How to Overcome the Talent Shortage by Hiring Freelancers

The growing talent shortage is a problem for many companies that can't seem to find the right talent for their open positions. But often, they overlook a simple solution - working with freelancers.

Talent shortage is a growing problem

A lack of skilled workers is causing companies to lose sales, face additional costs, make slow progress and overwork existing employees. The growing shortage of skilled workers in Germany is creating problems for more and more companies and could jeopardize the country's competitiveness and innovative ability in the long term.

A survey of almost 22,000 companies published in January 2023 by the German Chamber of Industry and Commerce (DIHK) shows that 53 percent of companies have staff shortages. Based on its survey, the DIHK assumes that there are around two million unfilled positions.

This matches figures released by Germany’s digital association Bitkom, which reported around 137,000 vacancies in the IT sector alone in November 2022 – with an average vacancy time of seven months. That's how long it takes on average to fill an IT position in Germany.

Reasons for the talent shortage

There are many reasons for unfilled positions. One central aspect is demographic change, which is causing that the German society to get older and older. The baby boomer generation is gradually retiring, and the declining birth rate of recent decades means that fewer young people are joining the workforce.

The following aspects also play a role and intensify the talent shortage:

• New requirements: Technological progress is creating jobs that have not existed until recently. For many profiles in demand, there are not (yet) sufficient quantities of well-trained specialists.
• New working models: More and more people are working part-time. In addition, self-employment and freelancing are becoming more attractive and these people are no longer available for employment on the labor market.
• Early retirement: Many people want to stop working well before the standard retirement age, and high-earning specialists in particular can afford to do so.
• Working for foreign companies: Experts in demand may migrate abroad or work from home for international companies thanks to the rise of remote work.

Consequences of the talent shortage

The shortage of skilled workers has economic consequences for companies: Orders cannot be accepted due to a lack of personnel, which leads to a drop in sales, and new projects are delayed. This puts a strain on the entire German economy and jeopardizes the country's competitiveness and innovative ability.

Companies are being forced to pay ever higher salaries to attract and retain talent. It is becoming increasingly difficult for small and medium-sized companies to keep up with the competition and prevail against better-paying corporations.

The ongoing talent shortage also places an additional burden on the existing team, which has to take on extra tasks. This can increase the risk of overwork and burnout and reduce employee satisfaction. A vicious circle, because this threatens further absences or resignations.

Freelancers can help

The longer a position remains unfilled, the more the company is slowed down. Working with freelancers gives you access to new talent. This allows projects to be tackled earlier and tasks to be taken on by freelancers until permanent team members are found.

It may even become clear that a certain field can also be covered by freelancers permanently, and that this is the better solution. This creates a hybrid workforce of permanent and freelance employees that combines the best of both worlds.

Advantages of freelancers

Freelancers give companies the opportunity to fill vacant positions at least temporarily or even permanently. Freelancers thus help to ease the talent shortage. But not only that! There are many more advantages:

• Larger talent pool: Freelancing offers high flexibility and promising income opportunities. That is why it is becoming interesting for more and more talents. Specialized knowledge workers in particular tend to find this project-based form of work more challenging and thus more attractive. These individuals are no longer available on the labor market for permanent positions. The only way to work with them is to hire them as freelancers.
• Fast project start: Filling a permanent position can take months, especially for profiles that are in high demand. In contrast, freelancers can often start working within days. While not every position is suitable to be filled by freelancers, in many cases it is easier than you might think. Alternatively, they can provide short-term support until the right person is found for a permanent position.
• Specialists on demand: Freelancers are often top talents with a lot of expertise in their field. They are specialized and make this knowledge available to their clients. Through their project-based work, they gain insight into various companies and thus have a steep development curve.
• Flexible structure: When a certain part of the workforce consists of freelancers, companies remain agile. They can hire additional people as needed or easily terminate the collaboration with some when a project is completed or the financial situation requires a budget cut. With permanent employees, things are much more complex. It takes much longer to find them, and terminations can also be complicated.
• Cost savings possible: Many companies fear high costs with freelancers, as their hourly rates are at first glance significantly higher than those of employees. However, this concern is usually unfounded. Since freelancers are only paid for productive hours and no ancillary wage costs are incurred, the costs for both types are similar or even lower for freelancers.

Do you want to learn more about the talent shortage and how to deal with it? Our free white paper "Overcoming Talent Shortage Through Freelancers and Remote Hiring" gives you a comprehensive look at the topic.