What The Gig Economy Means For Employers

project workThe large majority of Americans have used some type of on-demand service, like Uber for rides, Airbnb for accommodation, Instacart for grocery deliveries or TaskRabbit for any kind of task. In addition, one-third of American employees are engaged in some kind of project-based, freelancing gig. And according to studies, this number will grow rapidly where more and more people will be in involved in working on quick gigs and project-based work. The same is happening with office work, where project-based work becomes an increasingly common concept and where employees will go back and forth between employees as contractors for the duration of the project. But what does this gig economy mean for you as an employer?

First of all, there is, of course, a significant increase in flexibility. You don´t need to have a large permanent workforce but can hire people when you need them. Hence, as business fluctuates you can adjust your workforce rapidly through project based work. This obviously also has an impact on your fixed costs.

Furthermore, due to digital technology, as employers, we are also no longer constrained to our geographic location for hiring the best project workers. You literally have access to the best services no matter where they are located in the world. This ensures that you can hire very specialized project workers for that specific project you need instead of more generalist permanent employees.

In summary, the flexibility this offers to you as an employer, the reduction of fixed costs and only spending on employment cost when you truly need to, and the access to the best specialized talent are some of the major benefits of this gig economy. However, it doesn´t come without challenges.

With project workers, which are temporary workers, engagement can be a challenge. How do they quickly become part of the team? And, how do you avoid an “us vs. them” mentality with permanent and temporary employees?

In addition, a big challenge for employers is how to manage development and training needs for project-based workers that probably won´t stay in your company for a very long time.  Learning and development plans for employees that will be with your company for a large part of their career is one thing, however, managing learning and development for temporary employees is a completely different subject.This means that just like schools and universities should adjust to this new gig economy, employers should also re-consider their learning systems to support a project-based workplace. Also, since employees will be moving in and out of your organization, you might feel it is a waste of money and therefore be hesitant to invest in training.

Furthermore, there are some challenges with respect to employment costs. One of the benefits currently for employers is that you don´t have to deal with the tax or insurance costs that you should cover for permanent employees.  Health insurance and other work-related costs now should be taken care of by the employee instead of by the employer. The same applies to employment tax, this should be paid by the employee. However, there are increasing proposals that due to the significant growth in project work this should change and employers should take care of some of these costs as well for freelancers. So although right now you won´t have these employment costs, this might change in the future. Furthermore, this is not something that should be abused: the IRS is very strict on checking that employers are not miss-classifying their employees as freelancers to avoid taxes. And finally, there is an increasing liability risk if workers get injured while working on a project for you and they don´t have the right work comp insurance.

What other impacts do you think the gig economy has for you as an employer?

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