The gig economy of freelance, contingent and contract workers is sizable and is likely to keep growing. Nearly 40 million workers aged 21 and over were self-employed in 2016, according to an annual survey by MBO Partners, which sells business technology to gig economy workers.
The MBO count, which has been done annually for six years, found about the same number of self-employed workers in 2016 as the year before. A 2015 Intuit survey counted just 3.2 million Americans regularly working as providers in the on-demand economy but projected that by 2020 the number would more than double to 7.6 million.
The popularity and growth of on-demand businesses models—such as those used by the likes of car riding and home cleaning service apps—also suggests the gig economy is likely to expand significantly. Employers' enthusiasm for freelance, contingent, contract and self-employed talent is on the rise among many types of companies, says Norm Smallwood, co-author of Agile Talent.
"In our research, over half the organizations we surveyed plan to continue to use external [employees] more," Smallwood says.
Demographics Help Drive Gig Economy Growth
Part of the impetus may be due to generational changes in the workforce, with younger workers more attracted to freelance-type engagements.
"In the millennial generation," says Stacey Engle, executive vice president for leadership development firm Fierce Inc., "there is more craving for greater control over their time and what projects they do and don't take on."
Employers as well as workers can see benefits in the gig economy. According to Smallwood, businesses embrace gig workers for two main reasons: agility and cost savings.
"First, organizations want flexibility, speed and access to new ideas," he says. "Second, they want greater control over resource costs, and the ability to bring top talent where they could not afford them on a full-time basis."
—Norm Smallwood, co-author, Agile Talent
Carisa Miklusak, CEO of Cincinnati-based Tilr, an on-demand employee matching service agrees. "For the first time ever," Miklusak says, "small and medium-sized businesses have access to the same caliber of consultants to supplement their core knowledge as enterprises have had for years."
But gig-economy employees can also present employers with challenges. Mostly, those issues revolve around integrating freelancers with strategy; communicating with and motivating workers who aren't motivated by things such as promotions; and managing the impact of mixing temporary and contingent workers with permanent, full-time so-called W-2 employees.
Employers can help gig employees be more engaged and productive by showing them how their work fits the company's strategy, Smallwood says.
"How does the work make a difference? How is it connected with the vision and mission of the company?" he asks.
Employers may also want to recognize the way gig workers have needs that are different from other suppliers. One possibility: Instituting policies that don't require self-employed individuals to accept payment terms of 60 or 90 days. "Make it easy, not difficult, to do business," Smallwood advises.
How and how much to try to onboard employees who may be there only a short time is another question. Miklusak suggests technological solutions can help. EmployStream and WorkBright, for example, are providers of paperless onboarding offerings that promise to speed and reduce costs of on-boarding with an automated solution.
Permanent full-timers may feel slighted when they work alongside gig employees who enjoy much different conditions, Miklusak warns. "One risk is a negative impact on your current and productive culture of traditional workers," she says. "Why can't they have the same flexibility? Why can't they be there different hours? Why can't they pick up a shift or not pick up a shift? Why can't they work somewhere else for six months because they're sick of their boss?"
The key to most management issues, these experts say, is effective communication. Explaining clearly to all members of the workforce what their roles are, how they contribute to the organization and what is expected of them can help.
"Business owners must not create an inside-outside tension between permanent and agile workforce," Smallwood says.
Other potential problems include failing to distinguish clearly between independent contractors, also called 1099 workers for the tax form used to report their earnings, and regular employees who get W-2 tax forms. Miklusak urges businesses who employ 1099 workers to seek expert advice on tax matters.
"Employers should become familiar with those rules," she says.
Finally, it can be dangerous to outsource the wrong types of jobs. Work that involves vital corporate knowledge and skills may best be restricted to full-time permanent employees, Miklusak suggests.
"That's not to say bringing someone in from outside in a strategic capacity doesn't help with problem solving and other things," she says. "But there's risk of not using the tool appropriately and outsourcing roles in your organization that perhaps are best served traditionally."
Ultimately, the limitations of gig economy workers may mean even companies that are jumping feet-first into the freelance economy are likely to find that they still need some permanent employees, Miklusak says.
"Look at it as a supplemental strategy, not a replacement strategy," she suggests.
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