According to the Society for Human Resource Management, about one-third of U.S. workers participate in the gig economy in some capacity – and that number is continuing to grow.
The gig economy is here to stay and will likely impact your company at some point. Here’s what you should consider before engaging with gig workers, and how you can maximize your company’s potential for success in this evolving work landscape.
The gig economy, defined
The gig economy represents a shift away from a workforce of mostly permanent, full-time employees working at a single company.
Instead, the gig economy refers to workers who are hired by companies on a temporary basis to perform specific tasks or services, or to complete a certain project. The duration and scope of work is usually limited and defined in a contract.
Gig work covers nearly every industry and job type, from lower-wage delivery or driving services to white-collar, high-wage professions and even medical services. Workers of all ages are engaged in this activity.
The gig economy covers:
- Freelancers
- Independent contractors
- Temporary workers
- Full-time employees with a side hustle
What are the driving forces behind the growing gig economy? It’s a combination of a few key factors.
- Technology advances over the last decade have enabled office workers to connect, collaborate and produce efficiently from any location. It’s now easier than ever for people to find a greater number of desirable opportunities online and it’s feasible for them to work with several companies at once, freed from geographic constraints or the requirement to go into a physical office space for a set period of time. Likewise, it’s become easier for companies to find flexible talent on short notice.
- During the COVID-19 pandemic, many full-time employees were laid off and forced to find alternative means of earning an income. They discovered gig work and never looked back.
Meanwhile, others reassessed their preferences and priorities, and chose instead to take on gig work that afforded them the flexibility and work-life balance they sought. Many people no longer want to exist at the whim of a company that could let them go at any moment – they want to live life on their terms.
In addition, the pandemic forced companies to become increasingly reliant on technology to continue business operations with minimal disruption. Many businesses adopted the technologies and digital platforms that enable remote work. Over time, businesses have largely become more accepting of remote, or at least more flexible, work arrangements, thus accelerating the shift toward the gig economy that had already been in motion pre-2020.
- Ongoing economic uncertainty has resulted in fears about job security. Employees are looking for ways to protect their income and want a back-up plan in case they get laid off. Furthermore, high inflation has led people to search for ways of boosting their earning power.
- Generational changes in the workforce are well underway. Younger people, specifically up-and-coming Generation Z, are less likely to desire to be defined by one thing or conflate their whole identity with their job. They tend to see their potential as limitless, want to pursue several passions and crave freedom and flexibility. This group is accustomed to job hopping to acquire the experience or career growth they want in less time, and gig work is a natural extension of this practice.
How does the gig economy affect HR?
The gig economy has definitely impacted HR practices, presenting both opportunities and challenges. On one hand, it offers flexibility in workforce management, allowing HR departments to tap into a wider talent pool for specific projects or tasks. This flexibility can enhance agility and scalability for businesses.
However, there are also gig economy HR challenges such as ensuring compliance with labor laws, effectively managing remote workers and maintaining company culture among a dispersed workforce.
It’s important to adapt your organization’s recruitment, onboarding and retention strategies to accommodate the unique needs and expectations of gig workers while balancing your overall objectives and values.
Pros:
- It’s less commitment for businesses – it’s can be easier and less risky from a legal standpoint to let go of an underperforming gig worker than a full-time employee.
- It reduces labor costs – businesses don’t have to pay a long-term salary or provide costly benefits. Nor do they have to invest significantly in training and development for extended periods.
- Businesses can hire the optimal talent for each individual job. They can identify workers whose specialized skills, knowledge and experience most closely align with what they need at that particular moment and, as a bonus, they can often avoid extensive training to get a gig worker up to speed.
- Without limits to a certain geographic area, businesses have access to a much deeper – and more diverse – pool of talent.
- By hiring gig workers, businesses can scale up and down efficiently as their needs change.
Cons:
- Gig workers are less likely to have much loyalty or sense of commitment to any one company. If they decide they no longer want to work with your company, they’ll be gone fast.
- With a distributed workforce of non-employees, businesses may find it challenging to maintain culture or team cohesion.
- Depending on the frequency and duration of a company’s work needs, they may get stuck in a constant cycle of recruiting, which can be a drain on time, funds and resources.
HR’s role in the gig economy
Without a doubt, the gig economy has pushed business leaders to adapt in how they manage their workforce. Here’s a list of 10 ways you can help your business navigate the gig economy and HR, and thrive in it while improving relationships with gig workers.
1. Demonstrate respect
Remember, most gig workers haven’t chosen this career path out of desperation – it’s often because they want to and are even excited by their future prospects. Furthermore, their options for finding work are wide open – they have plenty of possibilities before them and you need to win them over.
Therefore, show gig workers respect by:
- Understanding their motivations for why they do what they do
- Treating them with courtesy and professionalism
- Honoring their work boundaries and policies, unless they conflict with your company’s values or practices
- Ensuring that they feel supported and valued
2. Classify workers correctly to avoid legal and financial problems
Are your gig workers truly contractors, or are they actually employees in practice?
Carefully consider what the U.S. Department of Labor and Internal Revenue Service, as well as the state laws where your business operates, say about classifying workers as contractors versus employees. Make sure that you’re not treating someone as a gig worker when all signs point to employee status.
This matters, because how you classify workers impacts:
- How they’re paid
- Their eligibility for benefits
- How employers pay taxes
To that end, the government is cracking down on mistakes in classifying workers – even if it’s unintentional. The government views these errors as businesses ducking their obligations and treating workers unfairly. Punishments can range from payment of back taxes and wages for each misclassified employee all the way up to hefty fines.
3. Pay attention to culture and community
The reality is, gig workers may not spend much time in your office – they may feel isolated and disconnected from others. Not being an employee, they have minimal attachment to your company. They may not even feel that they have very high stakes in your company’s success. This combination can be a recipe for a diminished culture and teamwork, if you don’t put in the effort to preserve them.
To help non-employees better integrate within the company and feel connected with others and inspired to do their best, even if it’s only for a short time, you’ll need to work harder to build a cohesive team and maintain a positive workplace culture. Your goal should be:
- For all workers to feel like your company is a special place where they want to remain affiliated for as long as possible
- To give all workers a positive employee experience
Other tips:
- Provide gig workers with an orientation and onboarding session to introduce them to the company and its values and culture. This can also help to instill a sense of belonging.
- Practice inclusivity and invite gig workers to any company events or meetings.
- Introduce them to team members and encourage collaboration, knowledge sharing and use of communication tools and platforms that can improve teamwork.
4. Embrace flexibility and prioritize work-life balance
For many gig workers, flexibility is one of the primary benefits in choosing this type of work. They want:
- More control over each work day
- The ability to balance work with other personal obligations and shift their schedule around as needed
- A working life that protects their health and wellbeing, including the ability to minimize stress and burnout
Usually, these workers are not looking to have a set schedule dictated to them or too many requirements surrounding when, where and how they work.
To be attractive to gig workers, make sure your company is a flexible workplace. In today’s workplace, this often means letting people work remotely or on a hybrid basis, if applicable to the work, and allowing them to choose their own schedule.
And to the point above about classifying workers correctly: If you dictate too much about a worker’s schedule and work environment, chances are the government will view them as an employee and not a contractor!
5. Establish a recruiting strategy
When using gig workers, your company will probably:
- Recruit more regularly
- Realize that standard recruiting tactics targeted toward full-time employees no longer apply
- Make faster hiring decisions so you don’t miss out on talent before they accept another freelance gig
You’ll likely need to:
- Review, update and streamline your recruiting processes
- Craft job descriptions that speak more to gig workers and their interests
- Get a very clear idea of who the optimal candidate is for a specific job at the outset, taking into account the precise skills and experience you need
- Research and leverage job platforms that cater specifically to gig workers or those looking for short-term, flexible work
Depending on the type of short-term job you’re filling and its level of specialty, you may need to brush up your “purple squirrel” recruiting tactics.
6. Be realistic and fair about compensation
To attract and retain gig workers, your company must pay them fairly. Base your pay rates to contractors on:
- Their specific role and the associated skill level and experience
- Market rates
- The value they bring to your business
Be transparent and communicate upfront about payment terms and methods.
Note: Because contractors and freelancers are not full-time employees, they often earn more than a salaried, full-time employee does for performing the same work. This is because:
- They pay their own taxes
- They procure their own benefits
- Their work is shorter-term and finite
7. Give them a voice
As with any other employee, a great way to engage gig workers is to demonstrate that you value their input and trust them. After all, you hire gig workers for their specialized expertise and experience.
So, give all your workers a voice.
- Explain upfront that your company has a speak-up culture and you want to hear from them.
- Ask for their ideas.
- Solicit their feedback.
- Actively listen to what they say and follow up on it.
8. Recognize and reward them
Just because gig workers aren’t officially part of your company doesn’t mean that they don’t want or deserve recognition and rewards for the value they bring to your business. As with any employee, this can be incredibly motivating for them. So, include gig workers in your employee recognition program.
Also consider providing testimonials for gig workers’ services for them to use in their own marketing or on social media. Gig workers depend on positive word of mouth to procure future jobs. In turn, this can increase their ongoing loyalty to your company.
9. Communicate regularly
The non-employee status of gig workers means that they can easily fall through the cracks when it comes to workforce communication. Don’t let this happen!
Regular communication is important not only for engaging gig workers, but for giving them the information and resources they need to do their jobs. It’s also critical for aligning expectations around their role, work output or deadlines, and preventing any misunderstandings.
Some tips:
- Establish preferred methods of communication and schedule availability at the outset.
- Set up a regular time for the gig worker’s main point of contact to check in with them and discuss project work, as your company would with any other employee.
- Use project-management platforms to monitor the progression of work.
- Include gig workers in company announcements or news.
- Encourage collaboration with team members.
- Promote open discussion.
10. Rethink performance management
Gig workers likely won’t be around long enough to conduct formal annual performance reviews. Instead, here’s how you can manage their performance:
- Regularly share feedback on their performance throughout the course of their engagement with your company
- Focus on clear, short-term objectives
- Perform project-based assessments in which you evaluate the outcomes they achieved and the value they brought versus focusing on key performance indicators
Of course, don’t forget to solicit feedback from them about your company, too.
Summing it all up
The gig economy already comprises a significant portion of the workforce – and those figures will only continue to increase. This is because there are many advantages to participating in the gig economy for both businesses and workers, not the least of which is greater flexibility for both parties. Should you decide to engage gig workers, we’ve outlined 10 tips to improve these relationships, engage and motivate these workers and get more value from them.
To learn more about obtaining the best talent on your team, regardless of their status as employees or gig workers, download our free magazine: The Insperity guide to attracting, recruiting, and hiring top talent.