Should Your Company Embrace the Gig Economy?

5 reasons hiring independent workers may give your business a competitive edge

Working a series of “gigs” instead of 9 to 5 for a single company is challenging the standard way of work. And while some employers remain wary of this emerging model, the opportunities it offers to access the right talent at the right time, fill persistently open roles, and improve corporate performance are delivering a competitive edge to some businesses that embrace it.

The gig economy is growing three times faster than the rest of the American workforce, according to an Upwork report. With numbers that reached 56.7 million in 2018, independent workers comprised more than a third of U.S. workers and grew by 7 percent over five years. Over the same period, the non-gig workforce only increased by 2 percent.

A true picture of the gig economy is still emerging, but most sources define it as workers who aren’t full-time employees in a full-time job. It includes independent contractors, consultants, freelancers, and on-demand workers. It spans all education and income levels, industries, and sectors.

Nearly 50 percent of Millennials are part of the gig economy, but it’s not solely relegated to the youngest generations. Nearly 30 percent of workers ages 45 to 54 and 30 percent of workers 55 and older are freelancing as well, Upwork reports.

What’s more: 61 percent of these workers are choosing to freelance over taking full-time jobs—and about 20 percent are making six figures by doing so, which mirrors the salary breakdown in the greater workforce.

Those statistics shatter some employers’ perception that the gig economy is simply comprised of people who can’t find permanent work. While that’s true in some cases, the majority are people who struck out on their own because they have the skills, experience, and expertise to make a good living. In fact, 51 percent of independent workers say no amount of money could get them to take a traditional job, Upwork reports.

Why employers should consider the gig economy

Based on the current growth rate, these “gigsters” are projected to become the workforce majority by 2027. The benefits to workers are clear: flexible schedules, the ability to work remotely, the opportunity to select projects that interest them, extra income during “retirement,” and a better work/life balance.

But what many companies have been slow to realize are the many ways the gig economy can benefit them as well. Let’s take a look at five reasons companies should consider taking advantage of the independent workforce:

• Lower costs. Companies using gigsters generally report savings of at least 30 percent. Here’s why: the permanent overhead costs of hiring employees are high, from benefits to office space to long-term payroll expenses. Hiring freelancers for certain, specific projects—while focusing employees on mission-critical business functions—allows businesses to make strategic investments on a fixed-cost basis. It also enables many to tap into global talent that they couldn’t afford to hire full-time.
• Appeal to Millennial and Gen Z talent. By 2025, Millennials and Generation Z are expected to account for more than 70 percent of the global workforce. And while they aren’t opposed to hard work, they can be quick to exchange higher salaries for positions that let them achieve optimal work/life balance.
• Nearly 90 percent of Millennials want to work according to their own schedule, and 92 percent want to work remotely. They also are notorious for job-hopping, moving on to the next best thing as soon as they get bored or a better opportunity arises. Companies must rethink their strategies and recruitment procedures to attract this new breed of worker. Embracing the gig economy may be key to winning the war for top Millennial and Gen Z talent by offering them an appealing job structure.
• Scale up and down in response to business needs. Many companies have fluctuating staff needs throughout the year—whether they are launching a new product, entering a new market, testing a new strategic initiative, or just trying to meet holiday demand. Being open to creating a workforce that expands beyond the traditional full-time employee model can help companies find specific expertise right when they need it, without committing to a full-time hire. This also protects the bottom line during market downturns, which may give a company an edge over competitors locked into staffing costs.
• A shorter hiring process for key functions. In today’s tight job market, competition for talent is fierce, often causing the hiring process to drag on for weeks and even months. Even when potential candidates are found, other demands on the company’s time can make hiring slow—with just interviewing alone taking an average of 23 days to complete. And then the onboarding process starts. For hiring managers, that often means delays on skill-specific projects or forcing the current team to work short-handed and risk burning them out.

  Tapping into the gig economy can enable companies to spend significantly less time and money bringing on skilled talent. Instead, highly qualified niche workers are ready to be deployed to achieve clearly defined outcomes. The result: time and cost efficiencies that boost the bottom line.

  Using independent workers also relieves the pressure of making hiring mistakes; once the project ends (or even before, in the case of a bad hire), you can either continue the relationship or not. Independent workers can be a solution for companies with perpetually hard-to-fill jobs as well. As advancing technology makes it possible to work from anywhere, employers can overcome a lack of specific niche skills or expertise in a local labor market by contracting with independent workers around the world.

• Boost your company’s culture of performance. Independent workers are hired and evaluated based on two things: the results and value they deliver. Adding them to an office mix can help refocus a company culture on what matters—outcomes and deliverables—over what doesn’t: office face time, relationships, and politics. Independent workers can also enhance your workforce by sharing new skills and knowledge with employees.

Label workers carefully or risk IRS consequences

There are some caveats: the Internal Revenue Service is scrutinizing tax filings for companies who are misrepresenting employees as contractors. Even accidental mistakes can be construed as an effort to dodge such employee-related taxes as payroll, Social Security, Medicare, and unemployment insurance. Stiff penalties await companies deemed guilty of this transgression.

The general rule is that if an independent contractor performs essentially the same job as an employee and you have control over how they complete their work and spend their time, then they must be classified as an employee as well. But even so, many companies are confused by the distinction. It’s wise to seek professional advice to avoid classifying workers improperly.

And the positives of freelancers and the gig economy aside, businesses will always rely on W-2 employees. In-house workers typically develop an added level of expertise and experience, often engaging in a wide scope of work that is hard to duplicate with contractors. Often, the relationships that they forge with colleagues and customers immeasurably add to their worth. This is why keeping truly prized in-house employees are essential through offering a competitive salary, attractive benefits, and an appealing culture and environment.

But the gig economy can supplement their skills and help speed growth by providing more agility and solutions than a strictly traditional employment model. By creating a workforce comprised of both independent and in-house workers, companies of all sizes will be better positioned to compete in the global market.

To learn more about how to implement HR solutions that benefit your employees and improve your bottom line, contact Karp HR Solutions today for a free consultation.