The Gig Economy
Gig workers. They represent a shift from traditional employment, a shift we discussed in The Big Book of HR, from an employee-employer relationship to a worker-payee relationship.
Who are these gig workers and what percentage of the labor market do they represent? Different studies provide different answers—and those studies are not always consistent. However, you can’t answer “the what” until you define “the who.” Only then can you measure their impact on the labor market and the economy and the challenges for leaders.
Let’s take a look at who gig workers are.
Independent contractors (or self-employed freelancers) who provide their individual services directly to an organization and receive a 1099 at the end of the year. These individuals are free to provide services to any number of clients—often working for many clients simultaneously filling a need those clients don’t require on a continuing basis. These client requirements can be long or short-term.
Contractors who work for a staffing firm that provides services are often considered part of the gig economy or contingent workforce. They differ from independent contractors because they are employees of the staffing firm, and they receive a W-2 at year end as well as other benefits.
Employees balancing side hustles in addition to their full-time job (usually freelancers) may or may not be captured in studies of gig workers.
On-demand workforce in industries such as Uber Technologies Inc., Lyft Inc., DoorDash Inc., but also trucking, construction, journalism, or financial services that rely on contract arrangements.
Of course there are artisans, performing and creative artists, independent contractors who provide services to individuals, day laborers, and the list likely continues to grow.
What’s driving the expansion?
Several factors contribute to the reasons people are turning to gig work.
Flexibility ranks high on the list. The ability to be free from a set schedule is an often-cited reason. Flexibility allows individuals to create a balance between their work and personal life.
Reliable source of income per Tracey Lazos, Senior Director of Transunion’s Gig Economy Business. According to their research, the gig economy has a strong reputation as a reliable source of income, and the trend is likely to continue as more seek gig work as primary or supplemental income.
Disillusionment after layoff which may become more common if the economy moves into a recession. There is anecdotal information pointing to a growing trend of recently laid off employees, including former government employees, realizing that having lots of clients rather than having one employer is a more secure situation.
What are the challenges?
As the gig economy expands, leaders will have many challenges to balance.
Recognizing how alternative forms of employment fit into talent strategy. As the gig economy grows, less workers, including those affected by layoffs, may be available to accept full-time employment.
Proper classification and compliance with DOL and IRS guidelines. Leaders will have to carefully balance between productivity and exercising “authority and control” over gig workers to avoid treating them as employees.
Workforce planning. Changing mindsets from replacing lost talent to identifying where and when specific talent and skills are needed to fill the gaps and then recognizing that this talent will “parachute in” on an as-needed basis will require a major shift to traditional workforce planning.
Organizations are likely now in arrangements with gig workers using consultants or staffing firms. But as the trend grows, it’s important to have a strategy to incorporate their services and talents.