Freelancer Management Systems or FMSs are online platforms where companies can save a list of curated and preferred freelancers (independent contractors) that they worked with or may need to work with. Managers at the company can tap this freelance talent pool and retrieve these profiles when needed. It usually contains the freelancer's profile, portfolio, resume, past projects done, ratings from managers, contact information and sometimes even their availibility.
Companies usually license the FMS for a small monthly fee (SaaS model). It is part of a new trend called self-sourcing where companies directly source some of their contingent talent.
FMSs are different than VMS/MSP which focus on the workflow of active temp staffing assignments and where the resumes in the system are sourced by staffing agencies.
They are different than Applicant Tracking Systems (ATSs) which focus on just storing and retrieving resumes for full-time or contract recruiting.
FMSs are also different than Freelancer Marketplaces like Upwork.com or Fiverr.com that enables anyone to find and hire a freelancer and conduct their transaction online. In freelance marketplaces, the order and payment is made through the platform. The platform serves as an escrow to hold the buyer's money while the work is performed. The platform takes 10-20% cut of the order value as a fee for enabling this transaction. Freelance marketplaces are are consumer focused, public and open and anyone can be a buyer or a seller.
Why FMSs exist?
In addition to the convenience of being an easy to tap into talent pool, Freelancer Management Systems provide greater trust through curation, background checks and Independent Contractor (IC) compliance and other more formal processes that are required by large companies. Unlike consumer freelance marketplaces, large companies have very strict restrictions on how they can use freelancers because of the risks associated with it. Some of these risks that are not very serious for small business or consumers can be very expensive and damaging to large companies.
Here are a few major risks that push large companies to FMSs over freelancer marketplaces.
Tainted Deliverable: Example- A manager hired a logo designer on Fiverr.com for $30 while she was working at a small startup. At her new large company, she needs a logo design and the preferred consulting company quoted $10,000 for it. She balks and decided to use Fiverr to save her company some money. She didn't realize, the freelancer delivered her a design that the freelancer copied from another company's brochure. When the product was launched the company was sued for copying the other company's logo and received a ton of criticism and bad PR. The bad freelancer was in a foreign country, did not care about IP or their reputation, didn't carry liability insurance and just moved on to a new client while the Manager learned a painful lesson.
Worker Misclassification: Another huge risk arises from worker misclassification where contractors are used as employees giving rise to co-employment risks. If a contractor is used by a company for doing the work similar to a fulltime employee for long periods, they automatically become eligible to be considered as fulltime employees- whether the company has a contract or not. FMS systems are designed to track and alert managers on over-usage of contractors and can guide a company about when they might be at risk.
Accountability: A third big risk is that company confidential information can be shared with freelancers that are not under any confidentiality agreements. Freelancers may be engaged without backgroud checks and get access to things they may not be eligible for, Some examples are defense and scientific data that are subject to export or other control.
FMS currently play in Niche Field Service and Remote jobs mostly
FMS systems alleviate some of the above risks and are an in-between solution that falls between a freelancer marketplace and a consulting company. FMS systems gained popularity for remote tech support jobs where it was cost prohibitive for companies to hire staff on a fulltime basis and send out their service personnel for one-off jobs. Instead companies discovered they could engage local workers on a per job or per hour basis where the jobs were sporadic and didn't require too much specialization. For these kind of jobs they found FMSs like WorkMarket and FieldNation that are now considered leaders in this field.
Example Use Case of an FMS
As an example, an FMS would enable someone like Dell's Service Department to quickly find and send a technician to go to your Grandma's house in a remote town to replace a defective hard drive. Previously it may have required telling your grandma to ship the laptop to them and incur shipping costs both ways and a long time to repair and send back. With an FMS, Dell can post that job online on their chosen FMS which relays that job to several hundred qualified technicians in that town and picks the one that is the best fit and available in an instant.
Benefits of an FMS
The ease of availability, the reputation management system of the contractors in the system and the ability to hire them only for a short time, make this a great proposition for clients. It is easy for Managers to call upon their favorite contractors on an on-demand basis- without the rigmarole of having to send out a request, screen and interview, get a new contractor up to speed and also commit for a certain period of time. In many cases companies may already have an informal pool of contractors that they could bring onto a freelancer platform to manage their transactions better.
Cons of an FMS
The only downside risk from FMSs is from co-employment risks and if they engage the worker as a 1099 instead of as a W2 employee. This is the reason that FMSs are currently mostly used for remote work outside of the client offices. Most FMS systems promise to take care of the compliance issue but other than some checklists and paperwork, this remains a challenge as the rules are still subjective around what constitutes an employee vs a contractor.
Top Freelancer Management Systems
There are many FMS systems that have been around for a while. Here is a list of the major and fast growing ones.