On-demand workforce: Guide to management best practices

Faster living is now a given. Your taxi is one click away. Your family is one chat message close – and your new purchase must have a “next day” delivery. Collectively, we now demand “instant” or at least “accelerated” experiences. 

But…most companies can’t sustain that crazy-fast pace of work. Even the biggest ecommerce giants are phasing out same-day deliveries because their fulfillment centers and logistics partners can’t cope with the load.

On the service side, 50% of companies surveyed by Mavenlink had to turn down work over the last year due to limited human resources.  

Indeed, the demand for talent is pressing. On average, 75% of global businesses report talent shortages with nearly every industry affected:

Source: Manpower Group 

The talent crunch will remain acute as the Great Resignation continues. One in five workers plans to quit their job in 2022.

But great talent isn’t disappearing from the workforce altogether. Instead, many people choose to join the booming freelance economy. 

Given the current trends, perhaps it’s time to shift the focus from on-demand service provisioning to on-demand recruiting.   

What is an on-demand workforce?

An on-demand workforce (on-demand talent) includes all self-employed people who can be engaged on a temporary, demand-driven basis. 

Compliance-wise, on-demand employees can be classified as either independent contractors (self-employed people) or payrolled professionals with temporary, episodic work schedules. 

The on-demand workforce includes:

• Independent contractors 
• Freelancers 
• Gig workers 
• Staffing agencies 
• Outsourcing partners
• Business services providers 

Cumulatively, that’s millions of highly-skilled people available for hire on short notice. 

How big is the on-demand workforce? 

Research from Harvard Business School x BCG suggests that since 2009, the number of on-demand talent platforms increased from 80 to over 330. Most of them emerged over the past five years. 

Source: Harvard Business School 

The boom in platforms was largely driven by growing employers’ demand for flexible talent sources. 

Today almost all Fortune 500 companies hire talent on-demand through at least one platform – and additionally: 

• Over 30% of business leaders use digital talent platforms extensively. Another 30% report medium usage. 
• 50% of respondents expected their use of new digital platforms to increase substantially in the future.
• 90% also view talent platforms as somewhat or very important to their company’s future competitive advantage.

Given larger changes in society – the pursuit of better work-life balance, growing acceptance of remote work, and a shift towards greater flexibility – the on-demand workforce will only continue to grow in the future.

A 2022 survey by Slack found that knowledge workers feel unhappy since returning to the office.

Source: Future Forum by Slack 

People who are unsatisfied with their current level of flexibility are three times more likely to “definitely” look for a new job this year. 

Also, after returning to the office, the work-life balance scores of non-executives are now 40% worse than those of their bosses. Regular workers also report 2X the level of work-related stress and anxiety, compared to executives. 

What does this data tell us? 

Corporate cultures don’t match the talent’s work preferences. Long work hours, lack of schedule flexibility, and low personal autonomy have already led to a mass employee exodus. 

More times than not, heavy workloads are a result of inadequate staffing (and poor management practices). But as hiring remains constrained, companies keep putting extra pressure on in-house staff, which eventually prompts them to leave. That breeds a vicious cycle. 

To reduce the pressure on your workforce without compromising your corporate cruising speed, you can (and should) tap into on-demand talent. 

Quick disclaimer: Don’t treat this as a suggestion to switch all people to “on-demand work”, but rather as an acknowledgment that many employees want more flexible work arrangements (and perhaps shorter working hours). 

Benefits of hiring talent on-demand

Larger enterprises and budding startups alike choose to leverage talent on-demand due to: 

• Need-based hiring. On-demand talent platforms enable greater specialization of labor while avoiding the cost of expensive downtime.
• Cost flexibility. Engaging self-employed reduces your payroll costs, plus you can easily scale your engagements up (and down) based on your cash flow projections. 
• Faster time-to-market. Develop new products, services, or promo campaigns faster by contracting out work to more partners. 
• Innovation and experimentation. Test new ideas and assumptions without hiring full-time executioners. Obtain on-demand consultancy from professionals experienced in a particular domain. 
• Risk reduction. Keep your in-house workforce lean to navigate market uncertainties. Minimize the risks associated with fast company growth (hiring too many people with limited financing). 
• Promote an efficiency-driven economic performance where your on-demand workforce is managed to deliver on specific KPIs.  

Read more about the benefits of hiring freelancers. 

Five on-demand workforce management best practices to build happy, high-performance teams 

Because an on-demand workforce is a relatively new concept, there are no “universal management theories” or “battle-tested collaboration frameworks.”

But there are several best practices you can use to establish a solid foundation for partnering up with on-demand service providers. 

1. Build a use case for hiring on-demand talent 

Before you get into the field, decide which specialists you need in your corner and in what capacity. 

To do so, map talent skill gaps in your workforce to determine which:

• Skills and competencies you need now and in the future 
• New roles should be created (and which can be deprecated) 
• On-demand service models are available on the market 

Your goal is to have a clear list of tasks, projects, and roles you want to fill in via the on-demand workforce and mapped to anticipate engagement duration. 

Then determine which service model might best work for you – hiring temporary workers, having contractors on a retainer (day rate), or commissioning productized services. 

Let’s say you want to add extra on-demand talent to your marketing team. Then you should go with something like this:

2. Set up an on-demand talent sourcing pipeline 

Create an address book of on-demand talent you can regularly engage as needed. 

For example, Omniscient Digital curates a list of freelance writers they’ve worked with and can recommend to others. 

Make a similar database in Notion, Airtable, or *your app of choice*. Include the person’s contact details, specialty/niche, availability, rates, and any other deets your team might need to make a hiring decision. 

OK, but how do I fill this list? So glad you asked! We talked about freelancer hiring strategies earlier, but it’s always worth repeating the best tips. 

Here’s where to find talent on-demand:

• Referrals. The majority of freelancers get new business via word of mouth from past and current clients. Ask your professional contacts privately who’s their go-to freelance person for X. Or publish a public request for referrals. 
• Social media. Instead of going to Google, try looking up freelancers on LinkedIn or Twitter. A combination like “freelance + [role] + [industry] can yield some solid results. 
• Your in-direct competition. Check who did the web design for a company you admire or who writes regularly for their blog. Chances are you’ll find some cool freelance folks. 
• Talent match-making platforms. The new breed of digital platforms offer a “catered” experience of matching vetted freelancers with clients. Think of companies like MarketerHire, Working Not Working, or Gun.io. 
• Freelance marketplaces. If you don’t mind acting as a recruiter, post a project on one of the popular freelance marketplaces. Or reach out to active members with a private collaboration offer. 
• Shared services providers. Staffing agencies, outsourcing services providers, and all sorts of other providers offer on-demand access to specific skills and talent. 

3. Plan to onboard your on-demand workforce

A unified onboarding system is essential for hiring, engaging, and scaling your on-demand workforce. 

As a freelance writer, Komal Ahuja rightfully notes on Twitter:  

If you are re-inventing onboarding steps each time for each contractor, you:

• Put an extra load on your team (HR and/or direct managers) who probably have better things to do. 
• Leave new hires in the dark about your work policies, performance expectations, and next work steps, which delay service delivery. 
• May shoot yourself in the foot and receive “meh” service because you couldn’t clearly articulate your needs and preferences. 

To prevent all of the above, build clear-cut process for onboarding your freelancers and independent contractors. 

4. Figure out how you will pay on-demand workers 

When it comes to paying freelancers and independent contractors, follow three simple rules: 

• Offer fair compensation. Low-balling or relentlessly negotiating service prices results in poor work 9 out of 10 times. Research the going industry rates and compare price quotes. Pick offers with the optimal price-to-value ratio. 
• Pay on time. Stick to the contractor’s payment terms. Don’t put extra cash flow pressure on your service suppliers (they also have bills to pay). Adapt your accounting system to accommodate faster payouts if your current payment terms are above 30 days. 
• Stay compliant. Unlike employee payroll management, contractor payment management is easier. There are fewer tax and legal overheads to keep in mind. Still, you have to request invoices in a proper format (as per your tax office rules) and pay applicable taxes such as VAT or sales tax when these apply. 

You can also keep your on-demand workforce payments low and lean by using a platform like Xolo. We let you pay contractors in bulk from a single convenient interface (plus deal with all the related compliance). You can hire, onboard, and pay freelancers in 186 countries in 10 minutes (or less!). 

5. Create ways to engage on-demand employees 

On-demand workers love flexibility, but they don’t thrive in chaos. 

Packing multiple gigs into a freelance schedule is no small task (and requires some great project management skills!). 

While an on-demand workforce is available on short notice, it doesn’t mean such workers should be:

• Subject to unreasonable, unrealistic deadlines 
• Forced to over-service and handle out-of-scope work 
• Notified about upcoming projects or changes last moment
• Sent to only deal with urgent, painfully overdue tasks 
• Expected to answer within seconds, outside of normal business hours 

Doing either of the above will get you branded as a “nightmare client.” That label will then follow you across the freelancer grapevine (the community is very close-knit!). Because of your poor reputation, the really good talent might become wary of working with you. 

On the other hand, when you are an amazing client, you’ll have no shortage of on-demand employees, eager to work with you! 

Why? Because the freelance economy runs on referrals. Freelancers flock to groups (because the profession can get lonely at times) – and usually know a lot of other people in their niche and beyond it. When you are a delight to work with, your freelancers can introduce you to their network and help you fill in more skill gaps. 

To create a positive work experience for your on-demand workforce, adopt these practices:  

• Empower internal teams to take ownership when it comes to engaging and managing on-demand workers. Explain the process of on-demand hiring, budget constraints, and areas of responsibility for managers. Then educate your teams on knowledge-sharing and communication best practices for remote teams. 
• Create repeat work opportunities. Try to wire predictability into your demand-based tasks to retain your best contractors. Update them on your demand patterns, seasonality in work, and upcoming projects, so that they’ll always have room for you when you need ‘em to. 
• Break down work into itemized tasks. Make it easy for external workers to understand your needs. Break down your “lofty vision” into concrete jobs-to-be-done – steps, tasks, deliverables, etc. Based on this information, freelancers can properly estimate the scope of work and quote the right price, plus set realistic deadlines. 
• Mix service models. Not everything can (or should be) an hourly engagement or a fixed-price job. Stay open to different compensation models based on the job at hand. 
• Provide support. If you want to retain your on-demand workers on a long-term (but flexible) basis, help them do their best work. This can be something simple such as giving access to corporate training resources, checklists, manuals, etc. to more proactive steps like offering paid training, subsidizing healthcare insurance, or giving our remote perks like premium tool subscriptions, gift cards, and other goodies. 

Read more about best management practices for freelance teams.

Getting started with on-demand hiring 

Your on-demand workforce can be built fast, but it isn’t “instant.” 

…At least, not until you’ve created a streamlined process for sourcing, onboarding, and managing external workers. 

The most effective way to get started is by creating sample cases – tasks and roles you want to try filling on-demand. 

Then experimenting with different collaboration models – via online marketplaces, talent match-making agencies, direct retainer-based engagements, or productized services. 

Analyze which options bring in the best candidates and the most strategic value. Then double down on using it! 

And to keep your “experimentation phase” lean, let Xolo deal with all the admin, compliance, and payments overheads.

About Elena

Elena Prokopets writes content for tech-led companies & software development businesses, marketing to them. Her empathy for the customer, expertise in SEO, and knack for storytelling help create content that ranks well and drives industry conversations.

Elena uses Xolo so she can focus on her solo B2B content writing business without stressing over the compliance and admin overhead.