There is no question that in a recessionary economy such as the one we are now suffering through, companies look to cut costs in any way they can—by buying less, cutting benefits and salaries, withdrawing company perks, negotiating lower prices with suppliers, instituting hiring freezes, and, alas, laying off workers. The latter course, however, puts these companies in a bind, because while they are cutting costs, they certainly don’t want to reduce the quality or quantity of their product output. So how do insurers and other companies maintain IT programs and even embark on new initiatives with fewer people and diminished resources? The answer seems to lie in hiring freelancers who will cost less.   As a result, according to a recent article in Computerworld, demand for contract tech workers, whether they call themselves freelancers or consultants, is increasing. The article notes that this trend may signal “an act of desperation by companies struggling to keep up with work in the face of staff cutbacks.” According to Computerworld, two job sites that use eBay-like features to match workers with employers have seen sharp increases in the number of employers that are hiring temporary workers from their sites. One site said it has seen job postings on its site increase by 100% over the past year. But it’s really not desperation we’re talking about here. The bottom line is that IT departments, like other company units, are being ordered to cut costs, and one way to reduce expenses is to hire employees to whom the company need not pay benefits. Those benefits—various company programs, life insurance and, most notably, health insurance, cost a lot of money. If IT staffing managers can save that money, they look like heroes, at least for the moment.   On the surface, this policy makes sense for IT departments and others who are being asked to do “more with less.” With so many talented tech people looking for work these days, employers are often able to pluck top talent from the unemployment pool and pay them considerably less than they would otherwise make. But this practice has a downside as well.   One problem is that while many IT shops are hiring freelancers, some are actually hiring people for full-time jobs. If your crackerjack freelancer gets an offer for a real job with benefits, chances are you will barely see his heat signature as he rockets out of your place, perhaps leaving you stuck mid-project with a sudden manpower shortage. You certainly can’t expect loyalty from a worker to whom you are paying substandard wages in order to fatten your own bottom line.   And here’s something else to consider. If we ever get nationalized healthcare as described by the U.S. House of Representatives, those who can’t get insurance through their employers will have to get the government version—the one that rations critical things such as MRIs, operations and other life-saving procedures. The legislation as currently proposed requires everyone to buy some form of health insurance—or be fined for not doing so. In that horrible scenario—an all-too-real possibility—employers who offer real health insurance with real jobs will have a tremendous advantage when it comes to landing the best talent, or keeping such people.   This is not to say that IT shops should not hire consultants and/or freelancers (perish the thought!). It does make clear, however, that over-reliance on temporary employees could have permanent negative effects on the quality of the IT department’s output. Suddenly, those IT staffing managers who put all their eggs in that basket are not looking so smart.   In the broader scope, IT departments would be well-advised to maintaining a balanced approach in putting together their resources. This article can also be found at InsuranceNetworking.com.

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