As the labor market evolves, worker definitions develop with it. Having a job is no longer strictly defined as a full-time 9-5 situation where an employee has to clock in at an office to receive a paycheck. Today, there’s greater flexibility in employment opportunities for both workers and employers. This development is most evident in the rise of the gig economy. Because businesses are always looking for ways to grow to keep up with social and economic changes, it becomes vital to look at alternative ways of cultivating a workforce. And while the gig economy offers numerous opportunities for lucrative growth, it’s necessary to understand the definition of a gig worker, what constitutes a gig economy, gig worker classification, and how companies can benefit from attracting more gig workers.
What is a gig worker?
A gig worker is an independent worker who operates in an “on-demand” capacity for one or many employers. These independent workers perform tasks or offer services at-will for companies and customers. Sometimes called a platform worker, many gig workers access jobs through a mobile app or marketplace. Gig workers are paid based on the completion of those tasks, rather than on an hourly or salary basis. Gig workers are considered independent contractors and aren’t subject to certain labor laws like minimum wage or sick leave. As independent contractors, gig workers are required to provide their own health insurance, unemployment insurance, and cover the employer portion of social security taxes. In exchange for many benefits enjoyed by traditional employees, gig workers enjoy independent work where they set their own hours, may work part-time and have the freedom to choose specific projects or jobs.
What is the gig economy?
The rise of gig work has led to a demand for a system that makes independent labor freely available. The gig economy has risen to meet that demand. It consists of a free market that connects individuals looking for short-term work with employers looking for contingent workers to perform contract-based work. The gig economy offers multiple advantages for workers. The biggest one is the amount of independence and flexibility regarding the type of projects that workers can do. It’s easier than ever for workers to decide precisely how they are going to make a living wage, as well as how much time to devote to their job.
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Types of gig workers
Because on-demand jobs encompass multiple disciplines and projects, there are many different types of gig economy workers and the services or contract work often vary in scope. However, the one thing they all have in common is that they offer their services and get paid for temporary work.
We have witnessed the meteoric rise of ride-sharing services like Uber and Lyft in just a few short years. These services are practically the epitome of the gig worker economy. Drivers are paid based on how many jobs they perform rather than by a set number of hours, and their employment is considered to be at-will. Transportation gig companies have had numerous legal battles over the years including California’s gig worker law, known as AB5. In 2020, California residents voted to add drivers and other transportation gig workers to a long list of AB5 exemptions.
Despite government regulations, the transportation industry remains the most recognizable face of the gig economy. Since the introduction of ride sharing apps, transportation companies have grown to offer gigs for scooter charging and maintenance, bicycle services, moving and more.
Certain global events have massively expanded the scope of delivery services quickly. From transporting packages to delivering food, gig workers can be found all over the delivery sector. Many transportation apps expanded their market share by turning their ride-sharing gig platform into a delivery one, specifically for food delivery. But food delivery apps like Doordash and Instacart aren’t the only delivery genres within the gig economy. Many e-commerce delivery trucks are run by independent contractors. Companies like Wal-Mart and Amazon use what’s called “last-mile” delivery companies to manage delivery routes and see to millions—if not billions—of deliveries every year. This area of gig work continues to expand as consumer behavior stays firmly focused on online shopping.
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Home services and construction
Many may not realize it, but the home and construction industries are full of gig workers. Electricians, carpenters, painters, plumbers, exterminators, roofers and landscapers all operate on individual projects and are paid based on the completion of those projects. These companies usually have a core team of ownership, but are staffed by many independent contractors who work on jobs as they come. Home services face the particular challenge of managing pay for gig workers; it’s difficult to run payroll or come up with cash when jobs get payment after completion. Adjacent to the gig economy is the sharing economy, made famous by travel company Airbnb. Other services like storage, event or photoshoot rentals, gardening and more have started to solidify an even bigger part of the gig economy allocated to home-based services.
Food service and hospitality
The food service industry is known for staffing temporary workers at events and gatherings, but hasn’t always been traditionally viewed as a member of the gig economy. However, new gig platforms are allowing caterers, bartenders and personal chefs to offer services as a contract worker. Additionally, there are multiple jobs surrounding the industry where gig workers can find an income. Maintenance workers, concierge members, and flight attendants are a few examples of people whose service positions are necessary for hospitality to function, but are more likely to be independent contractors than a W-2 employee.
What do gig workers do?
The methods of operation that gig workers employ are also varied. For example, gig workers generally don’t have an office to report to or an organized structure to present them with work the same way that full-time employees do. So how do gig workers operate?
A freelancer is a person who performs a specialized trade, such as writing, photography, graphic design, or artwork. They are typically hired to perform contract work on particular projects, and they are paid based on the completion of those projects according to criteria negotiated beforehand. Freelancers also typically have a background in their chosen profession, with education and training that makes them well-suited for performing their tasks. Even if they work for a company, freelancers are not considered an official part of that company. Instead, most freelancers have their practices set up as their own businesses. They do their own networking and marketing, and they are even considered self-employed, which means that they are eligible for collecting unemployment benefits under certain circumstances.
Labor marketplace workers
A marketplace worker is a freelancer who finds work through a labor marketplace or online platform, like Upwork, Tend or TaskRabbit. These gig platforms exist to connect businesses with talent and facilitate a relationship where regular gig workers can find consistent projects. Freelance workers typically need to ‘hunt’ for jobs, unlike regular employees who are given projects as part of their employment. Marketplaces offer a centralized system where independent workers can find jobs by filtering search results and picking any desired task available to them.
While the labor marketplace model allows freelancers to find more consistent work, there is one drawback. The gig economy platforms driving these marketplaces tend to take a cut of the profits that gig workers could potentially make. So, it’s not uncommon for freelancers to utilize these platforms for long enough to develop their skills and market themselves before branching off on their own to create a business for themselves.
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What is the difference between gig workers and independent contractors?
Traditionally, when businesses have needed to contract outside workers to complete tasks, these personnel members have been referred to as contingent workers or temp staff. The way they operate is highly similar to gig work in that they are brought on short-term and paid based on the completion of individual tasks. However, with the gig economy growing, it has become more critical than ever to distinguish between gig workers and other types of independent contractors.
Essentially, a gig worker is a self-employed worker who provides services or goods to as many clients as their schedule will allow. They can see their own rates, choose where they work, and deal with taxes independently of any business. Gig workers also have a significant amount of autonomy regarding how they operate when performing a project, which is usually supplied via a mobile app or online platform.
Independent contractors are temporary employees of a business who work as freelance or contingent help. They usually take on larger projects, meaning they typically work on fewer individual projects at a time. In addition, independent contractors often work with agencies and clients under a written or verbal short-term contract, allowing them to negotiate details such as how they complete a project and its price. Finally, independent contractors are generally paid hourly for their services, unlike gig workers who are usually paid by the project. Because of the different tax classifications, businesses that work with independent contractors of any kind and employees need to understand their differences. There have been several legal cases related to employee misclassification, which have led to the government firmly defining the line between different worker types. So, while utilizing gig workers has advantages, businesses need to observe some nuances for the sake of legal compliance.
How can companies benefit from hiring gig workers?
Understanding what gig work encompasses is only one part of the equation of growing a business. The other part involves figuring out how best to utilize the gig economy for your specific business goals. Because of its nature, some industries benefit from gig work more than others. But, there are still many industries that can hire gig workers or even convert to a freelance-based system. So what are the advantages gig work can offer to a company?
With higher earnings, workers are more motivated
Because gig workers have total control over the number of projects they will take on and are paid based on project completion, there is a much greater potential for higher earnings among gig workers. Moreover, when people make more money at a job, they are often more satisfied. With their pick of employers, employing tactics that specifically motivate gig workers—like sign-on bonuses and daily pay—can help you attract and retain staff.
Gig labor lowers costs for businesses
Long-term employees can cost businesses money as they continue to work. The financial impact of their work output will never consistently outpace the pay rate that companies use to maintain their workforce. Factor in the cost of insurance and benefits, perks such as covering transportation costs, and money lost due to injuries and time that workers have taken off, and it’s easy to see how traditional employees represent a cost for any business. However, not only are gig workers temporary, but they are also not officially considered employees. Therefore, businesses’ only concern in dealing with gig workers is paying them for their work.
Businesses can scale faster
Hiring new employees is often a time-consuming and expensive process. Between attracting prospects with job postings, interviews, the onboarding process, training, and their salary, new employees can cost a business a significant amount of money. For this reason, many companies hesitate to hire new employees even when they need them. However, gig workers can bypass all of those issues. Companies can find workers through labor marketplace portals that do all the recruiting work for them. There’s no need for interviews or training beyond providing information on the nature of the job. And gig workers can start working on projects immediately. Because gig workers can choose their hours and projects, businesses need to take a different approach to motivate them. But, this approach is still more efficient than what could be done with a regular employee.
Grow your business with gig workers
The professional world is constantly shifting, but one thing is for sure: gig work is here to stay. The best thing you could do for your company is learn to take advantage of it. The potential growth that utilizing the gig economy could bring to your business is fantastic, but only if you know how to attract, hire, and retain gig workers. Read up on trends shaping the gig industry and download our gig worker survey report to learn more.