Originally posted on Forbes by Jon Younger, September 15, 2021.
Organizations are expected to make sure that the independent professionals working with them are properly vetted, on boarded, and that the organization complies fully. New rules such as IR35 in the UK, and new tax obligations, have created problems for both freelancers and the organizations that rely on them. As a result, new research by the IPSE suggests that as many as 50% of UK freelancers may stop contracting in the UK and plan to seek work abroad or full-time employment. In the US, new rules in California and NYC are also having an impact on freelancers and freelance clients.
Because of these rule changes, the additional burden of EOR and related regulation and reporting requirements, and the continuing demand for freelancers, we are seeing increased interest in freelance management systems (FMS), and several new startups or buildups of freelance management systems in the marketplace. Not too long ago, the typical startup or SMB (small or medium sized) organization managed freelancers on an excel spread sheet, but no longer, and large enterprises certainly cannot. I’ve written before about Talentdesk.io and Talon FMS, two of the early FMS systems, how MBO Partners created bespoke white label freelance platforms for firms like PwC, and Twago has built similar “pizza slices” of their freelance community for Phillips and other corporates. As more and more corporates of scale depend on the freelance workforce, some innovative companies are creating applications that increase the ability of companies to efficiently and compliantly manage their freelance and unaffiliated freelancers. For some organizations, the combination of an FMS, platform relationships, and apps like Zoom, Slack and collaboration apps like Mural begin to fill out a real ecosystem of support for both remote workers and the larger flexible, blended workforce.
Here are three more you should know:
GreenLight calls itself “An intelligent API for the contingent workforce” and the platform’s founder, Jason Posel, knows this industry well. He’s a long time industry veteran, harkening back to 2004 when he set up the US division of an EU staffing company. Over the next four years, Posel grew the division by 10X. In his next role, he led a management buyout of a competitor company. And, as a third act, Posel moved to Palo Alto and in 2018 started GreenLight. Posel and his team have set up GreenLight to provide a freelance management capability to corporates and smartly, to provide automated on boarding services on behalf of freelance platforms as freelancers contract with clients. Both wings of the business have a common mission: “To help millions of contract / gig / freelance workers get paid easily and compliantly.” And both deliver a common benefit for their customers: the ability of platforms and corporate users of freelancers (and other contractors) to cost efficiently and quickly scale their freelance activities. Here’s how Posel explains it “We make it easy for marketplaces and freelancers. We’ve automated the process of on-boarding freelancers on behalf of their platform or corporate client, and solved their regulatory and classification risks.” Operationally, once a freelancer is selected for a project, GreenLight takes over and provides administrative support including work agreement, background checks, classification, and compliance and reporting actions, as well as analytics.
GreenLight focuses on marketplaces and talent management technologies for the lion’s share of their business, and serves a wide range of platforms like Upwork, We Are Rosie, Toptal, Catalant and others.
CXC Global is the largest of the three, having grown from its Australia roots to a sizable global enterprise. I spoke with Connor Heaney, head of their EMEA business, and he helped me to better understand the increased administrative and regulatory burden placed by governments on employers. CXC lifts that burden through compliance – tax, labor law, classification, and access control – and payroll services on a platform built for clients in 65 countries across Australia/New Zealand, Asia and the Americas, and most recently Europe. Effectively, CXC is offering to be the “compliance interface between independent talent and the company, eliminating selection and regulatory risk.
Heaney sees CXC as one of the better positioned FMS platforms to serve large, complex, international clients because of their network, experience, and the 300 plus professionals working across 40 countries. Over its almost 30 years of operation, CXC has morphed into an expertise enabled technology platform incorporating subject matter expertise in many areas of contingent workforce management; for example, CXC recently collaborated with GitLab in developing a model and approach for reducing employee misclassification, false self-employment, and ensuring IP was protected when independent professionals were engaged. Heaney sees no shortage of growth prospects both in the base business and adjacencies. For example, he says, freelance platforms may be a new and important customer segment, served by CXC as a common talent utility: “We could easily help big talent marketplaces to pre-vet their talent.”
Shahar Erez, founder of Stoke, a company that recently earned a series A investment from Battery Partners, described much the same challenge leading to his decision to startup Stoke three years ago, “My old company had no mechanism to access the flexible workforce. Everything was captured in spreadsheets. There was no system to manage contracting, compliance, freelancer information, on-boarding, and payment, and no ability to easily share the information across the company. The need and value of fixing the problem was obvious.”
Stoke is a SaaS platform focused on simplifying the internal processes within companies, primarily for tech companies. They help companies source top talents, but also manage budgets, pay freelancers and ensure full tax, legal and workforce classification compliance.
They also offer a sourcing solution, providing talent through partnerships with freelance marketplaces who vet their talents, like Communo and Advisable, but also through freelance communities, online forums and referrals from their existing database of top talents.
I found it interesting that Stoke partners with marketplaces who vet their talents, but also potentially challenging: At least one platform executive wondered if Stoke might be both a provider and competitor to platforms offering talent. Of particular note to entrepreneurs in the platform space, Stoke is explicit that its value proposition regarding the transparency and quality of compliance and risk management support is designed to give confidence to an otherwise skeptical CFO or, as Erez put it, “We’re the freelance management platform your CFO will love.”
According to current estimates, there are sixty million full- or part-time freelancers in the US, and an equal or greater number around the world. As freelancing becomes more prominent and as more companies treat freelancers as a regular and ubiquitous part of their flexible, blended workforce, freelance management systems place an increasingly important role. Over the years I’ve introduced readers to many freelance management systems, and in an upcoming article will introduce you to another fast growing and innovative startup: My Base Pay. As interest and dependence on freelancing continues to grow, the complexity and importance of effective and efficient administration increases, and direct sourcing becomes a larger part of the total freelance revolution, we see the freelance ecosystem that is larger, growing, and profitable. Remember Sutter’s Mill, the start of the California gold rush of the 19th century? As one historian pointed out, the real money wasn’t made by miners. Real enduring wealth like Levi’s was made selling miners food, supplies and services. Could it be true in the freelance revolution as well? We’ll see.
Viva la revolution!