Gig Economy for Small Business Owners

Last Updated on  December 4, 2020  By  Freelance Central Editorial Team
What is Freelancer Management System

As of 2020, 36% of Americans engage in some sort of gig work. Many companies are actively onboarding freelancers in a move to bring down labor costs. Besides being more cost-effective, freelancers help scale up operations at a faster pace all the while optimising operational costs.

The global pandemic has propelled the growth of the gig economy as remote working and work-from-home schedules have become the norm. Today, 57.3 million US citizens have engaged in freelance gigs. It’s estimated that by 2027 there will be 86.5 million freelancers*.

What is a gig economy?

The gig economy, or the freelancer economy is used to describe a work environment where non-employees work with businesses to execute short-term projects or work on temporary contracts. When the project ends, so does the freelancer’s tenure within the company.

The growth of the gig economy is driven by both the parties: workers searching for flexible, short-term arrangements, and companies seeking to hire freelancers in lieu of full-time employees. There are other factors as well:

  1. Filling skill gaps:
    Many companies struggle to find the right talent to fill their skill gaps. Freelancers fill that gap as they come with specialized skills and expertise in their line of work.
  2. Work flexibility:
    Businesses can hire freelance experts or gig workers for specific services which are not needed on a regular basis.
  3. Time management:
    Talent managers find it’s faster to onboard gig workers than full time employees, and it’s easier to lock in outside resources.
  4. Infusion of talent:
    As freelancers work on a wider range of projects across different industries and companies, they possess vast experience and talent to finish the job at hand.
  5. Business scalability:
    Businessesses can scale their workforce up or down quickly by onboarding freelancers to meet business demand

What are the pros and cons for businesses relying on gig workers?

Pros

Cons 

By onboarding freelancers, companies can save the cost of hiring full-time staff. Companies don’t have to contribute to retirement savings accounts or health insurance coverage for gig workers. 

Not all freelancers are reliable resources. As they do not follow the same processes that your employees do, you need to set realistic expectations and ensure that they will deliver work on time as promised. 

Companies can leverage the skill needed to carry out specific, short-term projects without having to hire full-time staffers that cost a lot. 

Businesses hiring freelancers need to know all the regulations for contractor status in their state. While some states require written agreements, others have “at-will” statements in place which allows the contractor to end the relationship with an employer at any time. 

Companies can get better and faster results more efficiently from freelancers than full-time employees. As the terms and turnarounds are already agreed upon in the initial onboarding, there will not be any lag in delivery. 

Companies need to file a separate tax form called form 1099-NEC when you work with freelancers. There are other paperworks like W9 that need to be sent to the freelancer. This can be a bit of headache for businesses to navigate.

Companies will have a diverse talent pool at their disposal. They can rely on freelancers to complete urgent tasks as they often work different hours from normal business hours. They can even work on weekends as they work remotely. 

Freelancers may not be as invested as full-time employees. They are not loyal to your company and are free to leave your project if they find better opportunities. 

Companies can rely on freelancers from varying backgrounds to deliver more creativity and ideas for the company which will add value to business growth. 

You may not be able to establish a personal connection with the freelancer as he works remotely. Communication gaps can lead to your project lagging behind. 

How can you realize true potential from gig workers?

To achieve the best outcome, you need to be mindful of how you work with your freelancer. 
Here are some of the points:

  • Calculate the delivery timelines to ensure the work does not get delayed under any circumstance. This should be communicated and agreed upon by the freelancer before the project begins.
  • You need to manage systems, processes, and tools that allow the freelancer to work with the same level of efficiency as your employees.
  • Build a process from scratch, starting from recruitment, work schedules to rules, privileges and closure of contract.
  • Invest time in building a professional relationship with the freelancer. Invite him to online meetings and allow them to mingle with other teammates as it will help them understand your work culture and processes
  • Understand the freelancer’s motivations. Most freelancers want flexibility and control over their hours and the work they do. Flexibility can be a powerful negotiating tool for your business.

What does the future hold for the gig economy?

The gig economy is expected to grow in the coming years whether you are ready or not. Companies are embracing remote working culture, overcoming communication barriers, and hiring gig workers for professional services. Moreover, the global pandemic has caused a major shift in traditional workflow with many companies successfully coordinating and working remotely without affecting the productivity or profitability.

Final Thoughts

Like it or not, the gig economy is here to stay. With the number of freelancers skyrocketing, the companies that adopt this disruptive work culture will find value and stay relevant in the long run by keeping their costs under control, addressing critical skills gaps, and leveraging technological advancements.

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