Hourly fees of freelancers are heavily under pressure, nowadays. A worrisome, but hardly surprising development

The excess supply of labor in the market and the diminished demand for it, as a consequence of the economic crisis took their toll on the hourly fees of freelance professionals, or ZZP’ers (i.e. independents without personnel) as they are called in The Netherlands. 

Already in September, 2011, I warned for the mounting pressure on the hourly fees of freelancers in the Building and Construction industry, the Financial industry, the ICT, medical industry and the free professions, as a consequence of the distorted balance between demand and supply:

And even if the freelancers keep their assignments, the hourly rates are often pushed downwards strongly, due to the (very) unbalanced relation between the principal and the assignee in this supply-market.

Only the best professionals with skills that are unequalled by others and that might even make them unique, can maintain virtually writing their own checks. You could call this the Champions League of the freelance workforce.

All others are earning less and sometimes much less. This is a strong deflationary force.

Today, these insights are confirmed by the latest data on the hourly fees of freelance professionals. Here are the pertinent snips from an article at the website of business radio station BNR (www.bnr.nl) in The Netherlands:

Freelance market is under pressure

Freelance professionals earn 15% less per hour than last year and a staggering 42% less than two years ago. This is disclosed by an investigation among 15,000 freelancers by the website www.hoofdkraan.nl. The average hourly rate is currently €42.

Freelancers already go through a hard time for quite a while. The investigation shows that there is little improvement yet. At the same time we notice that there is a lot of activity on the internet, where entrepreneurs get much more ‘bang for their buck’, concerning activities like bookkeeping and the creation of websites and apps.

Next to the crisis, it is the increasing competition that causes the dropping hourly rates. “More and more people started freelancing. Not only as a replacement for a steady job, but also as an extra source of income, next to the daytime job; the so-called moonlighting’, according to Tymen Selman, founder of Hoofdkraan.nl.

This development is very harmful to the people whom it concerns. Although an hourly rate of €42 does not sound too bad, it means that the people keep too little money to save for a rainy day and to build up their pension.

If such a period of diminished fees lasts for only a short time of 12 months or less, most freelancers can survive without much problems. On the other hand, when such a period lasts for a number of years, the freelancers will be starting to eat into their capital with eventually grave results. When freelancers earn too little money structurally or when they are too long without an assignment while not having a financial backup in place, poverty may lurk eventually. Freelancers don’t receive unemployment fees and don’t receive the other kinds of benefits that normal workers do receive when they become unemployed.

In good economic times, the risk of being without an income for a longer period of time is often more than compensated by the generous rewards that freelancers receive from their principals.

But these are not good economic times:

·         freelancers earn much less money per hour in their assignments. The 42% reduction per hour, compared to 2010, is a lot of money and can mean the difference between financial stability and an awkward financial situation, as the costs for freelancers mostly have remained at the same level or have even increased, compared to 2010;

·         freelancers have in general much shorter assignments than a few years ago. At this moment the assignments are often a matter of weeks, instead of the months or years that the business was previously used to;

·         the time between assignments for freelancers is (much) longer than a few years ago, due to the increased competition that makes it even harder to acquire a new assignment;

This triple whammy could bring many freelancers in financial trouble, like I already predicted last year. At this time, there is still no improvement visible at the horizon.