Human resources information systems (HRISs) have been around for longer than many of our employees have been alive. These systems, which first appeared in the 1960s, are meant to manage employee data and ease the relationship between human resources departments and their employees. In an economy that is increasingly freelance-oriented, however, HRISs are struggling to keep pace.
Since their design, companies have come to rely on HRISs to improve the decision-making capabilities of management, provide effective cost controls, and generally improve the efficiency of the HR team. The headache that is employee hiring and maintenance paperwork has been heavily eased by the automation and standardization of quality systems.
Not much about employment today is the same as it was in the ’60s, however. This may be one of the reasons 90 percent of Fortune 1000 companies have said they plan to replace their HRIS within the next decade. Nearly three-quarters of companies that plan to replace their system are doing so to improve the user experience, while more than half said they were in the market for a newer technology that works better or faster, provides better analytics, or more readily integrates with other systems their company uses.
A Shifting Marketplace Requires Shifting Technology
HRISs are specifically designed to manage the relationship between employees and their employer. For instance, the onboarding process typically includes gathering information from the employee, such as his Social Security number and a number of tax exemptions. But freelancers are classified as independent contractors, meaning they need to provide information for 1099 forms instead of W-2s — something most HRISs can’t handle.
HRISs are also widely used to manage benefits. Because freelancers are typically not eligible for benefits due to their 1099 classification, however, they have to jump through hoops that don’t apply to them. That, again, creates frustration and reflects poorly on the company.
Using HRISs to manage freelancers can also cause problems when it comes to evaluating performance metrics. For instance, a company using a “revenue per employee” metric to track progress toward a budget goal will receive skewed reports if it introduces freelance employees into the data set. Freelancers may work only a few hours a week or may be on a job for just a few weeks, so counting them as a traditional employee in the HRIS will skew aggregate data, clouding important decisions.
Choosing the Right Tool for the Right Job
HRISs may not be the answer for managing freelancers, but does a new system make sense for what may be a minor part of a company’s workforce?
At many organizations, freelancers won’t be a minority for long. Around 42 percent of company executives plan on hiring more independent contractors in the future, and it’s expected that by 2020, contingent workers will make up nearly half the workforce.
In other words, it’s more important than ever for businesses to find new and better ways to engage with a growing part of their workforce. As far as technologies go, freelance management systems (FMSs) are the best way to do that.
FMSs are specifically designed to help enterprises manage independent workers and freelancers, enabling a company manager to source candidate freelancers from either a private or public pool of available workers based on the skill set required. When the manager selects a freelancer, the FMS automatically takes care of communicating the details to the freelancer and gathers the necessary information to onboard.
Upwork Enterprise, for instance, is an FMS with more than 12 million registered freelancers around the world. It segments workers by more than 3,500 skills, making it easy for companies to find what they’re looking for — which is why over 20 percent of Fortune 100 brands use it.
What’s more, FMSs make sense for both sides of the relationship: They allow company managers to easily locate workers with “hard to find” skills, and they provide freelancers with access to projects suited for their unique skills.
The world is changing, and so is the way people work. Old systems from yesteryear simply aren’t designed for today’s varied workforce. The sooner companies embrace FMSs, the more successful they — and their freelancers — will be.
Peter Limone is the president and CFO of Innovative Employee Solutions, a leading nationwide employer of record that specializes in human relations and payroll services. Founded in 1974 in San Diego, IES has grown into one of the city’s largest women-owned businesses and been named one of its “Best Places to Work” for 10 years in a row.
Peter joined IES in 2011 as the company’s corporate controller. He was promoted to CFO the following year, and in 2013, he was also named company president. Prior to his work at IES, Peter worked for 3E Company, where he oversaw integration of the company’s accounting, financial, and tax systems. He has also served as division vice president of finance and information systems at Follett Software Company.
