Workplace & Human Resources
The rise of independent contractors, side hustles and on-demand freelancers
The lure of being your own boss — with all the possibilities of flexible schedules and unlimited earning potential — has given rise to the so-called gig economy, a labor market of short-term contracts and freelance work. The business model includes project-based consultants, writers and designers, as well as rideshare programs, such as Uber or Lyft; community marketplaces, such as Airbnb, Etsy and TaskRabbit; and multilevel marketing companies, such as Rodan and Fields and Lularoe. Some people choose to make a living through gigs; others use them
as a “side hustle” to earn extra cash.
According to a survey by ReportLinker, 26% of survey respondents say they would consider exiting the traditional workplace to work as a freelancer or independent contractor, and nearly 17% say they would be willing to take the leap within the next three years. Among the reasons given for the appeal of freelancing full-time are being one’s own boss (29%), more work/life balance (23%) and flexible working hours (17%). And the movement is growing: A study by Intuit notes that the contingent workforce is expected to reach 43% by 2020.
If employee engagement is the number one concern for human resource experts — with higher employee engagement translating to higher business profits — should businesses be concerned that the trend for the less permanent will pull energy and focus off more traditional jobs leading to a shortage of talent?
In short, not exactly. After all, while the intangible benefits of the gig economy may be attractive, the tangible ones — such as health insurance and paid time-off — are as well.
“Employees still need benefits. Until the problem of accessing benefits is solved, we don’t expect to see an issue with hiring and engaging talent,” says Kristin Gaarder, vice president of human resources for Nilfisk, a global manufacturing company based in Brooklyn Park.
The big business of gigs
In fact, many companies are taking advantage of the rise of gigs. They’re tapping into independent contractors to help lead projects when they are short-staffed or lack the resources to hire a full- or part-time employee.
That’s why Edina-based True Talent Group, a boutique staffing and recruiting agency for digital, marketing and creative industries, recently launched its consulting division.
“We continue to hear from employers that there is a need for high-level, experienced talent to run projects and lead initiatives, but they can’t get budget approval to add a full-time position. They are looking to maximize talent,” explains Stacey Stratton, founder and CEO of True Talent Group. “Our consultants can hit the ground running and don’t need to be managed, which is also a cost savings for our clients. Projects are successfully run with little to no oversight needed.”
Leveraging seasoned independent contractors allows companies to do more while keeping payroll and taxes down. Gig workers are technically classified as independent contractors — a status that legally means a worker is self-employed. As such, they aren’t eligible for benefits, such as paid time-off or health insurance.
Lack of benefits is the number one challenge for the gig workforce. As the workforce continues to grow, the demand for portable benefits will as well. Forbes reports that one in four workers is already a part of the gig workforce, while Deloitte estimates it to be one in three. In 2005, the Bureau of Labor Statistics reported 9%–11% of workers were contingent or independent contractors (updated statistics are due out soon). That’s dramatic growth over the past decade, and it’s still growing.
Some states, such as New York and Washington, are leading talks about access to benefits for independent contractors and other rights that traditional employees have in the workplace. The discussion is also taking place at the federal level. In early 2017, “The Portable Benefits for Gig Economy Workers Act” was introduced by Senators Mark Warner (D-Virginia) and Suzan DelBene (D-Washington) to address benefits and the on-demand workforce. The bill is seeking a $20 million budget to award to portable-benefits pilot programs to help solve the benefit challenge for gig workers and independent contractors.
Portable benefits would allow workers to earn benefits and carry them with them from gig to gig. Today, these workers don’t have the same rights as employees, meaning they aren’t covered by minimum wage or safety requirements, and they don’t have the right to unionize.
Lesson to be learned
It’s clear the gig economy isn’t going away anytime soon. Beyond capitalizing on it to reduce overhead, what else can companies learn from the gig economy? If companies are serious about employee engagement, it might be time to ask, “Why are workers flocking to gigs and side hustles, and what can we do to make our business model more attractive?”
Most gig workers and side hustlers will tell you they want flexibility, the ability to earn more, and a more supportive leadership. Traditional companies need to figure out how to become this for their employee base. For example, could businesses create gigs for current and past employees to tap into to earn some extra money? Could they design flexible work schedules to support the time demands of parents and caregivers? Are there resources (not just people) that are underutilized that could be additional revenue streams? Perhaps it’s time to think like a freelancer and evolve with the changing workforce to stay ahead of the trend.