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Two hundred years ago, Americans were anxiously shouting “the British are coming”. Well, they are coming again, but this time to provide freelance talent to U.S. corporates across the country. And it’s not just the British who are coming - platforms like YunoJuno.com, Distributed.com, Talmix.com, Underpinned.com and others. It’s also German freelance platforms like Vicoland.com and WorkGenius.com, French platforms like Beager.com and Malt.com, Spanish platforms like Outvise.com, Australian platforms like Mash, Brazilian platforms like Ollo.is, and African platforms like Andela.com.
But access to the world’s largest industrial market requires a deep understanding of US rules and regulations, and platforms and individual freelancers that don’t take the time to understand how to operate compliantly in the US are in trouble. Fitz Ventura, CEO of 1099.com, an insurance expert, recently described a situation where a large corporate was issued a massive fine for not complying with the rules.
So, what does a freelancer or freelance platform need to do? I asked Cesar Jimenez, CEO of Mybasepay.com and ProsourceIT.net, and a global expert in all things freelance compliance, to help readers understand what it takes to enter the U.S. freelance market efficiently and compliantly. Here he shares what to expect:
Cesar, how do you see the U.S. staffing market in 2022? According to current forecasts, revenue for staffing overall is rebounding strongly. The U.S. took an 11% hit in 2020 but grew 16% in 2021 and continues to show strength. We’re seeing layoffs at some companies but it’s also a very tight market overall with almost two open jobs for each unemployed individual. The IT staffing and freelance segments are clear market share leaders, and healthcare is a particularly strong segment. Because of the tight market, companies are looking beyond traditional sources and expanding their recruitment efforts to Twitter, Facebook, Instagram and even TikTok.
Is it still a seller’s (talent) market? Yes. It’s still challenging to find both top full-time talent and freelance or contract talent. The most successful companies understand the value top talents place on flexibility. By necessity, employers in many industries and geographies are now shifting from the traditional 9-5 schedule as an incentive. And the option to work from home full-time or on a hybrid basis is now more of a standard offer than a perk.
Compared to other countries, what’s unique about operating in the U.S.?Size, margin and category are three important areas of difference. Let’s start with size: According to recent stats, the total global size of the staffing industry is around $500 billion dollars. The U.S. portion is estimated at 150 billion, or approximately a third of the total. Margin is a second area that’s important. The strong and increasing demand on freelance talent (over 90% of large corporates rely on freelancers to supplement their workforce) also means it can also be more profitable compared to average margins in other regions of the world.
What do you mean by category? Regions differ in the freelance talent that local freelance platforms provide. for example, the U.K. has a strong history of excellence in freelance marketing, advertising and PR. The E.U. benefits from strength in tech but also independent consulting and interim management. Asia is rising in several areas, as is Africa and Latam. The U.S., of course, has strength in most freelance categories and a great many verticals; however, the size of the U.S. market overall provides substantial opportunity in most areas. To give you an example of size, recent surveys estimate the U.S. talent gap in just one area of tech – Artificial Intelligence or AI – at over 300,000 professionals.
Is there one law for the country, as in many others, or do the states and even municipalities have competing rules? The U.S. political and legal system is complicated in most areas, and certainly so in the freelance and staffing industries. International readers who are paying attention know that individual states have a great deal of autonomy in setting laws, and each state is likely to be unique in its choice and selection of regulations governing freelance and contract work. So, the rules for New York may be very different than for Florida, Texas or California. In addition, cities within states have a fair amount of autonomy to set their own regulations. If you are interested in establishing a business base for your freelancers here in the U.S., it is important to be planful about what areas of the country you will prioritize based on business and regulation. Sticking with general regions will help minimize your exposure to regulatory oversight. Going national from day one is challenging.
Freelancers are often confused by requirements for EoR and AoR services. Can you explain these terms for readers and its importance? When a business hires a freelancer, it assumes responsibility for the tasks, costs, and liabilities of employing. But not all businesses want to deal with that responsibility. The alternative is using an employer of record: the EoR or Employer of Record is an organization that serves as the employer for tax purposes while the employee performs work at a different company. EoR takes on the responsibility of traditional employment tasks and liabilities. The EoR handles all personnel functions for the freelancer and is a cost and time-effective way to outsource payroll and HR functions. The business pays the EoR a set rate for every hour the employee works, and the EoR handles all tasks. Not surprisingly EoR services are especially helpful dealing with payroll processing and employment laws for employees in multiple states. The EoR stays updated on the state and local laws, so you don’t have to worry about learning and complying with laws in multiple places. And, when a business wants to hire an employee from another country, but has no entity in that country, the business can use an EoR. The employee still works for the business, but the employer of record handles payroll and HR issues in that local country. With the rise of remote work trends, global EoRs are poised to be a vital part of the global employment ecosystem for companies that want to hire anyone, anywhere. Agent of Record or AoR is similar to the EoR and manages the relationship between a business and an independent contractor or freelancer. Importantly, the business must appropriately classify and administer the freelancers or face significant fines for misclassification. For this reason, most international platforms and domestic companies rely on AoR services to properly vet, identify and administer the freelancer. For example, one well-known company recently faced a fine of several thousands of dollars per day for misclassification.
You’ve been a leader of this business for a long time. What’s your advice for global talent eager to work in the states ? Best advice I can give, the U.S. staffing market is big and complex, and offers great opportunity to thoughtful and prepared entrepreneurs. Number one: walk before you run. Lead with a niche that you are strong in, that is in demand, and market your unique capability, experience, or relationships. Partnerships help get you get there faster. Look for partners who are complementary and where the combination creates value, e.g., where 1 + 1 = 3. Do your homework on compliance and set up the proper infrastructure and relationships to support your business and, our suggestion, to outsource that infrastructure to experts like Mybasepay.com. Competition is real and tough so you will need to maintain an extreme focus on marketing your capabilities, building customer relationships, and investing your resources on delivering great talent vs managing internal process and compliance.
Finally, what’s next for the U.S. freelance economy during these challenging economic times? I’m optimistic. Freelancing often does well during periods when companies are slowing down full-time hiring or reducing staff. Remember that the work continues, and freelancers often provide a time and cost-efficient alternative to expensive full-time hires. But be smart. Freelancing is a big tent, and different categories of freelancing are differentially impacted by economic circumstances. While some tech areas like AI may continue to be in high demand, other categories like copywriting could well experience a loss of altitude as advertising dollars decline.
Viva la revolution!
