Payroll Solutions for Cross-Border Freelancers: A $1.4 Trillion Opportunity

The acceleration of the digital transition from 2020 onwards emphasized one thing: there is only one global market, and in this global market, talent is more valuable than ever. According to a report by Advantis, 68% of middle-market firms reported struggles to attract top talent, while consulting firm Korn Ferry estimates that by 2030, there will be a skilled labor shortage of 85 million people.

However, while many see this as a risk, I see it as an opportunity.

We already know enough about freelancing and how it provides businesses and employees with a win-win arbitrage value proposition, which is why there is a lot of hype surrounding the HR Tech marketplace.

To understand it, we need to look at the statistics related to freelancers. According to World Bank data, 1.57 billion people in the world are freelancers. That equates to almost 47% of the workforce. There are reports, like this one shared by the University of Cincinnati, which estimate the value of global freelancing at $1.5 trillion, and predict that it will grow at a rate of 15% annually.

However, there are challenges to make it work.

First, freelancing involves an increasing amount of cross-border collaboration. If freelancing is slated to grow at 15%, cross-border freelancing is poised to grow over 30% annually, according to Finextra. The same report also mentions how a popular freelancing platform had over 70% of its revenues coming from outside the USA.

Hiring international freelancers brings the challenge of payroll. How do we ensure that all these contractors get paid on time? Furthermore, how do we minimize the cost at which they get paid?

Dealing with freelancers involves, on one side, moving money across countries, which becomes expensive when dealing with conventional banking institutions. And if this doesn’t flow well, it is likely that, with plenty of options, freelancers will take their talents elsewhere. A deep dive by Pymnts shared that 40% of freelancers would work for a company that pays them faster, and 59% of freelancers work for more than one company. In this crowded marketplace, talent has the upper hand, especially when it comes to high-level specialists who are always sought-after.

Furthermore, there is the legal aspect. Hiring contractors can be tricky when nations have different laws and regulations, and the wrong expectations can lead to costly problems down the line.

Having said this, the pressing need for a service that helps companies scale globally by working with freelancers and providing freelancers with the necessary legal and compliance tools has not gone unnoticed. Human resources tech, or HR tech, is often labeled as the next big thing. Alex Wilhelm, from TechCrunch, mentioned that some of the hottest IPOs (Initial Public Offerings) in the second half of 2023 could be companies in the HR tech field.

While technological capabilities play an essential role in the scalability of the solutions offered, there is another factor at play that can make a company stand out in this increasingly-crowded market, as more companies are vying to attain a piece of the market that, just for payroll, Sacra estimated to be $1.4 trillion.

This key factor in serving this increasingly-global demand is having a thorough understanding of the nature of each of the markets where contractors are and where business is being conducted. It involves earning the loyalty of customers as people and making human connections instead of transactional ones. To succeed, HR tech companies must be culturally adaptable and recognize that every market posits a different set of challenges, and as such, providing companies and freelancers with the necessary tools to make this cross-border collaboration seamless.

With this in mind, let’s keep one statistic in mind. The same World Bank report that said that there are 1.57 billion freelancers in the world also said that there are 73.3 million freelancers in the United States. This means that there are over 1 billion freelancers that are in different parts of the world. And they will be hired by companies that could be anywhere: in Dubai, Beijing, or Tel Aviv.

For HR tech companies, and especially for those focused on payroll, the opportunity this opens up is unparalleled. A report from Hello Bonsai disclosed that 29% of freelancers are paid late, and the reason why that happens is because of the complexity involved with international transactions. In addition to tolerating delays, freelancers need to put up with hefty commissions, especially those charged by platforms like PayPal.

Hence, there is a pressing need for an efficient, seamless service with human-centered design in mind that is able to satisfy companies and freelancers alike. With cross-border collaboration likely to keep increasing, and millions of people joining the freelancing ranks on a yearly basis, the company that can capitalize on this will have a foot ahead in the race for the $1.5 trillion pie.