By Robin Throckmorton, MA, SPHR, SCP
Have you heard about the ‘Gig Workforce’? Also called: on demand workforce, freelancers, subcontractors, and contingent workforce. The Gig Workforce is not really new but according to Freelancing in America more than 55 million Americans do freelance work, and 79% of them prefer freelance work to a traditional job. And, as reported by the Herman Trend Alert, by the year 2025, more than 50 percent of the global workforce will be Gig workers.
According to TechTarget, there are a number of reasons why we are seeing this growth in the Gig Workforce. For the freelancer, the technology of the digital age allows workers to be more mobile and basically do work from anywhere creating a separation between a job and a location. But for employers, the same is true – employers can select the best individual for an assignment or project from a much larger global pool than in the past.
Based on a study by the McKinsey Global Institute, the typical freelancer has a high degree of autonomy, gets paid by the task or assignment, may work for multiple clients, and often works shorter term assignments that are less than a year. Interestingly enough, these are some of the key factors required to assess whether a freelancer is an employee or not according to existing legislation.
Obviously if 50% of our workforce is going to be made of freelancers, we need to work on understanding the benefits and challenges and begin creating strategies around attracting and retaining this workforce of the future. It’s not going to be easy.
Freelancers love the flexibility. They can now work from home while supporting their family and/or children. Plus, they control what days and hours they work, including even taking as much time off as desired. Traveling is even easier because the work can be done from nearly anywhere.
|1) Inconsistent Income
Not only is the income inconsistent from project to project and gaps between, but as a contractor an employer can reject all or part of the work without payment. And, payment terms could be 30, 60, 90 or more days.
Freelancers love the opportunity to choose the type of work they will do. There are lots and lots of opportunities. As a freelancer they can choose what assignments match their skillset, interests, and lifestyle.
|2) Increase in Costs
The rate of pay may be higher and look more lucrative. But, as an independent contractor, other costs can be incurred which would normally have been paid as a W2 employee such as self-employment taxes, health insurance, retirement plans, equipment, costs for technology (i.e. internet), and marketing.
Some individuals are dipping their toe into freelancing as a means to provide income while between jobs. With this cushion, waiting for the perfect job or assessing whether to stay in a freelance role is much easier. In fact, some will say a freelancer has more control over their career than a traditional employee. They pick the work they do, when they do it, and how they do it, and know when the work may be ending.
|3) Less Stability
An assignment can end at any time with minimal notice. Likewise, the employer can go out of business ending the work and sometimes even the payments due.
|4) Less Legislative Protection
Freelancers don’t benefit from the same protections as a W2 employee such as sick leave, PTO, workers compensation, unemployment, and minimum wage.
|5) Termination Is Easier
Freelancers are a quick resource to hire for a project but often are treated the same way if the work dries up or less than positive reviews are provided.
|1) Lower Cost
Employers benefit by allowing them to avoid long-term investment in employees, including the costs of benefits, office space, and even training. Employers are starting to scale back office space and even go to shared offices.
|1) Just in Time
Employers will need to begin paying closer attention to their work/project needs to be able to effectively find freelancers with the right skill at the right time.
|2) Agile Workforce
By utilizing an on demand workforce, employers are able to quickly scale staff up or down in response to changing demand.
|2) Engagement and Retention
New strategies will need to be created to effectively attract, engage and retain this Gig Workforce, while ensuring compliance with current legislation.
|3) Higher Skill
An employer also can contract with a higher level expert for specific needs that would have been too costly to hire as a full-time employee.
Employers are likely to find employees moonlighting to supplement their “traditional” employment. While you’d assume there is no impact, employers may see lack of availability, “personal” calls during the work hours, and even conflicts of interest.
What Do I Need to Do?
To attract and retain the gig workforce, you’ll need to make shifts in how you handle these freelancers all while staying in compliance with the laws around employee versus contractor. The best place to start is to ASK your current contingent workers. What would attract them to freelance with you and come back over and over? With the percentage of traditional employees becoming Gig workers, you don’t have a choice but to change and/or improve your HR practices.
Hiring talented Gig workers will require us to provide the benefits mentioned above while also helping the freelancer overcome some of the challenges listed. For example, how flexible will you be to when the freelancer works and from where while also providing some stability in your payment terms?
Finding these talented freelancers will require us to find out where they are. Some resources may include:
- Networking (who knows someone that knows someone)
The vetting process many organizations go through to hire a contract worker is minimal compared to the current employment process. This process is going to have to step up and be enhanced to be effective. Careful consideration will need to be given to the scope of the work, length of the assignment, fee structure, and terms such as when payment occurs and who owns intellectual property.
At the same time, effective retention strategies will help you retain Gig workers and will help with attraction as well. The strategies are much the same as we’d use to retain an employee:
- Establishing clear expectations
- Providing feedback as the project proceeds
- Creating an inclusive environment including cross functional teams
- Paying invoices very timely
- Don’t treat them as disposable
- Offering unique perks (make sure the benefits are different than what you do for employees)
Managers will have to learn how to manage these remote and independent workers. Encouraging engagement and creating loyalty to the employer are going to be tough challenges to overcome while staying compliant with state and federal laws. It’s a fine line and the Department of Labor has been watching closely.
Robin Throckmorton, MA, SPHR, SCP is the President at strategic HR, inc. (www.strategicHRinc.com). If you have any questions or would like to share your comments, contact Robin@strategicHRinc.com.