What You Need to Know About the Gig Economy

Two hands hold up a gig economy sign.

The ability to augment staff by hiring gig employees to fill critical skills gaps or absences is changing the way organizations staff.

The gig economy is continuing to proliferate across a variety of industries. Recode reports that 9.2 million Americans are expected to work in the gig economy by 2021. While Uber and Airbnb have driven much of the early buzz, the truth is that gig workers, also known as freelancers or contractors, have been around for a while. But whatever label you want to assign, as an HR leader there are some particular nuances related to hiring gig employees that you need to be aware of.

"The contingent workforce has always provided employers with additional flexibility to cost-effectively expand capacity during peak periods, to insource skills that may not be in-house or to maintain productivity during a staff vacancy," says Marion McGovern, author of "Thriving in the Gig Economy."

The Growing Gig Economy

Ardent Partners reports that 35 percent of today's workforce is considered a gig economy worker. "With 95% of organizations today perceiving their contingent workforce as important and vital not only to day-to-day operations, but also to ultimate enterprise success and growth, this arena should be of the utmost importance to every executive today," reports Ardent Partners.

The trend is growing, but it comes with both opportunities and risks. Where are the greatest opportunities to leverage the value of hiring gig employees and what best practices can help ensure maximum engagement and compliance with wage and hour laws? On the contrary, what are the potential risks related to hiring gig employees, and how should HR think differently about the impact of the gig economy on their staffing models?

Opportunities and Risks

The growth in the gig economy may make it seem like securing talent is more complex, but McGovern says nothing could be further from the truth. "Access to the array of talent that is now available on a just-in-time basis is a competitive weapon," she says. Employers in small markets now have access to workers with specialized skills who can be geographically located anywhere.

The biggest risk related to the gig economy is ensuring that workers are properly classified as employees or contractors. Penalties can be stiff for noncompliance or inaccuracies. "HR managers should make sure they understand whether the contingent worker should be an employee or can be a contractor and whether, if the former, he or she is exempt or non-exempt," says McGovern. "That all comes down to the nature of the work, the level of direction and control required and the business status of the workers."

Additional risks may be less tangible but deserve equal consideration: gig workers may be less loyal than traditional employees by virtue of the fact that they value flexibility. Organizations might also be challenged to incorporate gig workers effectively into the teams they'll be working with. Communication is critical and needs to be ongoing and inclusive. Luckily, there are some best practices that can help organizations adapt to this new staffing model.

Best Practices for Hiring

Rob Keranen, managing director at Computer Task Group, recommends taking a strategic approach to considering the role of gig workers in your organization, much like other staffing decisions such as identifying skills gaps, evaluating hiring processes and using metrics to track success. McGovern agrees and notes that one of the first steps employers should take is rethinking job descriptions. "Thinking about skill sets rather than roles will make it easier to execute on a talent acquisition strategy that includes the full spectrum of independent workers," she says.

Managing employees remotely requires different processes than managing employees on-site. HR can play a role in helping educate and train management staff to become comfortable and adept with these processes. While there are many similarities between hiring and managing gig workers and hiring and managing traditional staff members, there are key differences that must be addressed, including:

-Becoming familiar with the various sources of gig candidates, which include sites such as LinkedIn, Upwork, Fiverr and others

-Being clear about scope of work, deliverables and time frames

-Maintaining strict adherence to practices that ensure workers are properly classified as contract employees

-Establishing methods of communication and project management to ensure efficiency and engagement

The gig economy is a trend that's likely to only become more prevalent, meaning HR leaders need to consider how it could impact their staffing models. "This will undoubtedly present some challenges, but as with any workforce change, the organizations that dedicate the time and resources to mastering the transition will be best positioned to capitalize on its benefits," says Keranen.

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