The gig economy isn’t just growing, it’s reshaping how businesses access talent. With 38% of the U.S. workforce freelancing and global gig revenue hitting $3.8 trillion, organizations face a pressing challenge: rogue spend. This unmanaged expenditure on freelancers and independent contractors, often bypassing approved channels, accounts for 25% of contingent budgets and exposes companies to compliance risks, budget leaks, and fragmented operations.

This week, we explore why rogue spend persists, its hidden costs, and how MSPs and Program Managers can transform this challenge into a strategic advantage. 

Let’s dive in.

Rogue Spend in Contingent Workforce Programs

Rogue spend, sometimes called maverick spend, refers to contingent labor expenditures that occur outside approved procurement channels. This occurs when managers hire freelancers or contractors directly, bypassing systems like a Vendor Management System (VMS), official contracts, or HR workflows. This unmanaged spending accounts for 25% of negotiated contingent budgets and often evades financial tracking, creating compliance and cost-control blind spots. 

Scale of the Challenge

• $1.4 trillion was spent on U.S. contingent workers in 2023, with 60% untracked in financial planning. 

• 71% of HR leaders report increasing reliance on contingent roles, yet governance frameworks lag behind.

  
  

Why Freelancers Drive Rogue Spend

Freelancers and independent contractors are often at the center of rogue spend due to urgent business needs and process inefficiencies. Here's why managers tend to bypass official channels when engaging freelance talent.

Urgency vs. Process Rigidity

Project deadlines and skill gaps push managers to act fast. When formal procurement feels too slow, they often turn to quick, informal freelancer hires to keep things moving. For example, marketing teams needing a last-minute designer may engage freelancers directly via marketplaces like Fiverr, sidestepping HR and Procurement workflows.

Policy Awareness Gaps

In many organizations, procurement practices for contingent labor are not uniformly enforced across departments. Inconsistent enforcement across departments means many managers don’t follow (or know) the correct process. Decentralized hiring creates fertile ground for rogue engagements. A Deloitte study found that 40% of managers engage freelancers without understanding co-employment risks, leading to inconsistent practices. 

Technology Accessibility

If the company has no convenient platform to source a freelancer, a manager can simply Google search and find talent on an online marketplace. The ease of these external platforms, combined with the absence of a user-friendly internal system, leads to managers engaging freelancers directly.

Onboarding Complexity

When onboarding and compliance workflows are not freelancer-ready, it leads some managers to cut corners: paying freelancers as vendors or through expense reports. While this may seem easier, it often results in hidden costs and compliance risks. 

Risks of Unmanaged Freelancer Engagements

Financial Leakage

Without centralized negotiation and oversight, managers often pay higher rates for freelance talent than they would through approved vendors. Rogue hires often incur 10 to 25% higher costs due to unnegotiated rates and duplicated efforts. One pharmaceutical company identified $50 million in rogue spend after auditing freelance engagements. 

Compliance Exposure

Misclassification risks escalate when freelancers lack proper contracts. This raises the risk that a so-called “freelancer” is misclassified when in fact they function as an employee under labor law. Regulatory penalties for worker misclassification have surged by 30% since 2022, with fines averaging $10,000 per incident. 

Operational Fragmentation

If departments are engaging freelancers off-system, leadership lacks a clear picture of how many contingent workers are engaged, what they are doing, and how much is being spent. Decentralized hiring dilutes negotiating power and creates vendor sprawl. Teams may unknowingly engage the same freelancer at varying rates, undermining cost optimization.

Market Trends

Growth of SOW and Project-Based Work

• 40 to 60% of contingent spend now funds SOW projects, outpacing traditional temp staffing. 

• 73% of organizations prioritize workforce agility, yet lack tools to manage blended labor pools.

Technology Adoption Gaps

Over 80% of best-in-class businesses use a VMS to manage non-employee labor. Yet technology adoption is uneven, and rogue spend often remains an issue even with some tools in place, especially if those tools are not user-friendly. 

Mitigation Strategies for CW Programs

Streamline Onboarding with Integrated Tech

Adopt Freelancer Management Systems (FMS) that embed compliance checks and centralized contracting. For example, platforms like Bubty integrate with existing VMS to provide:

• Automated worker classification

• Real-time spend dashboards

• Direct sourcing talent pools

Educate Stakeholders Collaboratively

Develop training programs that align MSP processes with departmental needs. Highlight how centralized hiring reduces administrative burdens while preserving agility.

Enhance Policy Flexibility

Redesign approval workflows for speed without sacrificing compliance. Pilot “fast-track” freelancer hiring for low-risk roles, requiring only manager and HR sign-off.

Leverage Data-Driven Negotiations

Use historic rogue spend analytics to negotiate better rates with staffing agencies and freelance platforms. For instance, consolidate fragmented freelancer spend into enterprise-wide marketplace agreements.

Regular Audits and Feedback Loops

Conduct quarterly audits to identify rogue spend patterns and refine processes. Share findings transparently with MSP partners to co-develop solutions.

The Path Forward 

The rise of rogue spend reflects evolving talent needs, not MSP shortcomings. By modernizing tools and fostering partnership, MSPs can transform into agile talent platforms that balance compliance with speed. For example, Bubty’s API-driven integrations enable MSPs to unify freelancer hiring under existing programs, turning rogue spend into managed growth opportunities.

What You Can Take With You 

• Check how much freelance spend is visible in your systems and identify gaps causing rogue spend.

• Review your freelancer hiring process for complexity or unclear policies that encourage workarounds.

• Ensure your classification and onboarding processes minimize compliance risks.

• Collaborate - MSPs and program managers should work together to build flexible, tech-enabled solutions for seamless and compliant contingent workforce management.

Until next week,
— Team Bubty