Freelance Marketplaces like Upwork or freelancer.com allow customers and sellers to find each other and enable their services transaction online directly while taking a portion of the invoice as a fee for enabling this transaction.
Freelancer Management Systems or FMS or Independent Contractor platforms are online platforms where contractors create an online profile so that preapproved clients of the FMS can engage them on an as-needed basis. FMSs are different because they are oriented to enterprise or larger companies and envisage clients returning often to use the same contractors from a semi-dedicated talent pool. Unlike marketplaces, there is greater trust through curation and more formal processes. FMS systems gained popularity for remote tech support jobs where it was cost prohibitive for companies to send out their service personnel. 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 through marketplaces like WorkMarket and FieldNation.
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 also probably the reason that FMSs are 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.