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The Growth of the Gig Economy

September 28, 2018

 

A study by Intuit, a financial software company, has predicted that by 2020 nearly 40% of American workers will be independent contractors. The gig economy is growing and people are more willing to take on short-term, temporary employment. There are both benefits and challenges to employers who hire “gig workers”.

 

Some of the benefits that employers may find:

  • Flexibility: Hiring contract workers to take on individual projects allows your company to be lean and agile. The hiring process is usually quicker since you are looking for a person to work on one particular project or task, and are not looking for a full-time employee that will be with your business for the long term.

  • Financial: Much of the appeal of the gig economy is that many times the work can be done remotely. This can provide a savings to the company in terms of the need for less office space and resources. Also, it reduces long term labor costs by not having a permanent, full-time employee on staff along with the associated salary and benefits associated with that hire.

  • Access the Best Talent: As people with specialized skills and talents begin to enter the gig economy, you may find that when you adjust your search accordingly, you are looking at a larger talent pool. Generally, contract employees are used to having to make an immediate contribution to the organization and don’t require much training or hand-holding.

 

Of course, there are challenges as well that should be recognized and addressed:

  • Compliance: How to classify employees can be a complicated matter. Both the IRS and the Department of Labor have an interest in ensuring that employees are correctly classified. In the case of the IRS, the misclassification of employees can result in lost tax revenue. For the Department of Labor, employees must be classified correctly in regard to their protections under the Fair Labor Standards Act (FLSA). How an employee is classified determines what responsibilities you have to them as well as how much control you have over their daily work. Misclassifying an employee can result in penalties.

  • Communication: It is more than likely that freelance or contract workers will be interacting with full-time members of your team. Clearly defining channels of communication is important, especially if the contract worker is remote and not in the office.

  • Fair Compensation: Although contract workers can provide your business with an overall cost savings, it does not mean that they come cheap. Though they are paid differently than full-time employees, you will want to use salary data to be sure you are offering a fair wage. After all, you often get what you pay for and hiring the cheapest worker won’t necessarily provide savings in the long run.

 

These are just a few of the pros and cons that you may encounter if and when you decide to enter into the gig economy and hire contract workers. It appears that the gig economy is here to stay and companies must make themselves aware of the advantages and challenges of a blended workforce.  

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