COMPANY CUTBACKS LEAD TO RISE OF THE ‘GIG ECONOMY’
▶ Trend plays well with freelancers and ‘solopreneurs’ on short contracts
From a budget perspective, they don’t have to have a full-time hire LARA MANSOUR Marketing and branding expert
Corporate cost-cutting in the UAE is fuelling a rise in the so called gig economy as companies hire freelancers for special projects rather than pay them an annual wage.
Industry experts say there are about 100,000 licensed freelancers, who are paid for each project or are put on a short-term contract, although official figures are hard to come by.
But over the past nine months, the introduction of VAT and other increases in the cost of business in the UAE have forced some companies to cut staff and take them on again as freelancers, experts say.
“The organisation perhaps made their position redundant but they still want to work with that employee,” said Amanda Perry, founder of a business accelerator called Vitality that focuses on women.
“That employee is then taking out a freelance licence or setting up a small company and taking on short-term contracts for the same organisation. It is probably a more cost-effective way for that organisation to employ that person.”
Companies save on visa costs, gratuities, flights and medical costs, said Ms Perry, who is also founder of Vital Corporate Solutions, which helps entrepreneurs and freelancers to register their businesses.
But it is not just new freelancers who are gaining from the trend.
Lara Mansour, an Australian marketing and branding expert and the founder of Brandly. Works, has landed more work recently because of corporate belt-tightening.
“At the moment, a lot of the marketing budgets at corporate organisations or larger entities may have been reduced, or they have had to restructure certain team organisations,” said Ms Mansour, 37.
“But the demand and the requirement for branding and marketing support still exists. So what’s the back-up plan? The back-up plan is, ‘why don’t we hire a boutique agency?’
“So it works quite well at the moment that we are able to plug in and support the client and step out when our job is done. We are always there to support the client. But from a budget perspective, they don’t have to have a full-time hire.”
Although not technically a freelancer, Ms Mansour has been working by herself, for herself, since 2015, having left her role with a government company in 2015 to take some time out after getting married.
After getting some freelance work here and there from her contacts in the industry, she decided to set up her own company.
She decided against getting a freelance licence because she wanted the opportunity to expand her business.
Experts in the industry say “solopreneurs” such as Ms Mansour and freelancers are pretty much one and the same.
“The term freelancer has a specific meaning in the UAE,” said Steve Ashby, the founder of Businessmentals, a consultancy for freelancers and solopreneurs.
“There is a licensed activity called freelancing but it is like women who do makeup for fashion shows, actors,
journalists or singers in pubs.
“But that ignores many, many more people who would never consider themselves to be freelancers because it might be a woman working from home who designs children’s clothing and gets the stuff made up in India, then brings them into the country and sells them.”
Experts say business consultants and free zones are best placed to advise entrepreneurs and freelancers on options, because there are differences between setting up a business and becoming a freelancer.
“With a business licence, they open a corporate bank account,
operate under a company name and grow their business to employ people down the track,” said Gemma Kennedy, head of sales at Virtuzone, which assists aspiring freelancers and entrepreneurs with licensing.
“Freelance permits don’t allow freelancers to have a company name or open a corporate bank account, which can limit their transactions and potential client base.”
Another important factor is that you need to have the correct activity on your licence in order to work legally. And the type of licence will also depend on who you will be working with, said Paula Statham, a director with Creative Zone.
“In many cases, a free-zone licence will be fine. However, there will be times where a DED [Department of Economic Development] licence is needed. A business adviser will be able to confirm which licence type is best,” Ms Statham said.
Costs also differ, but licensing yourself as a freelancer or self-employed is expensive compared to countries such as the UK, where it costs only £200 (Dh1,320) to set up a company, Ms Perry said.
Here, a freelance licence will typically cost about Dh20,000 to Dh25,000, she said, although there are some cheaper options, such as those offered by twofour54, which costs about Dh7,000 to Dh8,000 for the year, minus health insurance.
Applying for a business licence tends to cost more. Ms Mansour estimated that she spent about Dh30,000 establishing her company.
But freelancers and solopreneurs say there are many benefits, such as the ability to make your own schedule and be your own boss.
“A freelancer at the end of the day is an entrepreneur. You are working for yourself and you survive or die based on your own ability to generate business,” said Bernard Lee, chief executive of GlassQube Coworking. “Being responsible for your own success is very exhilarating.”
There are many down sides. There is no paid holiday, no health insurance, no end of service gratuity and it can be lonely. Experts say financial security can also often be a concern because of the time it often takes to be paid for work.
But many who started their own business say it has been worth it, including Mr Lee, a former investment banker.
“It would be a disservice to tell someone who was thinking about being an entrepreneur or a freelancer that it is all upside and a fantasy world of making your own hours and the platitudes of freelancing,” he said.
“Those are only half truths. It is very tough.”