Corporate cost-cutting in the UAE is fuelling a rise in the gig economy, experts have said, as companies look to hire freelancers for special projects rather than pay them an annual wage.

Industry experts estimate there to be around 100,000 licensed freelancers who are paid per ‘gig’, task, or on a short-term contract basis, though official figures are hard to come by.

But over the past nine months, the introduction of VAT and other rises in the cost of doing business in the UAE have forced some companies to cut permanent staff and take them on again in a freelance arrangement, say experts.

“The organisation perhaps made their position redundant, but they still want to work with that employee, and that employee is then taking out a freelance licence or setting up a small company and taking on short-term contracts for the same organisation,” says Amanda Perry, the founder of Vitality, a female business accelerator focused on women and Vital Corporate Solutions, which helps entrepreneurs and freelancers register their businesses in the UAE.

“It is probably a more cost-effective way for that organisation to employ that person.”

This way, companies save on visa costs, gratuity, flights and medical costs, she adds.

But it is not just new freelancers who are benefitting from the trend.

Lara Mansour, a marketing and branding expert and the founder of Brandly.Works, has landed more work of late thanks to increased belt-tightening among some of the bigger companies.

“At the moment, a lot of the marketing budgets at corporate organisations or larger entities may have been reduced, or they have had to restructure certain team organisations, but the demand and the requirement for branding and marketing support still exists," said the 37 year-old Australian.

"So what’s the backup plan? The backup plan is [they say] why don’t we hire a boutique agency?”

“So it works quite well at the moment that we are able to plug in and support the client and step out when our job is done. Obviously, we are always there to support the client. But from a budget perspective, they don’t have to have a full-time hire, all the time.”

Amanda Perry, chief executive of Vitality, says she is a reformed spender, who has learnt to become a saver. Pawan Singh / The National

Although not technically a freelancer, Ms Mansour has been working by herself, for herself, since 2015, having left her role with a government company in 2015 to take some time out after getting married. After getting a bit of freelance work here and there from her contacts in the industry, she decided to go all out and set up her own company. She decided against getting a freelance license as she wanted the opportunity to expand her business and take on staff down the line.

She may not officially be a freelancer – and indeed would probably balk at the suggestion – but experts in the industry say so-called solopreneurs like her and freelancers are, for all intents and purposes, one and the same.

“The actual term freelancer has a specific meaning in the UAE,” says Steve Ashby, the founder of Businessmentals, a consultancy for freelancers and solopreneurs.

“There is a licensed activity called a freelancer but it is like women who do makeup for fashion shows, actors, journalists, or singers in pubs.

"But that ignores many, many more people who would never consider themselves to be freelancers because it might be a woman working from home who designs children’s clothing and gets all of the stuff made up in India and then brings them into the country and sells them online.”

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Experts say business consultants and free zones are the best to advise aspiring entrepreneurs and freelancers on the best options, as there are important differences between setting up a business and becoming a freelancer.

“With a [business] licence, they [can] open a corporate bank account, operate under a company name and grow their business to employ people down the track,” said Gemma Kennedy, head of sales at Virtuzone, which assists aspiring freelancers and entrepreneurs with licensing, but does not issue freelance permits.

“Freelance permits don’t allow freelancers to have a company name or open a corporate bank account, which can limit their transactions and potential client base.”

Another important factor to consider is the fact you need to have the correct activity on your license in order to work legally. And type of licence will also depend on who you will be working with, says Paula Statham, marketing and communications director with Creative Zone.

“In many cases, a freezone license will be fine, however there will be times where a DED license is needed. A business advisor will be able to confirm which license type is best,” adds Ms Statham.

Costs also differ, but licensing yourself as a freelancer or self-employed is expensive compared to countries like the UK, where it costs just £200 (Dh1,320) pounds to set up a company, says Ms Perry.

Here, a freelance licence will typically cost around Dh20,000 to Dh25,000, she says, although there are some cheaper options out there, such as those offered by twofour54, which costs around Dh7,000 to Dh8,000 for the year, minus health insurance.

Bernard Lee, CEO of GlassQube coworking space in SkyTower on Reem Island Abu Dhabi. Khushnum Bhandari / The National

Applying for a business licence tends to cost more. Ms Mansour, for example, estimates that she spent around Dh30,000 establishing her company.

But freelancers and solopreneurs say there are a multitude of benefits, such as the ability to make your own schedule and be your own boss.

“A freelancer at the end of the day as an entrepreneur. You are working for yourself and you survive or die based on your own ability to generate business for yourself,” said Bernard Lee, chief executive of GlassQube Coworking.

“Working for yourself, making your own hours and being responsible for your own success is very exhilarating.”

But there is a downside. In fact, they are many.

For one, there is no paid holiday, no health insurance, no end of service gratuity, and it can be lonely. Experts say financial security can also often be a concern due to the time it often takes to be paid for work.

Yet, many who have started their own business say it has been worth it, including Mr Lee, a former investment banker.

“But it would be a disservice to tell someone who was thinking about being an entrepreneur or a freelancer that it is all upside and a fantasy world of making your own hours and the platitudes of freelancing,” he said.

“Those are only half truths. It is very tough.”

Freelance Q&A with PricewaterhouseCoopers

Study after study has found that freelancing is the future of work. But what do the experts think? David Suarez, partner, Middle East people and organization leader for PwC, talks about the topic and explains why more people will freelance in the future.

Why is freelancing expected to become more popular?

Because it hedges bets both for employers and employees. And because it can be done more efficiently. Let us also remember that in developed economies at least, the bulk of the GDP comes from companies that have less than four to five employees. These companies typically rely on a contingent workforce to meet peaks in demand. In the future we will just see more of this.

Is freelancing the future of working?

It’s part of it, for sure. But not the only destination.

What benefits does it offer the freelancer and companies?

Freelancers in the future will be able to offer an increasing amount of services digitally and remotely. So they will be more efficient. Companies have access to a much more variable (or contingent) workforce that can move up and down without having to lay people off, and adapt much more quickly to fluctuating customer demand.

Are there any downsides?

Yes. Like anything. This is no silver bullet. The contract between company and employee is in a way broken. There will be less loyalty in the future. I see it as a downside. The other downside for the freelancer is that there is a much thinner safety net in terms of pension or savings plans, benefits etc. This is the same as today but it will become generalized to a wider population.