July 8, 2021Thoughts & Insight

Is the gig economy right for your business?

Businesses are always looking for new ways to grow, and since the gig economy is here to stay, you should consider how hiring independent contractors might fit into your business model.

For businesses, a key benefit of implementing a gig model is cost savings. While you undoubtedly want to be able to offer competitive pay and benefits to those you hire, service companies can often benefit from using a gig model, with the ability to save on payroll costs and scale up a lot quicker.

Questions to ask before adopting a gig model

While fiscally attractive, a gig-based business isn’t for everyone. If you’re considering hiring independent contractors as part of the workforce, take some time to ask yourself the following questions, which are among the primary reasons many people choose gig work. 

  1. Do you provide a service or product where demand varies widely from hour to hour or day to day?

  2. Can you offer convenient and flexible pay options, including potentially same-day pay?

  3. Are you in a position to offer flexible working conditions where workers set their own hours?

Answering the above questions can help as you tackle the administrative set up of your gig-based business, including researching important worker-specific considerations. 

That includes thinking through payroll, tax, and benefits requirements for W-2 employees versus independent contractors, who typically are responsible for their own estimated tax payments throughout the year and receive a variation of the annual 1099 form. Of course, having a modern payments system that helps you manage both types of workers can help make all of these unique considerations easier.

Test the gig model for your business

Gig economy expert Harry Campbell, who founded the popular Rideshare Guy website and blog, says the most important step is to test your model on potential workers, so you and they see the process from the customer’s point of view. “Trying the service as a customer will teach you both so much about how your product works,” he adds, “and it’s a simple step to take.”

Have the potential employee go through the steps with you or another experienced team member as their customer and mentor, noting where breakdowns, glitches, and friction occur so you can introduce your company using a well-oiled process that will delight new customers from day one.

Using this approach is essential to helping you identify breakdowns in the process, the app, and the service you’re seeking to provide. It also happens to be a great way to train workers, helping to understand what your product or service is meant to do while engaging them in guiding how it works, which could help drive loyalty and retention.

Another tip, says Harry, is to set yourself up for success by testing out your business model during a time when you won’t be busy (say Tuesday night instead of Friday night, for example), or in an area you’re highly familiar with so you can ease into things and minimize chaos as you and your workers are getting started. Restaurants and stores, for example, often have a soft opening that they don’t publicize heavily, to give everyone time to learn as they go and work out the kinks.

Paying gig workers

While you’re refining your processes, take time to create a payment strategy that offers competitive wages, rewards high-performers, incentivizes new workers, and communicates clearly how earnings and bonuses work. 

Approaches to pay that work for traditional W-2 employees will most likely differ for independent contractors who prize flexibility above all else. 

In the 2021 Gig Worker Survey Report, independent contractors indicated the perks that made employers most attractive. When it came to pay, 65% of respondents said same-day deposits were a highly valuable benefit. 

Resources for gig companies

If you’ve decided the gig economy is the right model for your business, you can dive into our other resources about: