How is the Gig Economy Driving Growth?
The internet is changing how business is done all around the world. One of the newest ways is the relationship between workers and businesses. Conventional employment is still largely the norm, but that’s changing rapidly. The future of work now appears to be based on the gig economy as workers want more freedom and flexibility.
To stay competitive, more small and mid-sized businesses (SMBs) are exploring the new economic frontier, but before you do, it’s important to understand what the gig economy really is.
What is the gig economy?
The conventional economy is W-2 employment-based. Most workers have a single employer, with a small percentage holding a second job to supplement their income. Employees tend to stay at the same jobs for long periods, typically measured in years. Employees work under the direction of supervisors and normally live within commuting distance of their workplace. Broadly speaking, this has been the norm for over 200 years.
The gig economy exchanges the employment model for a freelance relationship. Workers may live almost anywhere, work under their own direction, and have little or no expectation of long-term relationships. They may find companies needing their services anywhere in the world. They’re independent, pay their own expenses, may work for multiple companies at the same time, and typically choose how and when to work.
The dividing line between employment and contracting is not always clear. Regulations frequently change as the gig economy explodes in growth. The definition of what it means to control how someone works is murky in some cases, and there’s a push to get some independent contractors the same benefits that full-time employees receive. Businesses need to ensure that their workers fit the legal definition of a contractor. This varies by state, and the laws are changing very rapidly as the legal system attempts to catch up to the real world, so you’ll either need to research the laws or consult an attorney.
How is the gig economy driving growth?
The statistics tell much of the story. The gig economy is expanding three times faster than the American workforce. 59 million U.S. workers now participate in it and within ten years, around 2/3rds of the U.S. workforce are expected to be plugged in. Freelancers are already adding over $1 trillion to the economy every year – and the technology is just getting started.
Mobile technology is what’s making the growth possible, and the convenience factor is lubricating the transition. 85% of Americans now use a smartphone, allowing them to socialize, buy goods and services, and work wherever they are connected. You can order groceries for delivery, hire a rideshare taxi, receive health services, or pay a worker (among many other possibilities) as needed. Businesses also gain access to a massive labor pool while avoiding many costs associated with having employees.
Today’s workers also want flexibility and independence, which fits well with contracting versus employment. There’s certainly a sense of adventure in being your own boss. Plus, most gig workers are part-time, with a large percentage using it as a side job to generate added income.
How can businesses successfully tap into the gig economy?
The biggest way to be successful in tapping into the gig economy is to make sure you understand how contractor laws work. This includes staying compliant and keeping excellent records of all payments made. Why? As you add contractors to your business, payment and record-keeping often become cumbersome and costly. Every independent contractor whom you pay at least $600 in a given tax year must receive the correct 1099 forms, each form has its own deadline, and the penalties for late filing or failing to send a form can be serious. Plus, the fines are applied to each violation, so scaling up your freelance pool also increases your risks – unless you use fast and flexible compliance and payment software.
Smart businesses owners are tapping into the gig economy using powerful software that easily manages their contingent workers. The best will combine both into a single software solution. You literally log in, pay each contractor either individually or in batches, and everything else is automated. The system will get the taxpayer information from your workers and then generate all the required forms on time. Find out how Gig Wage can handle the hard parts for you.
Written byGig Wage