The new breed of solo self-employed drives innovation and its members must be recognised as agents in the labour force
IT MAKES perfect sense to Eileen Gavin to be the sole employee in her business Shavac Bawn, a provider of web design and online marketing services. “Not only am I working on my own, but a growing number of my clients are too,” said Gavin, who is based in Monaghan. “I partly set up the business because I could see there was a market out there providing services to other one-man bands, as well as the corporate clients here and abroad.”
“I don’t have the overheads of a large agency, so I can be more competitive on price,” she added. “I am my own boss. I outsource everything I don’t want to do myself and that leaves me free to provide the services I love.”
As Gavin knows from her client list, there are plenty more workers like her out there. “We’re somewhat overlooked.”
According to Andrew Burke, the new dean of the Business School at Trinity College Dublin, the significance of self-employed freelancers to enterprise has yet to be acknowledged fully.
Start-ups and successful owner-managers have become economic heroes, admired for being innovative and taking risks to create products that transform our lives and create jobs, said Burke, who was previously director of the Bettany Centre for Entrepreneurship at the UK’s Cranfield University, Bedford, north of London.
“However, over the past decade, the drivers of growth in entrepreneurial activity have not been these archetypal entrepreneurs but freelancers,” he added.
Freelancers are usually skilled workers with specialist abilities, hired on a project-by-project basis. They enable other businesses to be entrepreneurial by adopting a lower-risk, variable cost approach to innovation, development and growth. They also allow companies to access a wide variety of extra skills and expertise not available within the organisation.
In many cases they are the direct providers of innovation, suggesting entrepreneurial strategies to businesses and leading their launch and commercialisation in the market.
According to Burke, freelance entrepreneurs have been the driving force behind the growth of self-employment over the past 15 years in the UK, while the number of employer owner-managers has not grown. In Britain, which will mark an inaugural National Freelancers Day on November 23, an estimated one in seven of the workforce now works for him- or herself.
According to the Association of Independent Professionals and the Self-Employed, these individuals do not want or need to grow their own businesses, and have been “largely invisible to policy makers”.
For Burke, it is “a 20th-century labour force mindset where we assume that career choice is between becoming an employee or starting your own business”.
Most freelancers do not view themselves as business owners, and merely register a company to avoid overpaying taxes, added Burke.
“Most fiscal authorities across the globe don’t recognise freelancing as a distinct economic agent,” he said. “The result is that freelancers become stigmatised as either false self-employed who should really be employed or underperforming business owners, as they have no employees.”
However, if Ireland wants a high- performing innovative economy, it needs “to recognise, legitimise and nurture the freelance sector”, including through the tax code.
High-income tax rates limit the ability of our freelancers to compete for work, and they will become as important as corporation taxes in terms of promoting our economic prosperity, believes Burke.
“We need to make sure that businesses can easily engage with freelancers and have no shortage of high-quality freelancers available to them,” he said. “We need to ensure that people who choose freelancing get the right guidance and training to enable them to have a realistic and optimal freelance performance.”
Freelancers need to be recognised as legitimate and distinct economic agents in the labour force. “We also need to rethink enterprise policy, to break out of a preoccupation with start-up rates and the international entrepreneurial league tables that go with them.”
The very high failure rate of traditional start-up businesses — four out of five typically crash — reinforces the idea. Of the 20% of start-ups still going after 10 years, just 3% will be high performers.
“Behind those numbers are personal tragedies in terms of houses lost, relationships broken down, physical and mental health issues,” said Burke. “Being an entrepreneur is hugely stressful.”
The notion of fail again, fail better and a much better sense of risk management is found in America. “The US is very good at lean start-up techniques,” said Burke. “In Europe, the feeling was that to be serious, you had to throw everything at the business.”
In Europe, if the business failed, you lost everything. “In the US, many of the entrepreneurs behind their start-up statistics hadn’t even left their day job,” he added. “We took away the wrong message.”
Having a skilled pool of freelancers is a good risk-management strategy for both start-ups and existing businesses, said Burke, pointing to retail giant Argos’s use of outsourced talent to build, launch and grow Argos Direct until it had revenues of £200m, before integrating it into the main business.
“Start-ups can dip into a talent pool of skilled freelances on a pay-as-you-go basis.”
Roderick Smyth of TempBuddy, a software service for managing pay-as-you-go employees, is not so sure such “solopreneurs” are entrepreneurs in the truest sense of the word. “An entrepreneur takes risks with a view to growing a business. Otherwise, what you’re talking about is just a different way of getting paid,” said Smyth. “Solopreneurs are definitely marginalised, and not just through the tax treatment. Contractors find it a lot harder than salaried people to get a mortgage.”
One acquaintance, an IT contractor, could not get a mortgage on €90,000 a year and took a permanent job, for €60,000 a year, to secure one, “even though there is really no such thing as a permanent and pensionable job these days”.
Such anomalies will come into starker relief as the number of freelancers grows. “In the US it is expected that 40% of the workforce will be on contracts by 2020,” said Smyth, whose TempBuddy is well placed to benefit. “Ireland lags behind, but that trend will continue here too.”
Within the gig economy, issues have already arisen in some countries as to whether Uber drivers, for example, are self-employed contractors or company employees.
“The pace of change in employment practice is so crazy now that legislation is going to find it hard to keep up,” said Smyth.
A growing number of business owners, such as Aodan Enright of Smarter Egg, see freelancing as their business model. Smarter Egg provides professional development services such as coaching and networking, drawing clients from big businesses and other solopreneurs. Being solo does not stop him taking on large jobs.
“I work on an associate model which means I can scale up and down depending on what’s going on,” said Enright. “Solopreneurs are often the happiest people in business, adding value on a daily basis, by doing what they are good at. So whose perspective is right? Personally, I think it’s a really undervalued business model.”