A guide to understanding the difference between an FMS and a Freelance Marketplace
Depending on the size and type of your organisation, 'engaging freelancers and independent contractors in your talent strategy' can mean two completely different things. For some, it's all about sourcing. For others, it's all about management.
This guide looks at the main differences between freelancer management systems (FMS) and freelance marketplaces.
In this guide:
- Sourcing vs management
- Facilitating payments
- Configuring or customising the software
- Features and functionality
- Integration with existing HR tech
Sourcing vs management
An FMS' main purpose is to provide a central 'point of truth' for managing your freelancers and independent contractors.
Freelancer management systems are designed to provide:
- Consistent, compliant onboarding
- Integration into other HR tech like vendor management systems
- Accurate reporting around freelancer engagement and spend
- Simple project allocation
Through their approved freelance communities, freelance marketplaces provide an effective way to source talent for projects.
Freelance marketplaces are designed to provide:
- Quick and simple project posting
- Profiled freelancers ready to work
- Ratings and reviews
- Payment processing
In summary, the FMS is the better solution for an organisation who has an existing freelancer or contingent workforce that needs to be managed more effectively.
An FMS is also acquisition channel agnostic. When an organisation uses an FMS to manage its freelancers and independent contractors, it is not tied to one source of talent - which is often the case with freelance marketplaces, who are geared to work exclusively with their community of freelancers.
The freedom to use a wider range of talent acquisition channels is a benefit for forward-thinking organisations, who want to engage their workforce directly and use their Employer Value Proposition (or Freelancer Value Proposition
An FMS provides complete flexibility when facilitating payments:
- Integration with 3rd party payment systems or MSPs
- Recording traditional invoice payments
A true FMS will typically have fees based around client user licenses or a % fee on spend under management.
Freelance marketplaces are typically restricted to one or two methods of facilitating payment:
- Direct bank transfers
- Credit card payments
Charges a transaction fee for processing payments.
The FMS provides several advantages over the freelance marketplace for organisations who regularly or heavily use freelancers. The payment processing fees used by freelance marketplaces can rapidly mount up for organisations who engage large numbers of freelancers. Marketplaces will also typically charge workers around 15-20% fees on invoicing thus pushing up the overall rates as workers look to compensate.
For most organisations, who have strict financial processes and procedures, it is preferable to route freelancer invoices through their current payment processing system, rather than allow individual managers and business units access to company credit cards.
An FMS also enables organisations to facilitate payments through a Managed Service Provider or Employer Of Record, and maintain a centralised view of invoicing.
In summary, the FMS is a better solution for organisations who want freedom from transaction fees and the flexibility to pay freelancers and independent contractors with existing invoice payment processes.
Configuring or customising the software
An FMS provides a bespoke platform to cater for managing an organisation's freelance workforce:
- Custom onboarding
- Only organisation's data hosted on the platform
- Can use Employer Value Proposition
Freelance marketplaces are on-demand software platforms, with limited options for customisation:
- Configurable client/recruiter profiles
- Custom talent pools
In summary, for those organisations who want tighter control over processes, branding and data, the freelance management system offers more flexibility in customisation. This is an advantage of using an FMS for enterprises and their MSPs.
Features and functionality
At a very high level, the FMS and the freelance marketplace can look similar: They both organise freelancers and are used to engage them in projects.
However, looking closer, the two platforms start to look very different:
A freelance marketplace is a walled ecosystem, primarily used to help organisation source talent by providing access to a community of freelancers.
An FMS is a platform used by organisations to manage an existing freelance workforce, and integrate them with other key HR and financial systems.
Integration with existing HR tech
An FMS integrates with current HR tech and processes:
- Finance and payment processes
- Talent Acquisition
- MSPs / EOR
As mentioned before, Freelance marketplaces are walled ecosystems that look to provide end-to-end functionality and therefore have little to no support for 3rd party integration.
The self-contained nature of the marketplace, ultimately results in them becoming an external vendor to be managed through a VMS. It is almost impossible to integrate the marketplace into existing HR tech and processes. Most marketplaces' enterprise offering requires the organisation to adopt the marketplace's processes in addition to, or to replace, existing HR tech.
For most organisations, adding complexity to, or entirely replacing, existing HR technology and systems is simply not possible.
By contrast, the FMS looks to improve the management of freelancers and contingent workers by complementing existing HR processes - integrating with other key components of the HR tech stack.