The term ‘gig’ refers to a job performed for a specified time. A gig economy is a free-market system where temporary work positions are common. This includes positions like – freelancers, independent contractors, project-based workers, temporary hires, and part-time workers. They are termed as ‘Gig Workers’. They are found in every industry, who enter into formal agreements with the companies to provide services without being on the company’s payroll.
With digitalization, the workforce is increasing around the world and employers can find the best individuals for each job, and there are not many geographic constraints. This also saves business resources like – benefits, office space, and training or providing employee benefits like an improved work-life balance and freedom to select jobs or gigs that they are interested in. While this flexibility is appealing, gig workers in turn trade that in for modest pay little or no health or retirement benefits, tax complications, and out-of-pocket equipment expenses.
The Role of HR Before and After the Evolution of Gig Economy
Recruitment:
It is the process of finding and hiring the best and most qualified candidate for a job opening, in a timely and cost-effective manner. It incurs significant costs and is mostly a one-time activity for many organizations.
Recruitment for gig-workers needs to be swift, not long-drawn. From sourcing to selection to onboarding it must be a matter of weeks, not months. HR tech can come to the rescue in this case, consider having an Uber-like exclusive rating and sourcing platform in place for freelance workers.
Performance management:
In performance management, the HR managers try to figure out, the existing performance level of the employees and work on improving that level. It is a systematic assessment of the performance of an employee and using the assessment to better the performance over time.
Gig workers must be evaluated on different performance standards. HR and the corresponding team manager must allocate them short-term, outcome-based objectives.
Employee Retention:
Employee retention refers to the various policies and practices which let the employees stick to an organization for a longer period of time. Every organization invests time and money in this process. The efforts are made to make that employee corporate ready material and bring him/her at par with the existing employees.
Retention and attrition management takes on an all-new meaning. HR must not incentivize gig-economy workers to stay, instead should create an environment that encourages the gig workers to come back.
Training:
The learning goals include the aspects of what an employee wants to learn and improve in order to do better in their workplace. This is a gradual process, where the employee’s improvements are measured in long term, it is not instant outcome-oriented. The HR department [Learning Development] should create courses that lead to knowledge transformation among employees.
The learning goals for a Gig Worker is curated very differently compared to a full-time employee. Intense, bite-sized learning that delivers immediate results on the job is the way to go for the capability building strategy. Spending too much on long-term trainings and workshops will be unprofitable for the organization.
Succession Planning:
Succession planning is a strategy for passing on leadership roles—often the ownership of a company—to an employee or group of employees. Succession planning involves cross-training employees so that they develop skills, company knowledge, and a holistic understanding of the company.
A gig economy means HR must prepare for frequent exits and hires. The uncertainty of employment is a factor that must be managed very well. It is therefore important to have a contingency plan and a succession plan, considering the mix of full-time and part-timers.
Conclusion
Managing a gig economy workforce is not easy. It requires HR to have an in-depth understanding of such workers- their needs and aspirations. With this population growth and the business situation becoming more dynamic, turning to the gig economy for talent solutions is no longer a choice. It is a mandate to stay cost-effective and agile. With a growing population and the trend toward more dynamic businesses, deploying a gig workforce option will often make sense. It’s a mandate in order to stay agile. Different companies will incorporate gig personnel in different ways, and the HR processes will need to reflect and support those decisions.
A gig economy is an economy with a temporary, flexible exchange of labor via online platforms that clients or companies tend to hire. Its primary goal is to provide quality services at a cheaper and sustainable rate. Hence, it is also known as the platform economy.
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It is essential to the business’ foreign operations. In addition to freelancers and independent workers, part-timers and contract workers get included in this category instead of full-time employees. These jobs offer flexibility, lower hiring costs, independent freelancing jobs, etc. However, it has also endangered the jobs of traditional workers.
Table of contents
- Gig Economy Definition
- Gig Economy Explained
- Examples
- Pros and Cons
- Frequently Asked Questions [FAQs]
- Recommended Articles
Key Takeaways
- The gig economy is a system where people go for freelancing, temporary contractual jobs instead of full-time. It enables the flexible exchange of labor at a cheaper rate.
- Freelancers and workers use gig economy platforms like Fiverr, Upwork, Uber, Lyft, and Amazon flex.
- Various benefits to this kind of economy include independent flexibility, cheap availability of labor, higher productivity, etc. However, the excess workload can cause stress to the gig workers.
- It erodes the foundation of the traditional economy consisting of full-time workers. Employers provide no additional extra benefits to the gig workers. They have to pay their taxes and expenses independently.
Gig Economy Explained
The gig economy allows companies to hire freelancers and independent workers at a cheaper rate. In this way, the employer gets resources at a lower cost, and workers get to follow their career paths. Various key drivers, such as flexible working, changing work styles, and varied fee models, boosted the freelance economy in the 21st century.
The word “gig” refers to a temporary nature of business used by musicians and artists. However, in the later stages, businesses and organizations added various definitions. However, people are unaware of this concept, although it has prevailed for many years.
Many businesses lost operations during the global recession in 2007-2008. It led to an alteration of the nature of business. The young generation started working as freelancers on a contract basis to survive the crisis. In 2017, almost 55 million Americans became part of the gig economy. Later, companies like Uber, Flipkey, Airbnb, and Amazon flex started hiring gig economy workers through online gig platforms.
However, the instant boost was during the global COVID-19 pandemic in 2020, which led the gig workforce to surge. According to a CNBC report, in February 2020, the number of gig economy workers increased by 15% [i.e., 6 million more people] to the gig economy. The gig economy jobs include carpooling, labor and delivery services, and freelancing.
While there are various gig economy jobs, the working structure remains the same. They work on a contractual or freelancing basis to render their services. In return, the clients pay them. For example, a person works as a driver with a ride-sharing company, Uber. First, he gets a cab ride and earns money for it. Then, he moves to the next ride, and this process continues till the time he wants to work with Uber.
Examples
Let us look at some freelance economy examples to understand the concept and its global effects.
Example #1
Suppose Eliza and John are siblings living in Texas. The former works in a well-known company, whereas the latter is a graduate student. Suddenly, there was a breakout of the COVID-19 virus in the state. During the lockdown, many companies fired their employees to cut costs. As a result, Eliza lost her job.
John started looking for jobs through gig economy apps like Fiverr and Upwork. Soon after he posted his profile, he got hired as a freelancer by a well-known company. Later, Eliza also started working on a contractual basis for clients with the help of online platforms.
Example #2
The 2022-Inflation has caused many workers to shift to gig economy platforms for jobs. Pew Research Center’s 2021 survey states that 16% of Americans installed gig economy apps to take up some gig work. So, 7% of the population took gig work as their full-time job. As a result of inflation, people are shifting towards gig economy jobs. As per PYMENTS, 40% of the American workforce makes 40% of their income from gig work.
Pros and Cons
In the United States of America, about one-third of the working population is engaged in this economy. Experts believe that the working numbers will rise, and the U.S. is on its way to establishing a gig economy. The gig economy is different from the traditional economy.
The freelance economy has certain pros and cons associated with it. First, it provides work flexibility to the workers working in remote areas. That means as the workers often work on an independent, part-time contract basis, they also work from home. Also, these workers get the freedom to either take up part-time or temporary work.
There is no compulsion to continue working with the same worker or company. Even an individual’s approach towards work has changed as they want to work on their terms and flexibility. Due to this approach, startups have a way to emerge in the global market.
Businesses and consumers benefit, too, as this economy includes a wide variety of positions. So, work becomes more adaptable to the moment’s needs and flexible lifestyle demands. For the employer, it is the cheapest mode of resource acquisition. They can get cheap and efficient labor. The gig workers get an opportunity to follow their career path, and for that, they get paid well enough. However, there are downsides to this concept.
Although the gig workers have work flexibility, an extra stress load gets added. Also, these workers avail no benefits usually given to full-time employees. Like full-time workers have job security, gig workers lack it as they have inconsistent income. In all this, isolation might trigger the worker. Also, people who cannot access or use the internet may be left behind.
ProsConsMore work flexibilityInconsistent incomeIndependenceNo BenefitsAffordable LaborWorkload stressSpecific SkillsTaxes and ExpensesGood paymentIsolationHigher productivityInadoptabilityEffective ServicesFrequently Asked Questions [FAQs]
1. How big is the gig economy?
According to a Statista report, the global gig economy shall grow to $455.2 million by the end of 2023. While in 2018, the market size of the economy was $204 million.
2. When did the gig economy start?
The freelance economy started in the 18th century when some jazz musicians used the word “gig” in 1915. Then, in 1940, the first temp agency provided temporary jobs to workers. By the late 90s, Upwork started, and almost 10% of the American workforce was a part of this economy. But the concept got popularized after the global recession in 2008 and the Covid-19 pandemic in 2020.
3. How the gig economy is changing the workforce?
The platform economy has allowed the employees to decide the nature of work. They can choose between freelancing and part-time work. According to a study by Mckinsey, 20-30% of the total population of the United States comprises the gig workforce.
4. How the gig economy is changing the workforce?
It can be the biggest economy since workers are more independent and flexible. In addition, the global pandemic of 2020 gave another reason to the employees to go for gig work as they could work remotely.
Recommended Articles
This article is a guide to Gig Economy and its definition. Here, we explain its pros and cons with examples. You can also go through our recommended articles on finance –