Knowing when you're ready for an FMS
Even though there are sizeable pitfalls with the above DIY, improvised solutions, they can work if your requirements are very basic. For example, if you only work with a couple of freelancers regularly on an ongoing basis, managing them with your VMS may be perfectly fine (of course, ignoring the potential IR35 issue).
There are some requirements that are a good indication you're ready to implement a freelancer management system.
Size of freelancer population
The first indication you're ready for an FMS is simply how many freelancers you engage. A good rule of thumb is if 10% or more of your workforce is freelancing/contracting.
Whether your organisation is 500 or 50,000 people strong, when your freelancer population grows to 10%, the cost starts to represent a significant proportion of your wage bill, and should be managed correctly.
Rate of freelancer churn
Freelancers are commonly used for short-term and often, one-time projects. This means there is always churn in your freelancer workforce. Purely from a practical point of view, as your churn rate increases so does the management overhead of keeping DIY/Improvised systems up to date.
If your freelancer churn rate is over 25%, you could reduce your management overhead by simply switching to an FMS.
Freelance Churn Estimator
Standardise onboarding or contracts
Freelance marketplaces make it possible for any hiring manager with a credit card to engage a freelancer. Of course, this can create security and compliance risks as the freelancer can unwittingly bypass important HR onboarding processes.
If you are concerned about freelancer compliance (for example, IR35), an FMS can help you to standardise freelancer onboarding processes, including the management of ID checks, contracts and nondisclosure agreements.
As you increase the amount (regularity or duration) you engage freelancers so too do you increase the financial impact of a mis-managed freelance budget.
A common issue with using DIY solutions is you are typically reliant on freelancer invoices being coded correctly and your finance teams providing reporting on your freelancer spend. As you can see, credit card payments and inconsistently coded invoices quickly make DIY freelancer spend reporting inaccurate.
An FMS provides a 'central point of truth' by facilitating and/or consolidating freelancer payments, making it possible to report on spend at an organisation, department, project or individual freelancer level.
Sharing & reviews/recommendations
A benefit of using an FMS is being able to share and recommend freelancers to other hiring managers in your organisation:
- It standardises the freelancer's rate (two hiring managers won't be unknowingly paying different amounts for the same skills)
- It reduces time to hire
FMS platforms enable effective sharing of freelancers by incorporating reviews and recommendations.