According to TechTarget’s WhatIs.com, a gig economy is “an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements.” It’s a concept that is trending. In fact, the idea of a gig economy has taken on such traction that even the Bureau of Labor Statistics has covered the trend.
Today, according to a Brookings report, the number of “nonemployer firms” has grown from about 15 million in 1997, to 22 million in 2007 and 2 million in 2014. One major impact on this trend has been the growth in ride-sharing services like Uber and Lyft.
So what, exactly, is a “gig”? In the entertainment industry, the term “gig” has referred to one-time performances or performance run (performing a number of times within a specific timeframe). In the staffing industry, It’s a term that has now been applied to any type of work that is outside of the typical employer/employee relationship. Gig workers run the gamut from freelancers like writers, to graphic designers, virtual assistants, IT and programming specialists, salespeople, and more. Gig workers are widely used for IT staffing, but also increasingly used for healthcare staffing and staffing across a wide range of other industries.
For recruiters charged with addressing organizations’ staffing needs, what are the pros and cons of recruiting members of the gig economy.
- Not taking on long-term staffing liabilities
- Staffing flexibility
- Ability to cast a wider net for candidates which can be particularly helpful when attempting to recruit for hard-to-fill, specialized positions
- Ability to hire for specific skill sets
- The flexibility to ramp up—or down—staffing investments based on business need, budget, and customer demand cycles
- The potential to save money. In addition to avoiding benefit costs, including Social Security, Medicare and workers’ compensation expenses, gig economy workers may be available at lower rates than local talent.
- Reduced costs of facilities and equipment.
Employers aren’t the only ones who benefit from hiring contractors. The gig economy has proven to be especially positive for workers who had been previously marginalized—older workers, stay-at-home parents, retirees, students, even people with disabilities. Not having to physically “go to work” can be a big benefit to many. Employees in the gig economy can often work from anywhere, saving money on transportation costs, clothing and other work-related expenses.
- Less control over contract workers
- Contract workers aren’t focused entirely on your needs; access may be an issue
- Some managers/supervisors find managing contract staff challenging
- Incorporating contract staff into the corporate culture
- Increased scrutiny from the IRS – they want to make sure they’re getting their due. You must rigidly and accurately adhere to classification guidelines.
For gig workers, the main disadvantages relate to the temporary nature of the assignments and uncertainty of future income, and the lack of personal connections with coworkers.
Overall, though, gig work is proving to be a win/win for both employers and employees.
The greatest potential con for employers, though, relates to proper classification of employees. The IRS is increasingly cracking down on employers who misclassify staff and, despite guidelines that are readily available, it can prove challenging to appropriately classify workers. Just ask Uber, the transportation company that relies on contract workers that has been fighting the IRS over whether or not these drivers are appropriately classified.
With many predicting that the gig economy is only likely to grow, how do organizations and their procurement and talent managers determine which jobs to staff with staff who will be internal and which to fill with contracted personnel? Each organization’s decisions will obviously be different but there are some important questions to consider:
- How much interaction will the person in this role need to have with other staff members or customers? The more interaction required, the greater the likelihood that a regular staff position would work best. Technology makes communication across geographic bounds and time zones possible, but not always optimal.
- How much control over the individual’s work is necessary in terms of requiring them to follow certain procedures, use specific processes, tools, etc.? The greater control and direction required, the less likely a contractor would be the right choice.
- How comfortable are you with the person in this role interacting with, and providing services for, other organizations and individuals? The more you prefer a singular focus on your business needs, the more you should lean away from hiring a contractor?
- How confident are you that this role fits within the IRS parameters for determining whether a position is a contractor or employee? The less confident, the more you should lean toward classifying as an employee (and always make sure to check with your legal counsel).
There are many benefits to the gig economy—for both employers and employees. But this less formal relationship is not appropriate for all organizations, or all positions. Staffing and recruiting specialists need to carefully weigh the options when considering what role gig workers might play in their workforce. Chances are, for most staffing needs, the answer will represent some combination of both.