Gauging the Financial Impact of the Gig Economy on Your Organization
This article was updated on June 14, 2018.
Freelancing has been on the rise in America for years, with over 53 million workers (one-third of the total workforce) earning income from something other than a traditional 9-to-5 job, according to the Bureau of Labor Statistics. There are many benefits to bringing on part-time or freelance workers as a business owner — and many things to look out for. Therefore, it's important to consider the financial impact of the gig economy on your business before you make any staffing decisions.
Here are some questions you can ask yourself to help you remain profitable when employing gig workers:
How Much Would I Pay a Full-Time Employee to Do This Work?
In order to really gauge the financial impact of the gig economy on your business, you need to sit down and calculate how much you invested in freelance work over the past year. Then, you should break down this information into the projects these workers completed and the hours they worked. If these freelance workers did not submit any time-tracking data, you may have to estimate how long it would take them to finish certain projects. Once you've completed this step, you should ask yourself: "Am I paying a higher hourly rate to a gig worker than I would to a staff member?" If the answer is "yes," it may mean that you should rethink your employee strategy. However, there may be reasons why it still makes sense to hire a gig worker, even at a higher hourly rate — for example, if the demand is only short-term or if you need someone to perform a specialized task requiring skills that your current staff members don't possess.
Will I Spend Too Much Time Coaching These Freelance Workers?
As the old adage says, "time is money." As such, you should consider how much time you have to take out of your day to communicate with your freelance team. After all, you may have to train multiple freelance contractors on your company's culture, voice, brand and offerings for every project. At the same time, it's important to remember that hiring traditional, full-time employees comes with higher overhead costs.
Is There a Chance That My Business Will Be Fined for "Employee Misclassification?"
Contract or freelance workers may be the perfect answer for one-off, short-term tasks or projects that require highly-specialized knowledge. However, becoming too dependent on freelancers could become more expensive than hiring one or more dedicated full-time employees. If you consistently work with one or more freelancers who have few (or no) other clients or exert control over how, when and where they perform work, your business could face employee misclassification challenges from federal and state agencies. To help protect your company from these challenges, review the United States Department of Labor's (DOL) Administrator's Interpretation on factors that the DOL will examine to determine whether a worker is properly classified. Other agencies, such as the IRS or the EEOC, impose different tests on employers to determine whether a worker is properly classified as an independent contractor. Employers should be aware of these tests, as well as any risks associated with misclassification.
The gig economy provides great flexibility and opportunity for business owners to find talented individuals. However, in order to remain profitable, you should regularly monitor your use of this workforce and how it's affecting your bottom line.
