from employees, and check your designations with your accountant and/or labor lawyer.