If you are an independent contractor or freelancer, the economy may be looking up for you — at least where small businesses are concerned.
Every month SurePayroll puts together its Small Business Scorecard. The Scorecard tracks hiring data among the 25,000 small businesses that use the SurePayroll service.
As part of that Scorecard the company calculates a Contractor Index. The Contractor Index shows the percentage of 1099 contractors versus W-2 employees hired in small businesses.
The Contractor Index for March 2009 shows that an increasing percentage of staffing help are independent contractors — nearly 4 out of 100 workers are brought on as independent contractors:
We track how dependent small businesses are on independent contractors with the SurePayroll Contractor Index.
As of the end of March 2009, the Contractor Index now stands at 3.88 percent.
This means that for every 100 workers engaged by small businesses in February, 3.88 are 1099 independent contractors and 96.12 are W-2 employees
This is up from 3.82 percent in the prior month. It’s also a record high for the Contractor Index.
In other words, more than ever before, small business owners are opting to engage an independent contractor rather than hire an employee.
This suggests 4 possible implicatons:
(1) The economy is starting to brighten a little. Typically, hiring of temporary employees and contractors is a leading indicator. If you’re just starting to see a little light after a long dark tunnel of recession, but are still feeling sales are a little weak, you’re more likely to start by bringing on temporary or contract help. You won’t feel confident enough to hire employees yet. Couple that with the fact that SurePayroll’s Scorecard shows hiring among small businesses is rising, and it’s one small nascent sign of an improving economy.
(2) Independent contractors are becoming a preferred way to staff a business, regardless of the economy. These days small businesses are run lean and mean. Sites like Elance help you staff up with contractors. So instead of hiring a single employee, small businesses might bring on several freelancers or contractors. That way you get a wider range of skills than one person can bring.
(3) Entrepreneurship is in. People are choosing to become independent contractors, not employees, so that they can run their own businesses. Many prefer contractor status.
(4) Those who prefer to be employees are forced into accepting contractor roles. The commentary to the Contractor Index suggests people are accepting contracting roles instead of employment, because they really want to be employees but can’t negotiate a good enough deal in this economy. I’m sure there’s some of that going on — although I don’t think that’s true across the board, by any means. Many prefer to remain independent. Often independent contractors will in turn hire other independent contractors to support THEIR own businesses. I receive as many 1099 forms as I give out each year.