Today’s small businesses are hiring less. An analysis of Labor Department data from the minds at the Kauffman Foundation, a research organization focused on entrepreneurship, found that in 1999, the typical new business had 7.7 employees – and in 2011, new businesses had 4.7 employees.
While that might seem to be a negative trend at first glance, it’s actually a strategic and savvy move for many small businesses – many of whom are saving both labor costs and time by hiring contractors instead. Data from the annual Elance Global Business Survey 2012 found that 73 percent of small businesses plan to hire more online contractors in 2012 – and that 84 percent said the practice “gives them an advantage over their competitors.”
Better talent, time saved
Survey respondents, which included more than 1,500 business customers, predicted that 54 percent of their workforce will be online in five years. One of the big reasons businesses cited for going the contractor/online hiring route is because they can find talent that is “better than or equal to what's available locally.”
Time is another factor. Businesses say they’re able to find contractors to do work from them that they would have ordinarily done themselves – or not done at all – and that saves them valuable time and effort. It also takes time to hire an employee and get them up to speed quickly. Hiring contractors can help small businesses reduce that time considerably – and get very specific skill needs at a lower cost, often within tight timeframes.
The most sought after skills businesses want in their online and contract workers? Web programming, graphic design and content development are at the top of the list, according to the survey, followed by online marketers to handle search engine marketing/SEO or social media, and mobile developers.
There’s no question that hiring contractors for one-off, specific jobs saves money ordinarily spent on hiring a full-time or even part-time employee. Once businesses include budgeting for salaries and wages of each employee, in addition to the out-of-pocket expense of payroll taxes and processing fees, the numbers start to add up quickly.
The Society of Human Resource Management (SHRM) and the American National Standards Institute (ANSI) annual Cost Per Hire report for 2012 defines a standard for American businesses when it comes to hiring employees. It’s a tool to help businesses determine “accurate and comparable costs of recruitment through a standard algorithm to calculate the recruiting costs incorporated into cost-per-hire.”
The formula includes external costs (like third-party agency fees, advertising costs and job fairs); internal costs (like salary/benefits of the recruiting team and talent acquisition system costs); and the total number of hires in a given time period. In the Global Business Survey, respondents said they saved 53 percent by going the online/contractor route.
“These results are further proof that the online workforce is powering the economic recovery and support our prediction that 1 out of every 3 people hired in 2020 will be hired online,” said Fabio Rosati, CEO of Elance. “Online employment is expanding as a core strategy for companies around the world as they realize the tremendous benefits of hiring talent on-demand.”
Send us Feedback: Is your business doing more hiring online, or are you hiring more contractors? We’d like to know. What are your best tips for working with online/contract employees? How has the practice most benefited your business?