The Gig Economy – 9 Things Employers Need to Know

Author Martin Oliva Date Jan 29 2019

What is the gig economy?

According to Tech Target, a gig economy is a “free market system in which temporary positions are common and organizations contract with independent workers for short-term engagements.” Well-known companies that provide gig economy jobs include Airbnb, Uber and Deliveroo.

Why are gigs becoming a more popular way of working?

An Intuit study found that 43% of American workers will have independent contractor jobs by 2020. It has always been widely accepted that people will switch jobs over their careers. The gig economy is perceived as a natural extension of this pattern. Advances in technology have enabled independent contractor jobs because it facilitates a mobile workforce, who can work from anywhere. Gig workers, who are sometimes referred to as freelancers, contingent workers or independent contractors opt to do this type of work to supplement their income, or for a better work-life balance.

This shift in the way work is carried out has resulted in a change in how companies hire the labor they require. Full-time jobs are likely to remain a fixture of most companies for the foreseeable future. However, businesses need to embrace providing gig economy jobs as a way to remain competitive. A report by McKinsey found that 162 million people in the U.S and Europe (20 – 30% of working age people) have some type of independent contractor job.

Advantages of gig economy jobs

While gig workers choose this type of work for a variety of personal reasons, employers benefit in the following ways when offering independent contractor jobs:

  • Flexibility

Employers now have the option to expand their product offerings in new markets without making a long-term commitment in relation to employees. Gig economy jobs also allow employers to cope with the fluctuations of seasonal businesses. This flexibility gives employers the freedom to adapt to changes in their circumstances. Independent contractors can normally work at short notice and are available to deal with the ebb and flow of business demand.

  • Expertise

Independent contractors are normally experts in their field. Therefore, they can assist companies to complete projects in a focused and lean way. Employers are able to leverage expertise without the associated costs of offering the independent contractor a permanent position. Independent contractor jobs, like graphic design and app development provide companies with the opportunity to benefit from expertise for one-off projects.

  • Cost savings

Savings are made as you are not responsible for paying the gig worker’s taxes or worker compensation. Some companies are not in the financial position to afford a six-figure salary, plus benefits, for specialists. Utilizing independent contractors allows you to be competitive because you benefit from expertise while protecting your bottom line.

Another benefit of offering jobs on an independent contractor basis is the opportunity to identify people who could become permanent employees. Not every gig worker will want to become a permanent member of staff, however, it is possible that some may want to change the way they work. Making reliable independent contractors permanent employees has many benefits for your company. This is because you would have already identified that they are dependable, a good fit for your company and they produce excellent work.

Disadvantages of gig economy jobs

As well as the positive aspects of working with independent contractors, there are also some downsides, including:

  • Legal issues

Companies may have to deal with the legal issues that arise when dealing with the production of artistic work. There could be questions about the owner of the work when dealing with gig workers, like designers. You can overcome this challenge by creating a ‘work for hire’ agreement. This agreement should be signed by you and the independent contractor. The agreement should specify that you will become the owner of the work after it has been paid for.

You must ensure that you are legally compliant with different state and federal tax laws when dealing with gig workers. If you provide jobs for independent contractors and they make more than $600 per year, you must provide a Form W-9, which contains the gig worker’s name, address and tax identification number.

  • Reliability concerns

Given that there is no typical gig worker, people who undertake independent contractor jobs do so for a variety of reasons. Therefore, gig work with your company may be a stopgap until something better comes up. To help protect your company from the effects of unreliable gig workers, you should include screening questions in the recruitment process. Although this is not a foolproof solution because gig workers can misrepresent their situation or experience a change in their circumstances, it is still a reliable way to get some insight into whether your independent contractor will stick around for the job they have been hired to do. Be aware that the type of agreement you offer can also affect the reliability of your gig workers. For instance, if you offer zero hour contracts, your gig workers are not obligated to work for you, just as you have no obligation to provide them with work.

  • Conflicting management styles

The leadership culture of your company will help to determine the extent that you will benefit from hiring independent contractors to work offsite. If you have cultivated a micromanagement style, your managers may find it difficult to adjust to managing gig workers who are not physically present. Although it could be tempting to constantly check up on your gig worker’s progress, this approach could cause frustration for your independent contractor.

You should be aware of certain factors while contemplating the pros and cons of offering independent contractor jobs.

Below are nine things you should be aware of when offering gig economy jobs.

1. Gig workers’ motivations

Gig worker motivations vary, however the main reasons offered when doing this type of work is the promise of more freedom and flexibility. It is important to understand the driving force behind gig economy jobs to attract the best people. The perks that you offer full-time employees are of little interest to independent contractors. Concerns about the rate of pay, whether they can work their own hours and whether you will have enough shifts are at the top of the agenda.

2. Specificity sells

You need to turn your full attention to the decision-making process relating to the type of work you allocate to an independent contractor. However, this is not as important when you need to hire low-skilled workers. If you are planning to outsource a job that requires a high level of expertise, you will need to be detailed in your brief. Your brief should include clear deliverables and timeframes. When dealing with independent contractors, clarity and specificity helps to protect both parties. You will have a clear expectation of what a successful project looks like and the gig worker can prevent scope creep.

3. The latest technology

Gig economy jobs are generally short-term and you may have to go through several different workers before identifying the right ones. Using gig workers should result in time and cost savings for your business. These savings could be realized even before the independent contractor starts to work with you. You should utilize the latest technology to streamline the recruitment of gig workers.

Fountain has the following features to take the stress out of hiring gig workers:

  • Interview arrangements – Avoid wasting time going back and forth by scheduling interviews using your calendar availability.
  • Screening functions – Ensure your independent contractors are suitable to work with your company.
  • Communication hub – Keep in touch with your candidates by using simple SMS enabled communication.

Contact us for a demo to find out how Fountain can help you to efficiently manage the hiring process of your gig (or any other) workers.

4. Strategic approach

The temporary nature of work in the gig economy can mean that some companies fail to plan for using independent contractors. Your business strategy and policy should include when and how you will use gig workers. This strategy should be aligned with your human resources management. You need to ensure that the recruitment, onboarding and training of gig workers are part of a process that must be followed for every worker.

5. Worker classification

Classifying workers can be a tricky issue. The IRS provides guidelines to help you to correctly classify independent contractors and employees. These factors include:

  • Behavioral control – A worker can be classified as an employee when your company has the authority to control and direct their work.
  • Financial Control – Does your company have the right to control or direct the financial parts of the job the worker undertakes?
  • Relationship – This depends on how your company and the worker see your relationship.

You may need to consult with a labor lawyer as misclassifying employees as independent contractors can have very serious negative consequences for your business.

6. Training for managers to facilitate cross-team collaboration

Managing independent contractors who work remotely requires a different skill set compared to managing office workers. Your managers should be trained in handling the different dynamics that an independent contractor can introduce to teams. Your managers should also learn different project management techniques, effective communication and knowledge transfer practices. Effectively managing in-house teams and working with independent contractors requires strong leadership skills to ensure business objectives are achieved.

7. Appreciation matters

Whether your business is in the health and beauty or retail industry, your gig workers have the same fundamental needs as your employees. They need to have an understanding of what is required of them on a day-to-day basis. They also need to be aware of how you do things in your company. Everyone needs to feel appreciated and that includes gig workers. Showing even small signs of appreciation can go a long way in demonstrating that you value your gig workers, irrespective of the hours they work.

8. Feedback is still important

You can ask for feedback from your gig workers to find out what is working and what needs to be improved. Although it is unlikely that you will be able to implement every suggestion, you should be seen as an employer who wants to improve conditions for your gig workers. Adopting this approach could make the difference between a gig worker deciding to leave or stay with your company. Like employees, the quality of gig workers vary greatly, so it is in the best interest of your business to try all that you can to retain the best independent contractors.

Feedback should be a two-way process. You should also have procedures in place to give feedback to your gig workers. Independent contractors who are serious about their work, will welcome the opportunity to find out the areas where they can make improvements.

9. A mindset shift

Effective hiring for gig economy jobs requires a shift from the traditional HR function. As the workforce becomes more agile, with workers being added and removed as required, people who are responsible for hiring need to use tools to keep up with this trend. Writing a vague job description to get workers on board will no longer be of benefit when providing independent contractor jobs. Hiring managers need to develop planning skills to break down projects into tasks. When hiring gig workers, the job is not the focus. The work needs to be highlighted, so that independent contractors know exactly what is expected of them.

Hiring the right workers is a crucial aspect of growing your business. With the increase in gig working apps, candidates have more options than ever for gig work. The way your hiring process is managed will form an impression on the gig worker. A disorganized and chaotic process will show your company in a bad light. On the other hand, a seamless and organized hiring process will leave the gig worker motivated to work with you. The hiring process is your opportunity to make a good impression on the right candidates.

Try Fountain today to find out why we are trusted by companies, like Deliveroo, to make their hiring process more efficient.


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About the Author

Chief People Officer

Martin Oliva

Martin Oliva leads the People function at Fountain. His experience ranges from startups to Fortune 500 companies, where he has been instrumental in searching for creative ways to develop teams and effective strategies that allow the business to thrive.