Freelancing – a viable economic option?

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Freelancing is part of the bigger self-employment and entrepreneurial wave that is changing the way business operates throughout the world.Freelancing is part of the bigger self-employment and entrepreneurial wave that is changing the way business operates throughout the world.Freelancing is part of the bigger self-employment and entrepreneurial wave that is changing the way business operates throughout the world.

The term ‘freelance’ comes from the days when wars were fought with mercenary groups – essentially, armies for hire. At that time, there were people who were skilled in arms (especially in the use of cavalry weaponry, including the lance), but who did not, for whatever reason, wish to join existing groups. Nevertheless, they still signed up for one war or another, and because they were independent, each one was a ‘free lance’ for hire.

Today’s freelancer is not very different from the ‘free lance’ of old. Indeed, many freelancers are skilled personnel who, for whatever reason, do not wish to be formally employed. Instead, they sign up for one job after another as independent contractors.

Freelancing is part of the bigger self-employment and entrepreneurial wave that is changing the way business operates throughout the world. Gone are the days – even in Japan – when you could reliably expect to be working for the same employer your entire career. Today’s ‘Millennial generation’ of workers are seeking work/life balance as well as flexibility of working hours and a job they can feel passionate about.

Meanwhile, in the face of economic hardships and recessions, more and more businesses are looking to streamline their costs – and labour costs form a significant fraction of any business’s expenses. Using outsourced and ad hoc labour (also known as ‘contingent labour’) as the need arises, instead of hiring people regardless of actual business activity level, would seem to be a win-win situation.

Freelancing is significant enough that to have the term ‘freelance economy’ coined to describe it. According to the Harvard Business Review in September 2014, over 1/3 of the American workforce freelance at least part-time. Forbes, in its 2014 annual predictions of the freelance economy, estimates that by 2020, 50% of the American workforce will be into freelancing of some form.

In Australia, the freelance economy could be as large as $51 billion. A 2013 report from Accenture highlighted the fact that worldwide, companies are spending approximately $300 billion on contingent labour. This trend holds true even in Malaysia. The number of freelancers in Kuala Lumpur alone has increased by 31.2% in 2014.

It is unfortunate, then, that the explosive growth of freelancing and other forms of self-employment has seemingly caught both government agencies and NGOs off-guard. There is no equivalent to the numbers the US Bureau of Labor Statistics reports on contingent labour, for instance; as a result, coming up with the relevant statistics for Malaysia can be a complex undertaking.

Additionally, Employment Act protections, which all salaried employees earning less than RM2,000 per month enjoy, do not apply to freelancers (as they are not defined as being employed under the Employment Act). Furthermore, there are few associations to assist fresh Malaysian freelancers, similar to the EFA in the US, the IPSE in the UK or Illustrators Australia.

Taxation implications can also be baffling to many. Freelancers reporting their income to LHDN, for example, will find very little information to help them in doing so; some will use Borang BE and report their income as ‘other’ non-employment income, some will use Borang B and report it as business income, and yet others will think there is no need to report freelancing income at all (especially if it is part-time and they are otherwise employed). With freelancers accepting offshore/remote work and payment, there is also the question of whether such overseas income should be reported.

Freelancing moving forward

Despite these complications, however, freelancing and side-income business continues moving forward in Malaysia. Kelly Services, a HR recruiting agency, has had dedicated contingent workforce solutions for Malaysian enterprises since the 1980s. The Star, in January 2014, quoted Malaysian Employers Federation executive director Shamsuddin Bardan as saying that freelancing in Malaysia had been experiencing rapid growth.

Entrepreneurship, self-employment and freelancing comes in many shapes and forms, and frequently relies on disruptive technologies and business models. For instance, uberX (now available in Malaysia) is a ride-sharing system which allows ordinary people to freelance as drivers with their own cars. There are a number of ‘home restaurants’ (otherwise known as underground dining) for aspiring chefs – or even people who just like to cook – to earn extra money by hosting diners in their own homes, even here in Malaysia.

As the world becomes more connected, opportunities for self-employment and freelancers – including those in Malaysia – will inevitably increase. The Malaysian government has taken note of the potential in international freelancing made possible via the power of the Internet, as have Malaysian businesses. Therefore, perhaps it is time that Malaysian workers who are not finding their jobs sufficiently challenging or satisfying, or even if they simply want to increase their take-home pay, to consider branching out a little and building up a little freelancing experience.

Tomorrow: Online freelancing and what it entails.

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