When do you need a freelancer management system?

A guide to understanding when you need to manage your freelancers with an FMS

Managing your freelancer workforce can be as simple as recording names and phone numbers in your phone book. But there's a point when you need to get serious about managing your freelance and contingent workers.

In this guide:

  • DIY freelancer management systems and their pitfalls
  • Knowing when you're ready for an FMS
  • How to get started with an FMS

DIY freelancer management systems and their pitfalls

You don't have to think back too far to remember a time when hiring a freelancer was a very irregular event. But as more and more organisations see the benefits of an on-demand workforce, it's fast becoming the 'norm' to engage freelancers on a regular and ongoing basis.

However, many organisations rely on DIY or 'improvised' methods and systems to manage and organise their freelancers.

Here some of the common DIY methods of managing a freelance workforce, with some of their associated pitfalls:

Spreadsheets
Arguably the most common form of DIY freelancer management. Excel and other spreadsheeting programs are capable of listing, sorting and filtering your freelancers. If you know how to work some of the more advanced functions, you could probably connect your freelancers with the projects they are working on.

The main pitfalls of using a spreadsheet to manage your freelancers are:

  • Version control. It'll be about 10mins before someone stores a local copy and everything's out of sync.
  • Communication takes place in other systems.
  • Payments, onboarding, contracts require other systems.
  • Reporting is likely to be inaccurate because of the bullets above.

A phonebook or simple contact database
Storing your freelancers contact details in an email program like Outlook is freelancer management in its most rudimentary form. Whilst managing your freelancers in your email program might make communication simple, it will lack most other essential functionality (like projects, contracts, onboarding or reporting).

A project management system
Storing your freelancers into a project management system, like Basecamp for example, is essentially the same as using an email program like Outlook. By using a project management system, you do have an advantage of being able to easily add your freelancers to project workflows and communication.

The main pitfalls of using a project management system are:

  • Security. Once a freelancer is added to a project, it takes a very organised administrator/project owner to ensure freelancers are removed once their contract ends.
  • Reporting on engagement, spend or budgeting requires other systems and it might be difficult to connect projects to freelancer's invoices.
  • Because of the permissions structure of most project management systems, it might be difficult to search/browse through all the freelancers you have when looking to resource a new project.

Another Vendor Management System (VMS)
"As each of our freelancers is essentially a supplier, let's put them in our current vendor management system" sounds pretty reasonable. From a reporting perspective, your VMS might even do a good job. There are however a number of issues with trying to squeeze freelancers into your VMS, the main ones being:

  • Scale. You could be dealing with hundreds (or even thousands) of freelancers, and sometimes the engagement might be a one-time thing. Adding all these freelancers into your VMS could become slow and costly.
  • Searchability. A key function of a freelancer management system is search, enabling you to filter and shortlist your available freelancers based upon things like skills, experience and charge rate. It is unlikely your VMS will be able to support the facets or dimensions you wish to be able to search/filter when looking to engage a freelancer.

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.

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.

Financial reporting
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.

How to get started with an FMS

Getting started with a freelancer management system is a four step process:

  1. Conduct a thorough audit into your use of freelancers
  2. Enable your teams
  3. Create a pilot to solve the issue you've identified in a small, managed scenario
  4. Review, adjust and roll-out in stages

Conduct a thorough audit into your use of freelancers
The audit should help you to understand your pain points. Build up a picture of how and where your organisation is using freelancers. What roles are they fulfilling? How much are they costing? How are they engaged? What problems are you seeing?

Enable your teams
Selecting a suitable FMS partner is only the first step. In addition, you should empower and incentivise internal teams and stakeholders to make a change.

Create a pilot to solve the issue you've identified in a small, managed scenario
With the right FMS technology and an empowered team, you should create a small, managed scenario to deploy an FMS. If you are a global organisation, this could be a particular country, market or region.

Review, adjust and roll-out in stages
The pilot process will create both new challenges and learnings. What went better than planned? Did anything not go as predicted? What feedback did you encounter?

As you plan for a staged roll-out, incorporate as much of your pilot experience and feedback as possible.

Useful resources

Buyer's Guide: FMS Pricing Options

There are a number of factors to consider when assessing the right pricing model for your freelancer management system. Learn how to select the right one for your organisation with this guide.

Buyers Guide: FMS or VMS

Explore the differences between a VMS and an FMS and learn why it is become increasingly important for an organisation to use a dedicated FMS for managing its freelance and contingent workforce.

The Importance of Brand in Direct Sourcing Software

Using your brand to attract the best freelance and contract talent makes a direct sourcing strategy an attractive proposition for large organisations.