Knowledge-Based Contractors: The Gig Economy Goes Upscale

Jan Alexander

When a pharmaceutical company contacted successful female entrepreneur Sandy Hillman to ask if her firm, Sandy Hillman Communications in Baltimore, could run a very targeted media campaign for a new product, she said yes, no problem, and got the account.

A woman sitting at a desk talking on the phone and looking at her computer screen.

Although her 12-person firm has worked with many pharmaceutical clients, for this particular campaign Hillman brought in a freelance account executive. The hired gun came in with a large network of contacts including the most influential bloggers on healthcare news and policy, as well as a knowledge of the most relevant social media niches.

“Having an expert who knows who’s talking to whom in multi-channel world has made it possible for us to create a superior strategy for our client,” says Hillman.

For the account executive, Hillman Communications is one of a number of firms that engage her for short-term projects requiring high-level expertise. She is one of the growing number of skilled professionals who are part of “the gig economy.” While the term is most often associated with ride-share drivers, Airbnb hosts, household helpers who list their services on TaskRabbit, or freelancers in various creative fields, there is a growing demand from the business world for knowledge-based contractors, also known by such labels as on-demand talent, supertemps, free agents, or members of the open talent economy. Whatever you call these entrepreneurs, they are a new face of capitalism.

Companies large and small, in a wide range of industries, seek them out partly to be more flexible with costs, but mostly because corporate leaders are finding this is how they can recruit top talent to help spur rapid innovation and change.

“Instead of structuring people’s jobs around broadly defined roles, work now becomes a series of deliverables and projects—for instance, launching a new drug, accessing a new business or transforming IT infrastructure to scale with long-term needs. Then, drawing from both internal resources and high-end independent professionals, companies can assemble the best team for the job,” says a 2017 study, On Demand I.Q.: Winning the war for talent in the gig economy, published by the Business Talent Group (BTG). The 10-year-old firm provides independent consultants and executives to corporations, investment firms, and large non-profits. BTG likens this strata of gig workers to Major League Baseball and Hollywood stars, saying “the best talent rises to the top in a free-agent world.”

Knowledge-based contractors may be experts in accounting, project management, business analysis, engineering, digitization and technology, or software development, as well as brand marketing. They are working in industries that include aerospace, finance, healthcare, IT, pharma & life sciences, and transportation.

…on-demand talent, supertemps, free agents, or members of the open talent economy. Whatever you call these entrepreneurs, they are a new face of capitalism.

“Ten years ago independent contractors were seen as people who couldn’t find a full-time job. Today being an independent is almost a badge of honor,” says Gene Zaino, the president and CEO of MBO Partners based in Washington. D.C.. His firm provides back office services for self-employed professionals, as well as an online marketplace to connect them with companies. Zaino believes the changed view is due both to fluid business models and disruptive technology that has forced companies to constantly re-evaluate the skills they need to stay competitive.

As the knowledge-worker segment of the gig economy grows, the ripple effect will be both broad and profound. There is a need for federal laws that recognize the status of gig workers content to remain so. Indeed, the 2017 MBO study finds that 70 percent of fulltime independent contractors think working on their own is better for their health, while 43 percent say they earn more money working on their own. But as Zaino puts it, federal laws are based on a perception that employee status is the “common preference.”

Under current law, companies risk penalties if the IRS determines certain indications of “employee” status, such as supertemps working for them on a fulltime schedule or using company-provided equipment, office space, or job training. MBO Partners has proposed a separate federal designation for high-level independent contractors as “Certified Self-Employed” (CSE) that the IRS would recognize. According to Zaino, this would allow companies to freely engage designated contractors, while professionals with CSE status could readily obtain tax withholding services and portable benefits.

As the knowledge-worker segment of the gig economy grows, the ripple effect will be both broad and profound.

The ripple effect is also evident in the peripheral businesses forming around knowledge-based contractors, particularly around online marketplaces that connect companies with contractors. As Zaino sees it, there will be some limitations to online marketplaces, because most supertemps develop their client base through their own connections, but there will be a great demand for independent coaching, training, and career development services that help make it easier, less expensive, and less risky to become a knowledge-based contractor.

The burgeoning ecosystem of services shares a notable feature with the independent contractors it serves; these are entrepreneurial ventures that can be started with very little money. This end of the gig economy runs on intellectual capital that the corporate world is beginning to recognize as priceless.