How the gig economy is changing the employment landscape

Publication date: 22 February 2019
Article type: Blogs and Articles

Shahara Wright attempts to define the gig economy and describes how it could be an advantage for small businesses

Gig economyThe meaning of the gig economy

‘Gig’ is turning into one of those buzz words whose meaning varies according to the person you’re talking to. However, The Oxford English Dictionary defines the gig economy as a labour market characterised by the prevalence of short-term contracts or freelance work as opposed to permanent jobs. 
In 2015, the US Government Accountability Office (GAO) published a Letter on the Contingent Workforce. In this, the GAO noted that the size of the contingent workforce varied significantly, depending on its definition. There is no consensus among labour experts as to whether the gig economy should include independent contractors, self-employed workers or standard part-time workers. Because there is agreement that those who lack job security and those with variable or unpredictable work schedules should be included, the GAO refers to this group as ‘core contingent’.
Defining workers in the gig economy 

Organisations such as Upwork and Freelancers Union, and management consulting firm McKinsey & Company, have studied contingent workers in an attempt to provide clear categories. The Freelancers Union segmented contingent workers into five categories: independent contractors; diversified workers; moonlighters; freelance business owners, and temporary workers. Meanwhile, McKinsey & Company’s Global Institute Survey of Independent Workers segmented contingent workers into four categories: free agents; casual earners; reluctants, and financially strapped.
It’s important to note that all the definitions are largely based on how the workers view themselves versus how the employer sees them. This is important in understanding how many contingent workers really make up the gig economy and how stable it truly is. Are those described as ’reluctants’ and ‘financially strapped; really a part of the gig economy?  
Stability in the gig economy

‘Millennials are being blamed (or praised) for the current shift in the employment landscape’

How do you determine the ebbs and flows of the gig economy and its true stability? You have to understand how major corporations intend to use contingent workers. A study by professional services firm EY concluded that, by 2020, a quarter of organisations expected to use 30% contingent workers. Of those studied, 62% said that contingent workers are used to reduce labour costs.

This is important because, in any capitalist society, supply and demand is key. In future, will there be more contingent workers than there are contingent jobs? Or will there be more contingent jobs than contingent workers? Right now, they both seem to be on pace. However, with the swift changes in technology and the need for human workers shifting, it remains to be seen how workers will be deployed going forward. For now, it seems, both workers and companies are exploiting the benefits of the gig economy.

The changing employment landscape 

Millennials are being blamed (or praised) for the current shift in the employment landscape. Preferring flexibility and freedom over stability, millennials have led the charge in terms of spreading their talents around. The downside is the lack of benefits they receive, such as holiday entitlement, sick pay and pension contributions. As previously stated, many employers use contingent workers because of their low cost compared with employees on the payroll. However, that same study from EY showed that employers expect new regulations to be implemented down the line to ensure contingent workers receive some of the same benefits enjoyed by permanent staff.

In 2017, Matthew Taylor, former Head of the Number 10 Policy Unit and current Chief Executive of the Royal Society for the Encouragement of Arts, Manufactures and Commerce, published The Taylor Review into modern working practices. (Add link: )

This introduced the concept of the ‘dependent contractor’, described by Taylor as someone who is not an employee, nor genuinely self-employed. Dependent contractors should be entitled to benefits and guaranteed minimum hours. This argument has been augmented due to the growth of businesses such as Uber – a company that touts itself as offering gig work, but which is increasingly seen as an employer.

‘Dependent contractors should be entitled to benefits and guaranteed minimum hours’

Contingent workers and small business 

As businesses opt for contingent workers to reduce costs, they may find themselves under served. Larger businesses with the capacity to pay more will find they have the pick of top talent, leaving small businesses searching for any help they can get.

The good news for small businesses is that they are better able than larger organisations to give contingent workers what they want. A survey of LinkedIn users found that 59% of contingent workers wish to achieve a better work/life balance, while 44% are looking for a culture that fits their personality and 40% want the ability to make an impact. These statistics show that small businesses can still be competitive even if they cannot compete with the pay and benefits offered by major corporations.

It is important for small businesses to consider how they can become more attractive to contingent workers. According to an article published on the LinkedIn Talent Blog (entitled 11 stats you should now if you are recruiting contractors in the US), 70% of contingent workers who switch jobs also move industries. This means that contingent workers are finding that their skills are transferable and are willing to move if they find work that is more challenging and interesting.  

The emphasis placed on work/life balance should not be underestimated. After all, this is surely the reason many people start their own businesses in the first place. Small businesses have the flexibility to move away from traditional benefits or pay scales. They can work with clients or projects in any manner that benefits their company. It is important not to create the type of environment from which people want to flee.

This is why it is so important to prepare for the changes in the workforce. When planning for expansion, job descriptions need to be very clear and, while drafting the job descriptions, it should be determined what can be done remotely and what needs to be done in-house. In addition, consider which tasks can be transferred between people and which should be considered ‘projects’.  

Small business owners should worry less about loyalty and more about how they can ensure that certain projects are accomplished. The way in which changes in the employment landscape are managed will affect a small business’ ability to scale. The lack of stability in the workforce means that small business owners will have to become more focused on the management of the business. Ultimately, this will give them less control over the details, but that is what is needed to grow a business anyway.  

‘It is important for small businesses to consider how they can become more attractive to contingent workers’

Shahara Wright is a CEO, business law attorney and business strategist.