The gig economy and mobile payments are fueling changes in the workforce. In fact, the U.S. Government Accountability Office estimates that as many as 30 percent of workers now have contingent jobs. A report by the Roosevelt Institute and Kauffman Foundation also says the economy will be almost unrecognizable by the year 2040 as more people move from traditional employment to freelancing, entrepreneurship, independent contracting and peer-to-peer platforms.

Many of these gig economy workers are being hired, managed and paid through mobile apps. This technology is giving birth to entire business models that rely exclusively on mobile, especially considering that an ADP Research Institute® study The Evolution of Work: The Changing Nature of the Global Workforce reports that 82 percent of employees believe they "will define their own work schedule" either today or in the near future.

While large organizations such as Uber, Lyft and AirBnB dominate the headlines, there are dozens of other gig economy apps that hire workers for everything from handyman and general labor jobs to bookkeeping help.

Value of Contract Workers

Using contract workers in such mobile arrangements can offer many benefits to employers, such as lower costs, more flexibility and a reduced level of responsibility for workers involved in rendering the service. While organizations have used independent contractors for decades, mobile technology is changing the relationship by expanding the marketplace to almost anywhere in the world and offering more control over workers. At sites like Upwork.com, U.S. organizations can hire workers from India and China to perform administrative tasks. At Uber, they can even track drivers through their mobile devices while they're driving.

Booking, time tracking and payment are the primary foundations of gig economy apps. Organizations need efficient and secure ways to receive payments from consumers and to pay contractors for services.

Mobile Payments and the Gig Economy

On-demand workers are compensated through proprietary apps that can issue payment by a variety of methods, including direct deposit and PayPal. A PaymentsSource article also said a growing number of workers are being compensated through prepaid cards. Chuck Harris, president of prepaid card marketer NetSpend, said in the article that "one in five of our direct deposit loads are coming from secondary sources of income" to workers who lack bank accounts or want a separate place to receive payments. "We see a special role in prepaid in solving problems as the gig economy continues to gain traction," said Harris.

When combined with mobile apps and jobs, these card programs can enable instant payments after a task is completed. Uber started a pilot program in San Francisco in March that allows drivers to instantly cash out earnings at an ATM through a mobile bank account at Green Dot Corp.'s GoBank, according to the article.

Compliance Concerns

The gig economy and mobile payments are also creating a gray area in the labor market with ambiguous guidelines for how to handle payroll and abide by federal, state and local laws. According to CIO, nearly half of surveyed organizations said they had concerns about compliance with labor laws when they start hiring people from other states and countries.

One major issue is employment classification, and "on-demand companies seem likely to be plagued by regulatory and political problems if they get large enough for people to notice them," according to The Economist. Charlotte Garden, associate professor at Seattle University School of Law, told Insurance Journal that worker classifications in the gig economy will continue to be tested in lawsuits and with challenges by the U.S. Department of Labor and National Labor Relations Board.

With new payment methods that bypass traditional financial institutions, there are also concerns by regulators that a growing amount of taxable income is flying under the radar. A study from the Kogod Tax Policy Center at American University found more than two-thirds of the 2.5 million people who earned money from gig economy jobs in 2014 didn't earn enough to have their income reported to the IRS. It could be a sizeable gap in the $200 billion that the IRS attributes to underreported individual business income.

Employers and HR departments will have to stay abreast of changing regulation and strive for flexibility to ensure they're remaining compliant as they move into the gig economy.

Tags: Compliance Mobile payroll contractors