167 days. That’s how long it takes to fill a vacant skilled worker position in Germany, according to a recent survey by Statista. And the trend is rising. One relief for companies is the temporary commitment of freelancers, who are perfectly suited to absorb and compensate staff shortages. And yet HR managers in Germany are still cautious when it comes to hiring freelancers. A misjudgment, as there are multiple reasons why working with freelancers pays off for companies.
In 2023, the Federal Employment Agency alone reported around 800,000* vacancies, almost twice as many as ten years ago. One of the main drivers of the skills shortage is the „baby boomer“ generation, which still made up around 30% of the workforce in 2021 and is gradually retiring. This will have devastating consequences for the labor market, as the subsequent generations with significantly lower birth rates will not close this gap. According to Federal Minister Hubertus Heil, there could be a shortage of seven million workers in Germany by 2035. The Federal Ministry for Economic Affairs and Climate Protection estimates that almost one in four workers will „disappear“ from the market by 2060.
*) The German Chamber of Industry and Commerce estimates that there are currently 1.8 million job vacancies in Germany.
There will be a shortage of seven million workers in Germany by 2035
It’s not surprising that consequently all forces are currently mobilized to attract workers: Better working and wage conditions, promoting training and further education, increasing female participation in the workforce, facilitating immigration, digitalization and flexible transitions into retirement. However, even in total and implemented at turbo speed, these measures will not compensate the shortage of skilled workers. Employees are already struggling with a significantly increased workload, which is reflected in higher sickness rates and fluctuation. Even worse, unfilled positions are not only a burden for the staff. The shortage of (skilled) workers is also proving to be a real bummer on economic activity and growth for the German economy.
One relief for companies is the temporary commitment of self-employed workers (freelancers), who are ideally suited to absorbing and compensating for staff shortages. And yet HR managers in Germany are still cautious when it comes to hiring freelancers. „Far too time-consuming!“ „Far too difficult!“ „Far too expensive!“
The use of freelancers is the best way to compensate for staff shortages
According to a study conducted among freelancers, they are convinced that the reluctance of many companies to hire freelancers is due to an outdated mindset and poor purchasing and procurement processes for external specialists. Added to this is the legal situation in Germany, which represents an obstacle for companies. Nevertheless, the participants report that the shortage of skilled workers, digitalization and new working models are having a positive impact on their business and expect even greater demand in the coming years.
And indeed, the boom in solo self-employment seems unstoppable. In the USA, 41% of employees are already freelancers. The „Freelancing in America“ study even assumes that the majority of Americans will be working freelance by 2027. In Germany, the proportion of self-employed people is significantly lower and recently stood at „only“ 3.9 million. However, following the slump caused by the crisis, experts are forecasting significant growth in the freelancer market with around 500,000 new start-ups per year from 2023. In the first quarter of 2023 alone, almost 40% more micro-enterprises were founded than in the same quarter of the previous year.
The main drivers of this development are the younger generations. 53% of the working Generation Z are currently freelancers. Among millennials, 40% work full-time as freelancers. Sometimes it’s just the possibility of an additional source of income, but more often it’s a decision for a new lifestyle away from a traditional employment relationship with a 40-hour week in one and the same company.
A traditional employment is not attractive to younger generations
The advantages of self-employment are obvious: variety, self-determination, independence and working in different constellations and teams are massive incentives for a career away from the mainstream and without the supposed security of a permanent position. It is therefore hardly surprising that, in addition to the classic freelance sectors, more and more freelancing activities are now becoming established that would have been unthinkable for the free market until a few years ago, such as in hospitals or the public sector.
In addition to the obvious labor shortage in companies and public institutions, there are many other reasons to consider hiring freelancers as a valid alternative to permanent employees. Here are the top 13 reasons why working with freelancers pays off for companies:
1. Short recruitment period
Since an employment relationship usually results in a long-term commitment and you therefore want to make sure that the new employee fits in with the company and is up to the task, the recruitment process for employees often takes a long time. This is not the case with freelancers, who are usually ready to work immediately and, in case of doubt, the collaboration can be terminated quickly in order to hire a more suitable candidate.
2. Relief for employees
Are your employees exhausted? If positions are not filled, the workload of the remaining employees is correspondingly high. This not only affects their mood, but also their health. The result is poorer work results and high absenteeism. The use of freelancers, who take on some of the tasks, reduces the stress of the employees and thus improves the team spirit.
3. Training employees is costly
Frequent job changes are part of the strategy of ambitious professionals. This can be expensive for companies: They invest in training only to soon lose their employees to other companies. Freelancers, on the other hand, are already experts in their field and offer their services precisely in the areas in which they specialize. The training period is correspondingly short.
4. No financial risk
Permanent employees receive a fixed monthly salary, regardless of how busy they are, whether they are on vacation or sick. In contrast, freelancers only incur expenses when the services are really needed, i.e. when the (positive) order situation makes it necessary. When the order situation is low, the financial risk also remains low, as there are no ongoing monetary liabilities. Self-employed freelancers therefore offer companies flexibility when it comes to hiring; freelance workers are hired or not, depending on demand.
5. Experience and know-how are key for freelancers
Freelancers have a great deal of experience and expertise in their field, otherwise their business would be doomed to failure. In addition, they usually work with several companies, which further expands their knowledge. So, you can be pretty sure that they will do a good job. However, there is another reason for freelancers to deliver high-quality work. Because the better the result, the higher the chance of getting further jobs.
6. Fresh perspective & innovative thinking
Compared to a permanent employee, freelancers have usually acquired their skills over a much broader portfolio of projects with different companies. The team constellations and processes into which they were integrated were correspondingly diverse. Therefore when it comes to bringing in a new perspective or fresh ideas, the diverse industry and professional knowledge of freelancers pays off once again.
7. No limits on working hours
If the workload of employees is consistently high, employers quickly face conflict with working time laws and the associated restrictions on working hours. Freelancers, on the other hand, determine their own working hours. They are flexible and used to meeting tight deadlines. Longer working days or weekend work are completely normal to them, as they can simply move their free time to another day of the week or sleep in longer.
8. Highly committed: freelancers act like entrepreneurs
Freelancers are self-employed entrepreneurs, have to act entrepreneurially on a daily basis and bear the personal financial risk. Unlike employees, they are dependent on satisfied customers, because without a good reputation there are no orders. So, it’s no wonder that their motivation, work ethic and solution-oriented thinking are fundamentally strong, because their personal livelihood depends on it.
9. Freelancers are tough
No question: freelancers are just human. But they are also people who have seen and experienced a lot in the course of their projects. There is little that drives them to despair. Short deadlines, changed briefing, everything back to start? Such scenarios do not deter freelancers, but are rather a stimulation to their flexibility and speed.
10. No workplace costs
Office space, furniture, materials, hardware and software – setting up and maintaining a workplace involves a lot of costs. All this is eliminated with freelancers, as they are responsible for their own work equipment and its proper use and respective costs.
11. Faster results
Freelancers are not faster than employees per se. However, they are not involved in many everyday office processes or ongoing meetings, so they are usually better able to concentrate on the project at hand and complete their work more quickly. If you want to increase productivity even further, simply hire freelancers from different time zones. Briefed in the evening, delivered the next morning – no witchcraft.
12. Greater diversity
Imagine you could put together a team for the tasks at hand that fulfills the exact requirements you need and is ideally made up of different experiences, backgrounds and cultures. No problem. Since most freelancers work remotely, you can draw on a much larger talent pool when putting together your „dream team“. This opens up new ways of thinking and also provides inspiration for employees.
13. Freelancers are easily replaceable
And if things don’t work out? Separate from employees is difficult, time-consuming and expensive. However, if you are not satisfied with a freelancer’s performance or your requirements have changed over time, the collaboration can be terminated easily and usually at very short notice. Here too, the entrepreneurial spirit of freelancers pays off compared to a usually resentful employee, because: customers come and go, that’s part of the business.