If you haven’t planned for this dramatic and accelerating transformation of the workplace — and the new laws being enacted to protect it — you may want to begin today.
“Outsourcing.” “Contract work” or “freelancing.” “The extended workforce.” “The gig economy.” Whatever you call it, this very significant revolution in jobs and hiring is accelerating throughout the world and if you haven’t already fine-tuned your thinking on employment and your labor force, you may want to. And soon, because this sea change has already begun and is gaining momentum.
- About 57 million Americans freelanced this year, 36% of U.S. workers
- Approximately 150 million workers in North America and Western Europe work as independent contractors
- The number of freelancers has increased by 4 million since 2014
- The majority of workers will be freelance by 2027
- 41% of executives think being ready to engage freelancers is important, but only 8 percent have established a process
And it’s not just happening in the United States. Freelancers are the fastest-growing labor group in the European Union (EU). The number of gig workers doubled between 2000 and 2014. What’s more, doing freelance gigs is outpacing overall employment growth in the United Kingdom, France, and the Netherlands.
Of course, this tsunami makes perfect sense. In fact, you could call it a confluence or a perfect storm of interwoven factors:
Generation Z, now entering the workforce, is painfully aware of the sad situation that befell Millennials, many of whom went into significant debt to attend college for a degree that wound up not necessarily guaranteeing entry into a great or even good job. So, many Gen Zers have decided to avoid college and instead have opted for internships or travel to self-educate and broaden their horizons. According to Gen Z and the Gig Economy — It’s time to gig in or get out, “They’re looking at gigs as a viable alternative to 9-5 desk jobs, putting their emphasis on decent work/life balance. The pros of the gig economy don’t go unnoticed by the new working generation. For Gen Z, the most appealing aspects of gig work are: schedule flexibility (55%), being their own boss (53%), and not having a boss or coworkers (42%).”
On top of the youngest segment of the workforce preferring to gig, a lot of boomers and other vital retirees still want or need to work, and are happy to accept projects. And their adult children may also want to prefer gigs to full-time desk jobs so they can care for their aging parents and grandparents, as well as their own kids. So, people of all ages are getting into the act.
All this in a talent-short economy which has left employers scrambling to find — let alone attract — the most qualified job candidates. It’s a ripe environment in which the gig economy isn’t just flourishing, but exploding.
How to prepare for more gig workers
Now is the time to modify HR policies and adapt hiring practices and attitudes to accommodate this shift in the composition of your workforce. Here are few things to mull over in preparation for the shifting landscape.
- Consider what jobs could be handled by gig workers which, while brief, will still require expertise; anticipate what changes you’ll need to make to accommodate gig workers for reasons including:
- Repeated seasonal increases in business
- Unique, one-off projects
- Anticipated growth spurts
- Tasks that could be handled by gig workers, including copywriting, graphic design, website modifications, research projects, and other tasks that can be done remotely by non-traditional employees are being paid salary and benefits
- Consider a title for gig workers who may frequently work for your company:
- “Dependent Contractor” has been suggested
- Conduct background checks on all workers, including gig workers:
- As with traditional employees, temps, and seasonal workers, conducting a background check on a gig worker will help ensure a safe and secure work environment, particularly if they have access to your financial data, customer information, and communication with other employees
- Apply the same high standards for gig workers as you do for traditional employees
- Budget accordingly:
- Obviously, funds will need to be set aside for projects given to freelancers
- It may not be too difficult an uphill battle since benefits will not need to be paid to freelancers
- Strive to retain your traditional workers:
- The lure of gigging may appeal to individuals on your payroll whom you don’t want to lose
- Review and consider enhancing benefits for regular employees, perhaps including a more liberal attitude toward allowing them to work from home
- Define how projects being created remotely will be managed:
- Consider timelines, deadlines
Working with Gen Z
Generation Z appears to be quite definitive in their perspectives on work. Based on information gathered by the Workforce Institute, keep these issues in mind to attract Gen Z:
To effectively empower them, focus on the tools and technologies needed for them to handle a gig. They value modern workplace technology (36%) and flexibility to work from home or remotely (36%) more than they value face-to-face interactions with coworkers (35%).
By its definition, a gig lasts only so long. Be prepared for Gen Z gig workers to move on quickly. In fact, more than a quarter (27%) expect to work for two years or less at their first full-time job.
Be aware of how they measure success. Pay will be very important to them. More view their first job as simply a means to make money rather than the first step in their career. Gen Z would rather receive cash rewards and bonuses (43%) than digital or social media recognition.
Work/life balance will be more important to Gen Z than previous generations. According to the Workforce Institute, “More than half (55%) of Gen Zers are drawn to the ability to work their own schedules in gig jobs, and one in four (26%) Gen Zers would work harder and stay longer at a company that supports flexible scheduling. Behind schedule flexibility, being their own boss is the second-most appealing attribute of the gig economy to Gen Zers worldwide (53%), with Mexico (65%), France (61%), and Canada (56%) valuing it most.”
In sum, consider modifying employment policies to allow more flexibility, paid time off, and overall work/life balance.
Be aware of new laws being passed addressing non-traditional workers
Lawmakers worldwide are paying attention to the trend and enacting or broadening laws and legal rulings that pertain to freelance workers.
In 2016, New York City lawmakers passed the Freelance Isn’t Free Act. It spells out penalties for employers who don’t pay their freelancers on time and in full. In September 2019, with passage of Int. 0136-A, a single-line amendment, the City Council expanded the New York City Human Rights Law so that it applies to not just traditional employees, but independent contractors, too. For NYC companies that engage independent contractors, the expansion brings broad implications for many standard practices. It will impact HR policies, from how companies conduct background checks of prospective workers before they even get an assignment, to how employers will manage these workers once they do.
On the other coast, California approved Assembly Bill 5, which set standards for whether a worker should be classified as an employee or independent contractor in California. AB5 essentially codifies the 2018 ruling in Dynamex Operations West, Inc. v. Superior Court of Los Angeles County, which refers to the “ABC test” that a number of jurisdictions require employers to apply when determining if a worker is an employee or contractor. According to the ABC test, a worker should be declared an employee, not an independent contractor, unless they:
A: Are free from the “control and direction of the hiring entity.”
B: Perform work that is “outside the usual course of the hiring entity’s business.”
C: Generally, “engage in an independently established trade, occupation or business.”
AB 5 has faced a great deal of criticism, especially from companies in the gig economy space that hire thousands of independent contractors. But it could serve as a model for other state laws around the country.
For a more thorough look at these new legal rulings, please see this article on Forbes authored by Alonzo Martinez, HireRight’s Associate Counsel, Compliance, here.
Meanwhile, in the United Kingdom, the rules governing off-payroll working through an intermediary called IR35 will be extended in April 2020 to apply to large and medium-sized businesses in the public sector. The matter is complex. It applies to situations in which contractors supply services to businesses through a specific kind of agency, such as a personal services company, or a chain of agencies. Organizations will need to evaluate whether an employment relationship (for tax purposes) exists between the contractor and the client that would not otherwise exist without the intermediary. There are also significant implications regarding employer national insurance and tax liability. Employers are advised to prepare for the new rules, review existing relationships with consultants and agencies, and identify potential areas of risk.
“As Generation Z begins to enter the workspace, the traditional worker as we know it”will begin to fade even quicker. The gig economy will no longer be a trend, but the norm. The impact on businesses will either make them more agile and innovative or they will find themselves in a world of hurt for workers.” – Shelley Smith, Premier Rapport
Stay abreast of this growing trend by keeping an eye on these pages and attending HireRight’s ongoing series of compliance webinars.