freelancers are unique economic agents in the construction industry. Their work and flexibility add value to businesses that could not be gained from employee labour.
In summary
Each of the three editions of this report has shown just how important freelancers are to the construction industry. Without them, it would face huge difficulties and many more business failures. This is because, through their unique economic function, freelancers both underpin and enable the entire construction industry’s business model.
Without freelancers’ contribution, the construction industry would be smaller and would hire fewer workers. It would also be less entrepreneurial and efficient. Consumers (i.e. households, industry and the Government) would pay higher prices to a more highly concentrated and less competitive industry.
Genuine freelancers play a pivotal role in promoting economic performance in the construction industry. They are not entrepreneurs, but enable entrepreneurship, and their unique contribution must be recognised and valued. Instead, however, policymakers and business leaders alike seem to so often misclassify them as lesser forms of entrepreneur or employee that they risk encouraging policies that would eliminate their crucial economic contribution.
freelancers add value to the industry and the economy more generally by:
Making it possible for businesses to use highly specialised labour and sub-contractors, thus driving huge cost-saving and productivity gains. The study shows that by using freelancers instead of employees for specialist functions, businesses can avoid idle, unused labour downtime. This leads to labour cost savings of 27-86 per cent per project. Savings are greatest when the labour needed is both short-term and highly specialised. In these situations, using employees would be too slow, involve excessive downtime and thus create excess overhead costs.
2. Allowing businesses to use a ‘pay per project or task’ variable cost model, which helps them to de-risk construction ventures. This also enhances the expected return on investment and thus increases the total industry output. Making finance for construction projects cheaper and easier to find by allowing businesses to de-risk their projects. This adds a further boost to the industry’s economic activity.
Helping the construction industry to adopt lean entrepreneurship management techniques. These allow lower fixed and sunk capital costs for each building project. They also make firms of all sizes much more agile and flexible. This allows Small and Medium-Sized Enterprises (SMEs) to compete with larger firms (because if there are freelancers available, there is no need to have a large internal employee workforce to cover a diverse range of labour skills). Overall then, it promotes a more competitive, high-performance industry, which improves choice, quality and price for private and public consumers. Helping businesses to manage fluctuations in demand, thus encouraging them to grow when market demand is above average, and also reducing business failures when market demand falls below expectation.
Allowing firms to pay for output rather than input if they wish. This can make building project costs more predictable (less risky) and mean that fewer managerial resources are needed to monitor labour productivity. Paying based on output instead of according to hours worked can also boost productivity by aligning the interests of the worker and the firm more tightly