The gig economy is not a new concept. Contractual jobs have existed since the time farmers hired temporary laborers for the harvest season. Jazz musicians reclaimed the word gig in the 1900s to refer to their musical performances. Now in the 2000s, the gig economy definition includes part-timers and freelancers.

In this blog, we’ll take you through what a gig economy is, who the participants are and the ten ways that it is revolutionizing the way businesses function.

Who is a Gig Worker?

Gig workers are freelancers who operate on a contractual, temporary, or part-time basis, often working on several projects in tandem and having the flexibility to engage multiple employers. 

Gig workers examples include drivers, babysitters, online tutors, freelance writers, musicians, and service technicians. In the last decade, even technical jobs in web development and cybersecurity have become freelance. Everyone talks about gigs these days, with even full-time employees taking up side-gigs, meaning to monetize their real passions.

What is the Gig Economy?

The gig economy refers to the growing global rise of freelance, contractual, and flexible jobs instead of traditional full-time work. Ventures like Uber and Airbnb are key gig worker employers and a huge reason why gig work is now mainstream. 

Companies like Uber are a trustworthy medium between thousands of part-time workers and customers. They handle the payments, establish rules, and ensure that work standards are adhered to.

The Bureau of Labor Statistics estimated that 55 million people in the US were gig workers in 2017, making up 36% of the workforce. Many economists think that 80% of the workforce may come under this category by 2030. The pandemic has brought a sea change in the way businesses handle the burgeoning gig economy, examples including the upswing in freelance marketing and journalism. 

Why are Full-Time Employees Switching to Gigs?

The reasons why more workers are turning to this model are:

  1. The New Dream: 9 to 5 jobs have lost their charm as workers increasingly prefer choosing their work schedules with minimal supervision. They want the flexibility to meet their financial targets as they see fit.
  2. Transitioning into New Careers: Traditionally, changing your work has a high entry barrier, with big businesses wanting degrees and experience. Gig employers are more forgiving in this aspect.
  3. Access to Higher-Paying Work: As opportunities for remote work increase globally, gig workers can access higher-paying work anywhere in the world. 
  4. No Choice: Recessions and the pandemic may have forced full-time employees to switch to gig work in desperation.

There are now numerous platforms like Fiverr and Upwork to connect gig workers and employers.

As some would say, the gig economy is the future of work. Is that future bright? Only time will tell. 

Why Is The Gig Economy Growing?

The explosion of gig work in the 21st century can be traced to the Global Financial Crisis 2008 (GFC) and the resultant recession. The growth of the knowledge economy and dot-com businesses have made freelance and contract work more popular.

Several traditional businesses sank during the GFC, while the nature of others changed permanently. The Lehman Brothers is an important example; the aftermath of the GFC 2008 changed the banking industry regulation. The news industry’s shift towards the digital medium accelerated. 

There was a slowdown in the manufacturing sector and labor movement into service and knowledge careers. In 2019, there were about 13 million jobs in the service sector, with the agriculture sector having 2.3 million jobs.

Plus, rising costs make it necessary for people to take up multiple jobs to maintain their living standards. People burdened with debt tend to look for various income streams and participate in the hustle culture.   

We see the rising trend of entrepreneurship and opening small businesses. Many of these collaborate actively with larger businesses and leverage social media to reach freelance and part-time specialists. All this is causing the gig economy to grow.

10 Ways the Gig Economy Impacts Businesses

What does the rising gig economy mean for businesses and HR? It’s not all bad.

Here are 10 ways in which the gig economy is impacting businesses.

Access to a Large & Global Talent Pool

Companies that can carry out work efficiently in remote conditions benefit from access to an extensive global pool of freelance workers. They can also hire skilled contractual workers for short-term projects. Many professional copywriters work for a worldwide clientele within the comfort of their own home.

One benefit of the gig economy is that workers can do low-intensity jobs while they upskill for fulfilling work. Freelancers may be able to invest more time and energy in acquiring skills than full-time employees.

There are also some unique ways on how people use the gig economy to fuel their side hustle. Forbes ran a story on an Uber driver who used his cab to showcase his jewelry designs.

Access to Workers with Niche Skills

There is a sizable demand-supply mismatch in areas like IT, design, and marketing. This makes it hard for businesses to find competent full-time employees. Many freelancers acquire niche skills in these domains due to jobs and projects requiring them to innovate.

Google has released Google Career Certificates designed to address the skill-curriculum gap in project management, data analytics, IT, and UX design. Many professionals do these courses and take up freelance projects.  

Companies may also find it costly to hire experienced workers but still need their skills. Many skilled professionals like teachers and IT professionals find taking up freelancing leads to an excellent side income.

Instead of distancing themselves, universities could also hire more part-time professors to increase the roster of teachable skills and subjects.

Agile Workforce

There is a shift towards design thinking in modern business. It’s more about sourcing deep expertise wherever it exists and when there is demand for such skills. A workforce based on gigs can reduce the need for travel-based deployment for client servicing or project supervision on-site.

An agile team can be assembled whenever there is a need and this works out to be much more cost-effective for businesses. An example is a new website that needs a one-time website overhaul hiring a content agency rather than a full-time in-house writing team.

Better Client Service

Businesses that have a global pool of clients can take advantage of the non-location bound gig economy definition. They can hire workers in different time-zones to address client requirements as and when they arise. This is a perfect solution to endless night shifts that impact customer-facing employee’s health too.

It may also be possible to tap into forgotten demographics like retirees with great networks who don’t want full-time work. They bring their vast experience and understanding of client psychology to the table while still being cost-efficient.

Increased Brand Awareness and Outreach

The gig economy may also help businesses improve their brand awareness if they can employ temporary workers in countries they wish to expand into. It may be possible for some firms to establish a skeletal workforce to meet legal requirements.

With minimum operational spending but significant brand outreach efforts in these new locations, brands can sell and generate revenue. 

Reduced Costs of Providing Benefits

Being able to hire part-time and contract workers can lower overhead expenses. It can be cheaper to hire for a short-term role than train the permanent workforce in skills they may not need. Onboarding costs can be over $40,000 for small to medium businesses, which are all but eliminated when employing gig staff. Additionally, gig workers don’t get unemployment insurance and severance pay. 

During the pandemic, many businesses found that some roles could be made remote, bringing a reduction in office-space-related costs. A Kelly Outsourcing and Consulting Group report finds that 43% of talent managers using gig workers report 20% labor cost savings. 

Improved Chances of Surviving Recessions

Laying off employees is costly for the businesses, as companies spent a lot on training their hires. Having a mobile workforce can help businesses survive recessions by saving on overheads. 

Using freelancers to collaborate across teams reduces the siloed nature of many hierarchical organizations. This can make them more agile and capable of surviving big problems from market competition to recessions. Gig workers bring in innovation, and businesses can gain from the knowledge transfer to their permanent staff. 

Some tech and pharma giants have reinvented the gig economy model by hosting crowdsourcing events to solve real problems. Hackathons bring access to a highly motivated global talent pool. This is another excellent option for businesses to consider, especially if they thrive on innovation. 

New Arenas of Legislation

So far, we have looked at the positive impact on businesses, but now it’s time to consider the potential risks of relying too much on the gig workforce. 

As the number of gig workers rises, new legislation will be enacted for their protection. Some laws may end up limiting the work that can be outsourced to the international gig economy.

Businesses often avoid paying billions of dollars in taxes by using the gig workforce. As ideas like universal income gain traction in the face of the growing freelance labor force, businesses may have to pay even more taxes. 

The AB-5 law enacted in California protects all wage-earning workers placing the burden of proving them as independent contractors upon the hiring entity. Uber, Lyft, and others have been resisting directives to classify them as employees to avoid the costs of paying benefits.

Morale Problems That Affect Business

A common problem with non-permanent staff is the resentment that builds up if they do the same work as regular employees but get paid less. On the other hand, some regular employees may feel threatened by highly skilled temporary workers. Businesses must be innovative about employee management.

When gig-based businesses lobbied against protective labor laws, it created resentment and anger among workers. If a firm already has chronic cash flow problems and revenue generation, such disruptions can have a considerable impact.

The work quality may be low if the person is not well-trained and may leave by the time resources are invested in training. They may also be unable to build connections with colleagues and managers, making the work environment unhealthy.

Need to Invest in Worker Retention

While the gig economy optimizes some types of savings for businesses, it requires them to attract and retain gig workers. As these people have multiple employers competing for their skills, they look for invigorating work and better pay. Many employers find it challenging to retain freelancer loyalty.

There is also the challenge of having to make do with their shorter working hours. Gig economy participants are juggling multiple projects and are unwilling to put in long hours. In case they leave with work commitments unfulfilled, it may cost more money for the next hire to fix.

If there is high attrition in specific freelance roles, permanent employee energies may be consumed in training new gig hires. 

Impact on HR

The rise of the gig economy brings some new challenges for HR personnel to navigate: 

  1. Data collection and processing systems will have to be optimized to adapt to the nature of gig work. The high turnover rate may pose a challenge for consultancy-based companies.
  2. HR will have to find new ways to measure contingent staff impact on business growth. 
  3. Job roles will need to be redefined and deconstructed to find fits for freelance and gig workers. 
  4. There will be new issues of providing benefits, timing, and coordination that arise from temporary staff management.
  5. Businesses may need to overhaul legal policies to protect client interests.
  6. Better tracking mechanisms will be needed to protect IP and ensure work completion. 
  7. Recruitment processes and training mechanisms have to be swift. If a worker fails to complete tasks or disappears, HR has to quickly onboard new workers.
  8. Appraisal processes and knowledge transfer mechanisms have to be accelerated and overhauled.

While the gig economy sounds like a dream, businesses function optimally if they maintain a mix of the permanent and temporary workforce. Getting your gig workers to be invested in your business will be incredibly difficult. They don’t have the incentives of long-term benefits and career progression that attract permanent employees. 

Many routine tasks are best performed by people who have traditional know-how of the business processes and are there for the long ride. 

What are your tips for hiring and retaining gig workers? Reach out to us @HarmonizeHQ and let’s talk.