Here’s a statistic that may amaze you. Thirty-one percent of America’s workers now consider themselves to be “free agents”. This is according to a survey published on CNN.com. These people may think of themselves as freelancers, independent contractors, temps, small business owners or as moonlighters. But the big difference is that they do not think of themselves as what would be called traditional employees because they don’t get their one source of income from a single employer.
According to a study done recently by the employment and recruiting company Kelly Services the majority of these people like being “free agents” because they don’t want to be tied down to just one employer.
Most did it willingly
Only 10% of those surveyed reported that they had been forced into free agency because of economic conditions. This is half as many as in 2011, which was the last time that Kelly did this survey. In other words, 90% of these free agents chose to do this willingly.
A higher level of satisfaction
If you are a free agent you may be able to relate to this, which is that the free agents reported a higher level of satisfaction than employees who worked traditional jobs. The survey took into consideration the free agents’ overall work, skills development, work-life balance and the opportunities they found to advance their careers.
Interestingly enough, when it came to job security this survey found that it was pretty much of a tie. This is a bit surprising given how notoriously uncertain a freelancer’s life is. According to Kelly, this might be due to the fact that many traditional workers now feel unsure about their jobs.
The survey also found that it was not just young adults that signed up to be free agents. In fact, 36% of the baby boomers considered themselves to be free agents versus just 26% of the millennials. The fact is that many companies are eager to bring in experienced, high-skilled workers for specific projects especially those that are related to technology, engineering, math and the sciences.
Are they really contractors?
This survey came at a time when the government, politicians, and economic researchers are trying to determine how big this “gig” economy really is. They are also concerned that employers are just misclassifying their workers as independent contractors in order to save money and reduce their liability. Plus, in this day and age it’s much easier to tell an independent contractor that he or she is no longer needed versus having to fire an employee.
The Uber lawsuit
The best-known example of trying to determine whether a person is an employee or a contractor is the lawsuit filed against Uber. The ride-sharing company is allegedly classifying their drivers as independent contractors instead of as employees – which is incorrect. In doing this, Uber has been able to pay them less than what they deserved – or at least, that’s what the lawsuit alleges.
Free agents are just cheaper
Why do companies love contractors? It’s because it’s simply cheaper for them to hire free agents than employees. They don’t have to offer them benefits such as health insurance and 401(k)s. They are not required to pay these free agents overtime or give them days off. They are not required to pay state unemployment insurance or workers compensation on their contractors’ behalf. And, of course, they don’t have to cover the employer’s share of their payroll taxes or withhold income taxes. These are costs that free agents must cover themselves.
What they get in return
It’s tough for free agents to pay their own payroll and income taxes. If they want time off these are days when they earn nothing so it’s all money out of their pockets.
So what do they get in return? They get the freedom to choose for whom they work, when they work, and how long they work. This can be a huge benefit especially for those free agents that have skills and expertise that are in high demand.
Are you a free agent or employee?
As was the case with Uber there can be a very fuzzy line between being an independent contractor and an employee. In addition to Uber, there are a number of other lawsuits alleging that companies should not be classifying their workers as free agents. If you think you’re an independent contractor the US Labor Department has provided some guidance in how it interprets things to determine how you should be classified. It may come as no surprise to you but the agency kind of considers most workers to be employees under the Fair Labor Standards Act.
How it’s supposed to be
If you’re free to take on the projects you choose and with other companies, you basically run your own business and may even have your own employees, equipment, and office space. In this case, you should be classified as an independent contractor. At least, that’s how it’s supposed to be.
You may be an employee if …
However, the lines get blurry if the company hires you to do something that could be considered as “integral” to the core of its business – something that a full-time employee would normally do. You might be an “employee” if the company dictates where, how, or when the work should be done or if it won’t allow you to work for other clients.
Here’s labor attorney’s take on what it takes to be an independent contractor, that spells things out exactly.
If you want to be classified as an independent contractor
Let’s suppose there are reasons why you want to be classified as an independent contractor and not as an employee. Unfortunately, the choice may not be yours. The Labor Department has explicitly said that the “economic realities” of the working relationship between you and the employer is what determines whether you’re an independent contractor or an employee.
It has also said that these realities override any agreement that you have with the employer. In short, this could be a problem for some people. A survey that was done recently by the Freelancers Union estimated that there are about 21 million independent contractors in the US. Plus, another 2.8 million that identify themselves as freelance business owners. The majority of these people say they would never go back to a traditional 9-to-5 job. However, the courts have a big say so as to which companies are violating labor standards and who should really be classified as an independent worker. At this point, it’s not clear as to whether the courts will define “employee” as broadly as has the Labor Department. If you think you’re an independent contractor the day may come when you’ll lose several or more of your clients as they would be forced to reclassify you as an employee.