Suddenly Unemployed Turn to Self-Employment Services as AI Reshapes Labor Market: Enabling Long-term Financial Security for the Self Employed

As artificial intelligence continues to disrupt hiring across industries, a growing number of newly displaced workers are turning to solopreneurship — often abruptly and without preparation for the administrative and compliance burden of running a business. That shift is accelerating demand for self-employment services – also known as “employer-of-record” (EOR) providers – which offer an alternative path to stability, benefits access and business credibility that can resemble traditional full-time employment.

So say Sara Wilkison, President and CEO of Solo Workforce, and Elizabeth Murphy, Vice President of Operations at Solo Workforce, in a recent vidcast for journalists.

“What we’re seeing is that many people aren’t choosing independence because it’s trendy,” Wilkison said. “A large number are pursuing it because they’ve been pushed out of traditional roles and still need a way to work and earn while staying compliant in an increasingly complex environment.”

Recent research helps connect the three forces driving this trend. A 2025 Stanford Digital Economy Lab analysis found that workers in AI-exposed occupations experienced a 13% relative decline in employment compared with less-exposed workers, disproportionately affecting those in support, operational and administrative (including project management) roles.

So what happened to these people? Federal labor data shows that many of these displaced workers increasingly turn to gig work or freelancing as an interim or permanent alternative after layoffs. The U.S. Bureau of Labor Statistics reported that the number of workers engaged in “alternative work arrangements” — including independent contracting — rose sharply following major layoffs in 2023–2024.

That said, the path to solopreneurship is not often clear. A 2024 Small Business Administration survey found that 62% of new independent workers felt unprepared for tax, bookkeeping, licensing, insurance, and compliance requirements associated with running a one-person business.

EORs Bridge the New Work Gap

Historically, employer-of-record providers have been used by large organizations seeking to avoid the legal complexity of engaging 1099 contractors — workers who operate as independent businesses and must meet strict federal and state tests to ensure they are not misclassified. EORs place workers on a W-2, handle payroll, taxes and benefits, and ensure compliance across multiple jurisdictions.

While most EORs have, in effect, represented the “hiring” side of the equation, there are service providers who have made it their mission to serve the “talent” community, leveraging those same services to offer a safety net for individuals who have been displaced from traditional full-time roles.

“What we offer is a way for people to keep working without having to become experts in payroll, taxes, insurance, or multi-state compliance overnight,” Murphy said. “Our job is to carry that administrative burden so they can focus on earning income and rebuilding stability after a disruption.”

The need for that kind of administrative backing becomes clear as soon as newly independent workers confront the realities of self-employment. Among the most pressing and emotionally charged challenges is healthcare.

Healthcare Costs Drive Early Anxiety

Healthcare remains one of the most immediate stress points for newly independent workers. A 2024 Kaiser Family Foundation study found that 45% of workers who experienced layoffs reported concern about losing employer-sponsored health insurance, and 31% delayed medical care because of uncertainty around replacement coverage.

“Leaving a W-2 job means leaving behind the corporate benefits package,” Murphy said. “People are worried about where they will find affordable insurance for themselves and their dependents.”

They find themselves navigating unfamiliar individual insurance markets, Affordable Care Act (ACA) marketplace plans, COBRA premiums, or association-based coverage. EOR-based group policies can offer a more predictable — and often less expensive — alternative.

Taxes, Licensing and Business Credibility

Healthcare, of course, is only one component of the broader operational challenges facing first-time “sudden solopreneurs.” New independent workers must quickly learn how to manage quarterly tax payments, determine whether to form an LLC, file multi-state business registrations, and comply with emerging state and local sales-tax requirements on services.

“They may be brilliant at what they do,” Wilkison said. “But they often do not have the skill sets for bookkeeping, tax compliance or contract management.”

Corporate clients, meanwhile, increasingly require contractors to maintain liability insurance, undergo vendor vetting, and satisfy documentation standards that mirror enterprise procurement programs.

Indeed, according to People Managing People, the employer-of-record market is projected to reach nearly $10 billion by 2028, fueled in part by stricter compliance expectations from a growing distributed workforce. The rising demand for these services is closely tied to broader shifts in the labor market, where technology-driven restructuring is reshaping how—and where—work gets done.

AI Labor Market Disruption Fuels Solo Work

A 2025 Stanford study documents the earliest measurable disruptions: AI-exposed entry-level roles have shrunk, while mid-career roles show mixed patterns. Those findings align with recent BLS data showing increased transitions from layoffs into self-employment, gig work or part-time consulting.

The combination of displacement followed by re-entry as contractors has produced what Wilkison describes as labor-market “elasticity” in which companies shed employees yet continue to rely on their expertise.

“A lot of times people will be brought back into the organization under a different budget line item,” she said. “Their knowledge is still valuable, even if the full-time role no longer exists.”

AI disruption, in short, is shrinking some jobs, reshaping others, and increasing the number of workers who oscillate between employment and contracting. EOR arrangements provide a way to navigate these transitions.

Diversifying Income and Regaining Stability

For many freelancers, contracting offers a way to diversify income streams and reduce reliance on a single employer. This can result in a form of economic resilience in uncertain times. As volatility grows across multiple industries, many workers view diversified income as a practical hedge against employer-driven disruptions — and are increasingly drawn to the idea that they are no longer “one decision” away from losing all of their income and access to benefits.

In fact, a Mercatus Center brief found that flexibility, autonomy and diversified income streams are top motivators for independent workers, especially among mid-career women balancing multiple financial priorities.

EOR arrangements can strengthen that resilience by providing continuity in employment records — a critical factor for creditworthiness. Freelancers who cycle between projects or juggle multiple clients often struggle to demonstrate steady income on paper, even when they are earning consistently. Wilkison noted that this is one of the first unexpected hurdles new solopreneurs encounter: lenders, landlords, and even healthcare providers still rely heavily on traditional W-2 documentation to assess risk.

She described a consultant who, after shifting to 1099 status, saw their mortgage application denied despite having sufficient income and longstanding client relationships. The sticking point was the lack of two full years of tax returns as an independent contractor — a standard requirement for most lenders. After transitioning back to W-2 status through Solo Workforce, the consultant was approved immediately.

“That W-2 provides evidence of stability,” Wilkison said. “It shows continuity, and that matters in ways people don’t always anticipate when they first go out on their own.”

Balancing Flexibility With Structure

While the broader economy remains unsettled, Wilkison and Murphy say a growing share of solopreneurs are seeking a hybrid model: 1) the project flexibility of freelance work; 2) combined with the benefits, compliance support and employment continuity of a traditional employer. That is where EOR providers like Solo Workforce come in.

“It’s scary for a lot of people to go out on their own,” Wilkison said. “But with the right support system behind them, they can do the work they love and navigate this turbulent period with more confidence.”