SI Review: January/February 2013

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Counterpoint

Online Staffing

Online staffing is the subject of this month’s Counterpoint. Jay Lash argues it is really just online freelance, but Andrew Karpie says online staffing is a platform that can support many types of work arrangements.

ARGUMENT: It is really just online freelancing

By Jay Lash

Online staffing is primarily a manifestation and enabler of virtualizing freelance work.

Largely focused on the creative freelancer, offshore developer, moonlighter and administrative home worker, companies in the segment act as a vehicle for low cost, “just-in-time” talent. They offer a strong solution for tactical, small, easy-to-define projects that can be managed remotely.

Many (not all) workers are willing to provide services for very low rates because they are either offshore with a lower standard of living than U.S.-based workers, or they have lower income requirements because they are moonlighting and happy to receive supplemental income. This segment of worker is typically not a core part of the staffing industry; rather it is a new worker pool.

I do believe, however, this online freelancing industry and those that use it may face strong headwinds from regulatory agencies. To date, they have operated largely under the radar, but these services make it easy to avoid regulatory compliance with local and international labor law, sales taxes, payroll taxes and income taxes.

The staffing industry needs to be careful about encouraging these platforms without providing caution, advice and solutions to mitigate abuse. Let’s not facilitate a connection that can backfire from an industry perspective. Just like the financial industry (whether justified or not) is faced with serious brand and financial damage due to a lack of self-restraint on lending practices, let’s not perpetuate practices that enable regulatory avoidance — especially with a political hot potato of sending non-taxed income to offshore service providers. Online freelancing is here to stay, but let’s use it responsibly.

Jay Lash is vice president of market strategies for MBO Enterprise Solutions. He can be reached at jlash@mboenterprise.com.

ARGUMENT: It is more than “gigs online”

By Andrew Karpie

Online staffing platforms can support many kinds of work arrangements, not just limited freelance work.

According to a recent survey, well over half of oDesk clients reported they were interested in forming long-term relationships with online workers as project team members or a part of blended workforce. Online staffing platforms can enable more than limited freelancer gigs.

While not a core part of the staffing industry today, it could be a growth market segment going forward. Online staffing platforms have begun to make visible new areas of opportunity, new forms of work arrangements through which supply and demand meet. We seem to equate online staffing with cheap off-shore labor, but there are many contractors, who are able to sell and bill their services at higher rates, based on things like quality, level of expertise, reliability. And some of the highest growth areas for online contractors are in the U.S. areas of high unemployment.

It is interesting that we first think about how online work platforms might be a way to circumvent taxation and regulation, whereas we might also consider how such platforms could actually be a way to enable tax and regulatory compliance (over ICs, for example).

I think the issue for the staffing industry is not that of “encouraging these platforms,” but rather coming to grips with how to leverage these models to serve clients better — satisfy more demand through speed, efficiency and new work arrangement service offerings. There is no doubt much evolution and risk ahead — and being on top of change and risk is essential to pursuing almost all emerging opportunities. But dismissing new areas of market demand and ways of doing business carries risks as well.

Andrew Karpie is a research analyst with Staffing Industry Analysts. He can be reached at akarpie@staffingindustry.com

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Elevate Platform Ltd

Dan Collier 05/02/2013 1:26 am

Interesting conversation from a US perspective so let me throw a European viewpoint on this. I run a fairly nascent UK start up focused on connecting highly skilled contingent workers with job opportunities, direct. There are no staffing agencies involved and thus the costs to the end user are significantly lower than previously. In the UK, over 90% of all contract/contingent hires within the IT space are still made via 3rd party recruiters/agencies charging 15-20% margin, often more in some other verticals.

The solution we have developed is aimed squarely at the "Onsite" contractor, the guy/gal that comes in for typically a 6-12 month engagement; they tend to operate as their own Ltd company (1099 in US speak), they are responsible for their own taxes and insurance etc and they get compensated very well.

What we have seen is a huge demand to do things directly by enterprises and reduce their spend and dependency on 3rd parties. The recession has hit hard on pay rates for contractors in the UK/Europe and during these austere times we're seeing a lot of interest from both global enterprises aswell as the small start up - they ALL want to save money and that's what these emerging platforms are really about, saving money for the company; not avoiding taxes.


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