What is the first thing that comes to mind when you hear the acronym ROI?
Before we get out the spreadsheets and start crunching numbers, we need to make sure we are comparing apples to apples. At Outsized, we speak to hiring managers all over the world and through those conversations we’ve noticed that we are not all on the same page when it comes to calculating the ROI of freelancers. For starters, the true value of freelance talent is not always tied to the numbers - we have to take into equal account the qualitative metrics that add value to your organisations.
The fact is that the freelance revolution is only starting to pick up pace. The number of freelancers in the U.S. is expected to reach 76.4 million by 2024 and could grow to 90.1 million by 2028.
This trend is equally strong in the growth markets where we operate. India for example, has seen a 46% increase in new freelancers since 2020, reflecting the growing use of freelancers to fill skill gaps. We see the same things reflected in the MENA region & Africa, not to mention our fastest growing markets recently across Southeast Asia Check out our Talent on Demand Report for more.
While it's tempting to reduce ROI to a simple equation, the reality is far more nuanced. ROI in freelance engagements encompasses both quantifiable metrics like cost savings and qualitative benefits such as innovation and flexibility.
In this article, we will explore the challenges of capturing the true ROI of freelance talent in the hopes of providing you with a more holistic way of thinking about what ROI means within your organisation.
What Do We Mean When We Talk About ROI?
When discussing return on investment, it's essential to recognise that this will include both things we can measure (such as salary) and things we cannot (such as contribution to innovation). We tend to lean on quantitative metrics because it’s easier to make a business case. While they are undoubtedly more convincing at the boardroom table, qualitative metrics provide a deeper insight into the true value of freelance talent.
Quantitative Metrics
Often we see a scenario play out in the minds of people at the hiring table. They look at the annual salary of a traditional employee and compare that to the usually higher hourly rate of a freelancer.
Unfortunately, or fortunately (!), it’s not that simple. By the time we factor in employee overhead like benefits, time off, recruitment costs and turnover we start to see a different picture.
Although there are many instances where a permanent employee makes sense, it is hard to ignore some of the benefits that come with hiring freelancers.
Benefit 1: Cost Savings
One of the most direct and tangible benefits of hiring freelancers is the reduction in overhead costs. Freelancers typically do not require the same level of benefits, office space, or long-term salary commitments as full-time employees.
Benefit 2: Revenue Impact
Freelancers are highly entrepreneurial. With that mindset comes a certain bias for execution and results-driven approaches. Because of that freelancers often contribute significantly to project completion and success. Their specialized skills can lead to quicker project turnarounds, enhancing revenue generation. Companies that utilize freelance talent report quicker project delivery times, which can translate directly into increased revenue.
Benefit 3: Time Savings
Freelancers can be onboarded more quickly than full-time employees, reducing time-to-hire and speeding up project initiation. This is particularly valuable for projects with tight deadlines or fluctuating workloads.
"Companies using digital platforms to access highly skilled freelancers are able to accelerate project timelines significantly. This capability enables businesses to respond swiftly to market demands and reduces the time required to bring products or services to market” Source
Benefit 4: Productivity Gains
Freelancers bring specialized skills and focused expertise, often leading to higher productivity levels compared to in-house teams. freelancers are often more productive than in-house employees, particularly when working remotely.
Studies have shown that remote workers, including freelancers, tend to be 35-40% more productive than their in-office counterparts. This increased productivity is attributed to fewer workplace distractions, greater flexibility in working hours, and a stronger focus on deliverables.
Qualitative Metrics
Qualitative metrics are a little harder to measure, but are still an important part of how we frame the ROI conversation. Here are some ways to measure ROI that go beyond the spreadsheet.
Client Satisfaction and Feedback
At Outsized we often see multiple contract extensions as a sign of positive ROI. For example, it is not uncommon for a freelancer on our platform to get hired for a 3-6 month project and then have that work extended to a year or sometimes even two. This for us is a big indicator of the true value a freelancer brings to the table. Long-term contracts with freelancers often lead to improved project outcomes and higher overall satisfaction.
Innovation and Flexibility
Freelancers are known for their ability to adapt quickly to changes and introduce new ideas. Their diverse experiences bring fresh perspectives that can drive innovation within a company.
"Freelancers provide organizations with flexibility and access to specialized skills that may not be available internally. This flexibility allows companies to scale their workforce as needed, without the long-term commitments associated with full-time hires." Source
Cultural Fit and Team Integration
While it can be challenging to measure, the impact of freelancers on team dynamics and collaboration is crucial. A freelancer’s ability to integrate smoothly into a team and contribute positively to the work culture is an essential aspect of their overall value.
Challenges in Measuring the ROI of Freelance Engagements
Diverse Nature of Freelance Roles
Freelancers can occupy a wide range of roles, from short-term projects to highly specialized tasks. This diversity makes it difficult to apply a one-size-fits-all approach to measuring ROI. We recommend that in these cases people leaders look to the quantitative markers of ROI we mentioned above.
Visibility and Tracking Issues
Tracking the contributions of freelancers can be challenging, especially for those working remotely or part-time. Unlike full-time employees, freelancers might not always be present in the office, making it harder to measure their day-to-day impact. Additionally, their contributions, while significant, may be less visible compared to in-house staff, leading to undervaluation. Clear deliverables, project scopes and regular conversations are key to getting a clear picture of productivity and impact.
Intangible Benefits
The qualitative benefits of hiring freelancers, such as innovation, flexibility, and the infusion of specialized skills, are even more difficult to quantify, but shouldn’t be discounted. These intangibles are often what set freelancers apart and justify the investment.
The Bottom Line
Quantifying the ROI of freelance talent involves more than just numbers on a spreadsheet. It requires a broader understanding of the value freelancers bring to an organisation, including both measurable financial benefits and intangible contributions. Businesses that successfully capture the true ROI of their freelance engagements are those that look beyond immediate financial returns and recognize the long-term value of flexibility, innovation, and specialized expertise.
Read our latest guide on How to Measure the ROI of Freelance Talent
