Souring Economy Gives Tech Freelancers a Lift

Demand for freelance coders notched the second-biggest gain, up 45.5%, followed by back-end developers, up 37.7%, the firm said.

Last month, by contrast, new job postings by U.S. employers for full-time IT workers fell 12% from August to roughly 300,000, according to IT trade group CompTIA.

Yet beyond cost-cutting efforts, employers say they are responding to a growing talent pool of IT freelancers with niche skills in areas like artificial intelligence, which can be tapped for specific, short-term enterprise-technology tasks.

“You’re looking for highly specialized skills that you wouldn’t particularly want to hire for, if it weren’t for a given project,” said Balaji Bondili, a managing director at accounting firm Deloitte. Deloitte is a sponsor of CIO Journal.

Mr. Bondili said Deloitte relies more heavily on IT freelancers than it did before or during the pandemic. Like most companies, he said, it enlists freelancers with specific skills across a range of capabilities, including AI and analytics.

Many of these workers increasingly prefer to tackle advanced digital initiatives, then move on, rather than be tied to a single employer, Mr. Bondili said. To stay competitive, he said, “companies need access to these specialized freelancers.”

On top of being drawn to unique tech challenges, a growing number of IT freelancers prefer the more flexible hours and remote-work opportunities they became accustomed to during pandemic lockdowns, said Tim Herbert, chief research officer at CompTIA.

“The pandemic and, more recently, the turbulence in the economy, spurred demand for greater labor flexibility both among employers and workers,” Mr. Herbert said. More IT workers are now choosing freelance jobs “as a preferred working model, rather than as a last resort,” he said.

Sebastián Siseles, a vice president at Freelancer.com, said freelance work also allows IT job seekers—especially younger workers—to reduce the risk of being dependent on a single employer. By adapting to remote work during the pandemic, employers “opened the window” to hiring more freelancers, Mr. Siseles said.

Across the tech sector itself, the use of freelance workers has grown by nearly 20% since the onset of Covid-19 in early 2020, said Luke Pardue, an economist at Gusto Inc., a cloud-based payroll, benefits and human-resource management software maker.

“Technology companies are increasingly turning to contract workers as a source of talent,” Mr. Pardue said. “Owners see the benefit of having access to high-skilled workers that complement the work of existing employees for a specific project or time frame,” he said.

Freelancers—who are also referred to as independent contractors or gig workers—tend to be cheaper than full-time workers, since employers aren’t required to offer benefits, such as health insurance, or pay payroll taxes.

Broadly, the Internal Revenue Service lumps freelancers, independent contractors and gig workers together, defining them as being engaged in work in which “the payer has the right to control or direct only the result of the work, and not what will be done and how it will be done.”

The Labor Department on Tuesday proposed new rules that would change how labor laws define independent contractors, a move that could impact millions of gig and contract workers. The proposal would use a “multifactor economic reality test” to determine whether freelancers are truly in business for themselves, or simply miscategorized employees, the agency said.

The proposed changes, which would affect millions of workers across a range of industries, are aimed at cracking down on employers that deliberately blur the lines between employees and nonemployees for economic gain.

Many tech-enabled companies such as Uber Technologies Inc., Lyft Inc. and DoorDash Inc., which rely heavily on gig workers, have opposed similar efforts in the past. After the proposal was announced, shares of Uber closed down 10%, Lyft dropped 12%, and DoorDash declined nearly 6%.

Write to Angus Loten at [email protected]