A growing number of managers have come to the conclusion that paying more pays off — especially for larger and more complex projects.
FORTUNE — For years, companies looking to outsource labor have opted for the lowest bidders, seeking freelancers and independent contractors in India, Vietnam, and other low-wage countries via matchmaker websites and local recruiters. One site even promised all projects would cost $5 or less as the race intensified to control costs and compete globally.
Recently, though, that line of thinking has done an about-face, as a growing number of managers have come to the conclusion that paying more pays off — especially for larger and more complex projects.
“People who employ freelancers are starting to realize cheaper’s not always better. I’m hearing that a ton lately,” said Sara Horowitz, executive director of the Freelancers Union. “You could do it cheap or you could do it well,” and a growing number of companies facing complicated changes to their financial or technology systems are vying for the latter.
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Horowitz’s perspective is echoed by managers of online freelancing marketplaces. “We’re seeing ridiculously high salaries coming in,” said Liam Martin, chief marketing officer of Staff.com, which focuses on placing people in long-term remote work. People who agree to take three to nine months of project work are more likely to secure higher wage rates, whether they’re a writer or an app developer, he added.
According to Dice.com, a tech employment site, 35% of all U.S. technology professionals, both full-time and contract, earned more than $100,000 in 2013, compared to 25% in 2009. Just consider contractors, though, and the portion of six-figure earners for 2013 was at 54%.
After four years of essentially stagnant salaries for IT contractors, pay popped up in 2012 and 2013, jumping 3.6% last year to $65.87 an hour, according to Dice.com’s salary surveys. That’s one full percentage point higher than the rate at which all tech salaries rose last year. Those gains are expected to continue, said Dice President Shravan Goli, fueled by employer demand for people who can create mobile or big data applications.
The boom in mobile and cloud computing is creating more demand not just for developers but also product managers, quality assurance engineers, and social media marketing professionals, Goli said.
“The majority of employers are looking for more from their freelancers and are willing to pay more for quality,” agreed Nikki Parker, a spokeswoman for Freelancer.com, which has 10 million members, from Australia to the United States. Employers assess independent professionals “on their past feedback, skills, reputation, and portfolio of work.”
To be sure, not all freelancers are cashing in on the rise in wage rates. Some, such as photographers, are working in saturated markets. Others are part of sectors in decline.
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Still, economic momentum and depleted corporate staffs within some departments are creating opportunities for freelancers to ask for raises. As companies find they need updated websites, new business software, or new marketing or employee communications materials, contractors have gained a stronger bargaining position. Horowitz said she started noticing it in recent months and has heard at least a dozen employers discussing higher rates.
At Freelancer.com, employers on average bypassed 8.9 bidders with lower bids and typically pick one around the midpoint in pay, said Parker. Six out of ten of the projects posted go to repeat freelancers. People who have received particularly positive reviews certainly garner higher rates, she added.
Katy Griggs, an independent marketing consultant and writer based in Atlanta, sees that creative professionals with updated technology skills are earning more. She is secretary of the board at the Freelance Forum, which helps independent contractors run their business, and she says that many members — graphic designers, writers, and art directors — claim that their incomes are on the rise.
A few years ago, Griggs says she charged around $70 an hour to corporate clients; now her rates are at $90 to $100, depending on the client and project. She knows other writers who receive more than $100 an hour from major clients. “Things are definitely picking up. But you have to know where to look,” she said. “You’re not going to get those rates unless you’re aggressive and you ask for it.”
The reason for the big raises, according to Griggs: A few years ago, several major corporations cut their creative and marketing staffs, and many turned into contractors. “That has created a jump in prices,” she said, since they know the company procedures and standards — and expect higher pay.
Griggs’ client list has grown in recent years and now includes Cox, Aon Hewitt, and Sage Software, as well as the Boys and Girls Clubs of Metro Atlanta. “I get really slammed. It feels like I don’t come out into the great outdoors for months at a time.”
