As AI integration accelerates, businesses are facing widening skills gaps that traditional employment models struggle to address, and so more companies are choosing to hire freelancers to fill the void, according to a new report. The report, from freelance work platform Upwork, claims there’s a major workforce shift as well, with 28% of skilled knowledge workers now freelancing for greater “autonomy and purpose.” An additional 36% of full-time employees are considering switching to freelance, while only 10% of freelancers want to return to traditional jobs, according to the report, which is based on a recent survey of 3,000 skilled, US-based knowledge workers. Gen Z is leading the shift, as 53% of skilled Gen Z professionals already freelance, and they’re expected to make up 30% of the freelance US workforce by 2030. “The traditional 9-to-5 model is rapidly losing its grip as skilled talent chooses flexibility, financial control, and meaningful work over outdated corporate structures,” Kelly Monahan, managing director of the Upwork Research Institute, said in a statement. “Companies that cling to old hiring and workforce models risk falling behind.” US businesses have ramped up their freelance hiring by 260% between 2022 and 2024, according to a report from Mellow.io, an HR platform that manages and pays freelance contractors. Increasingly, US businesses have turned to freelancers overseas — most frequently Eastern Europe — to fill their tech talent void, particularly for web developers, programmers, data analysts, and web designers, according to Mellow.io. “This trend shows no signs of slowing,” Mellow.io’s report stated. “The region offers an unparalleled balance of cost efficiency and highly skilled talent.” The US is a freelancer haven Gig workers, earning through short-term, flexible jobs via apps or platforms, are also thriving, according to career site JobLeads. JobLeads analyzed data from the Online Labour Observatory and the World Bank Group to reveal the countries dominating online gig work. The United States is leading in the number of online freelancers with 28% of the global online freelance market. Software and tech roles dominate in the US, representing 36.4% of freelancers, followed by creative/multimedia (21.1%) and clerical/data entry jobs (18.2%). Globally, Spain and Mexico rank second and third in freelancer share, with 7.0% and 4.6%, respectively. Among full-time online gig workers, 52% have a high school diploma, while 20% hold a bachelor’s degree, according to JobLeads. “The gig economy is booming worldwide, with the number of gig workers expected to rise by over 30 million in the next year alone,” said Martin Schmidt, JobLead’s managing director. “This rapid growth reflects a fundamental shift in how people approach work — flexibility and autonomy are no longer just perks but non-negotiables for today’s workforce.” Gen Z and younger professionals are embracing gig work for its flexibility and control, while businesses gain access to a global pool of skilled freelancers, Schmidt said. “As the sector continues to evolve, both workers and employers need to adapt to a new reality where traditional employment models may no longer meet the needs and expectations of the modern workforce,” he said. Confidence in freelancing is high, with 84% of freelancers and 77% of full-time workers viewing its future as bright, according to Upwork’s report. Freelancers are also seeing more opportunities, with 82% reporting more work than last year, compared to 63% of full-time employees, the report said. Freelance workers generated $1.5 trillion in earnings in 2024 alone, Upwork said. The trend is gaining momentum, particularly among Gen Z, with many full-time employees eyeing independent work, according to Upwork. Freelancers are leading in AI, software, and sustainability jobs, demonstrating higher adaptability and continuous learning, according to the report, which focused exclusively on skilled knowledge workers, not gig workers. It also included “moonlighters,” or workers who have full-time employment but freelance on the side. More than half (54%) of freelancers report advanced AI proficiency compared to 38% of full-time employees, and 29% have extensive experience building, training, and fine-tuning machine learning models (vs. 18% of full-time employees), the report stated. Those who earn exclusively through freelance work report a median income of $85,000, surpassing their full-time employee counterparts at $80,000, the report stated. Upwork’s Future Workforce Index is the company’s first such report, and so it said it is unable to provide freelance employment numbers from previous years that would indicate a rising or falling trend. “However, what we can confidently say, based on multiple studies conducted by the Upwork Research Institute over the past several years, is that freelancing isn’t a passing trend,” an Upwork spokesperson said. “It continues to hold steady and accelerate, emerging as a vital and intentional component of the skilled workforce.” A silver tsunami Emily Rose McRae, a Gartner Resarch senior director analyst, said she’s seeing growing interest in freelancing from professionals who desire more flexible work, oftentimes as a safety net for people who lost their job during economic turmoil “and also as a way to build up a network of clients when starting a new business or looking to expand your small business.” Organizations are also facing an impending “silver tsunami” of older workers retiring and leaving a talent gap in their wake. “Many clients I speak with on this topic are trying to identify the best strategy for addressing this expertise gap, whether it is upskilling more junior employees, bringing retired experts back to serve as freelance mentors or coaches, contracting out critical projects to experts on a freelance market, or even redesigning roles and workflows to reduce the amount of expertise needed,” she said. “Being able to bring past employees back as freelancers can be critical for knowledge management and training,” McRae said. “This is especially critical when increasingly AI tools are being deployed on the basic and repetitive tasks that were previously the training ground used for employees to create a pipeline of future experts within the employee base,” McRae said. Despite the occurrence of layoffs — and sometimes because of them — organizations often face skills gaps exacerbated by the rise of AI, according to Forrester Research. Skills intelligence tools, often powered by AI, can help organizations identify and manage the skills and gaps in their workforce and predict future skill needs, including recommending needed recruiting, upskilling and reskilling, and talent mobility. Companies must also be able to scale up or down rapidly in on-demand talent markets, which include contractors, freelancers, gig workers, and service providers. On-demand talent increases the adaptability of your workforce but works best for non-core functions and for specialized skills that are needed for a limited period. Companies, however, can’t simply replace employees with freelancers without facing significant risks, McRae noted. Freelancers are best used for defined projects with clear deliverables. Using them to do the same work as former employees, without changing the role or workflow, can lead to legal and operational issues, she said. As reliance on non-employees grows, so do risks like worker misclassification, dual employment, compliance problems, and costly mistakes such as rehiring underperforming contractors or overpaying for services. “I’ll see this at organizations that instituted hiring freezes, so business leaders turned to contractors to continue to be able to meet their goals,” she said. “It can also create financial risks — when there isn’t much transparency or data collection going on, organizations may find that they are paying the same contractor service provider or freelancer different rates in different departments, for the same set of tasks.” There’s also a risk that third-party contractors are not vetting temp workers, who may not meet the necessary certifications and trainings to comply with local or national regulations, McRae added. “Or that contractors and freelancers have not been fully offboarded after completing their assignments and still retain access to the organization’s systems and data,” she said.