We’re going to start this one off with a big old disclaimer.
While we by no means intend to disparage the gig-apreneur or the gig economy, we do want to give small businesses an accurate picture of the pros and cons of hiring gig workers. Unfortunately, we have found that there are more cons than pros as a whole. But in those smaller instances finding the right gig worker can be a huge boon for your company. It’s just that most businesses have to go through many, many bad experiences before they finally find the right gig-apreneur.
OK, we’ll stop disclaiming and generalizing now and get specific. Starting with a definition…
A gig worker by any other name…
The gig-apreneur can go by many names – gig entrepreneur, gig worker, freelancer, temporary worker, contract worker, independent contractor. In essence this is a person who possesses a skill and wants to go the independent route, working with businesses directly rather than working through an agency or as a traditional W-2 employee. The gig-apreneur is a 1099 employee, which labels them as an independent contractor in the eyes of the IRS.
The pros and cons of the gig economy
The gig economy may be a hot buzzword these days but there is nothing new about it. The gig economy has been around for as long as there have been gigs. What is new in the last decade are the vast number of intermediary companies popping up to connect gig-apreneurs with business (think Uber, Fiverr, Upwork and many, many more).
In general, the pros of the gig economy are simple and twofold. First, hiring a gig worker can save your company money because it essentially cuts out the middleman (though this is not entirely true, as we’ll discuss). And secondly, it puts more money directly into the pockets of these gig workers. In theory this can be a great model for all parties involved. In practice, it’s not as pretty of a picture.
The downsides of the gig economy are many. One is that millions of people with varying levels of skill can claim expertise on any task or “gig” that you need help with. The gig economy can mean that small businesses actually pay more for “good help” and jeopardize their own growth. It can also erode traditional relationships between workers, businesses and clients.
Let’s look at the cons in more detail.
Consistency and reliability
If you like your jobs to get done on time and have a sense of dependability on your workers, the right gig-apreneur is going to be hard to find. It’s not that gig workers are inherently unreliable, it’s just that they may not have the same commitment level to your company as a traditional employee. Basically, there’s less on the line for them.
Couple this with the fact that many gig workers are working multiple jobs and have multiple projects going on at the same time and you don’t have the best recipe for consistency and reliability. Again, you can always find that diamond in the rough, but it’s going to be rough for a while before you find that diamond.
Quality of work
Let’s say you need some blogs written. You could hop on Upwork.com post your gig and then sort through dozens of applications. You can review profiles, read samples and research all of these applicants (which is going to take you a lot of time) and then choose the best of the lot. But this isn’t necessarily going to guarantee you a high quality of work. and if the work is not up to par, you have to go through the process all over again.
The problem is that the gig economy is worldwide. While this might be considered a pro for some it’s generally a con for your business. As many workers in developing nations compete with workers in developed countries, the competition gets fierce. One person in Sri Lanka will be able to charge much, much less than a person in the U.S. performing the same task because the cost of living is much less. This creates a system where freelancers are forced to charge less and the quality of work is like throwing a dart at a board blindfolded. What this also does is raises the prices of the “qualified” high-end freelancers. They can charge more because they are actually worth the money but the idea of saving money for small businesses is out the window.
The “contractor” loophole
One of the biggest drawbacks of the gig economy is actually for the gig workers. Whether they chose the independent contractor path or it was forced on them by economic circumstances they have no job security, no benefits and no stability. While small businesses might save money by not having to shell out these typical worker compensations, the end result is a gig-aprenuer that is increasingly desperate.
This is not best environment to foster quality work, consistency or great relationships. Some might say (all right, we’re going to say it) that the gig economy is fertile ground for increased wage gaps, economic and social disparity and workers being taken advantage of.
Cutting out the middleman?
Whether you consider the middleman as the IRS, an agency or something else, the idea of cutting out this entity is inaccurate, if not completely false. Occasionally you will find a gig worker without an intermediary but that’s becoming increasingly uncommon.
Every intermediary (SimplyHired, Upwork, Behance, We Work Remotely and on and on) will charge a service fee for connecting you. In some cases your business will pay this fee, in others, it will be the contacted worker that pays. Either way, you’re still paying for it. Contractors have to raise their fees to cover this cost, as well as covering the huge tax hit they’ll receive as a 1099 worker.
What it all means to your business
We realize that we’ve made it sound like the gig economy and gig workers are eroding the very fabric of small businesses but we want to reiterate that this is not the case. The gig economy offers opportunities to millions of people that could never have been achieved any other way. It can put food on the tables for families that are struggling to find job opportunities and it can sometimes save businesses money.
But too often small businesses have to go through 2, 3, 20 gig-apreneurs before they finally find the right fit. We’re not going to tell you that you shouldn’t try the gig economy, but we are telling you that there are intrinsic risks involved. In the end, only you can decide what’s best for your business.
Need help making that decision? That’s what we’re here for.