According to a recent study by Upwork and Freelancer’s Union, the number of workers participating in the gig economy now stands at 56.7 million Americans. What does the gig economy have to offer that traditional employment doesn’t provide?
There are two types of “gig economies.” The first type is comprised of part-time, on-call, or temporary workers that supplement the full-time workforce. The second and newer type of gig economy is composed of freelancers, platform participants, and shared economy workers.
This second type of gig worker is notably different from full-time or temporary workers. Whether they work full-time or part-time to supplement their income, they have more control over the types of work they do and whom they work for. These workers also feel greater creativity and enjoyment because they are often providing a product or service that they enjoy and believe in. Gig workforce statistics reveal a robust workforce:
- 1.07 billion freelance work hours per week
- 61% choose freelancing as a conscious choice (as opposed to necessity).
- 84% choose freelancing as a lifestyle choice.
- 42% enjoy freelancing flexibility over traditional employment.
- 93% participate in skill related training (online courses, books, video training).
- 64% find work online.
In addition to online tech and office work, the shared economy offers opportunities for millions of freelancers who are looking for a full-time or supplemental income. Ridesharing is popular, with reported statistics of Uber boasting 750,000 drivers and Lyft 1.2 million drivers in the US and Toronto. AirBnB reports having 600,000 US listings mostly by people with private residences.
One of the distinct downsides of freelancing is income instability and inconsistent cash flow. In addition, there are no inherent employee benefits in the gig workforce. Workers must secure their own benefits, whether out-of-pocket or through a spousal partner, including health insurance, retirement funding, and other perks that traditional employment offers their employees.
Under the Affordable Care Act, gig workers obtained health insurance in the subsidized marketplace or incurred significant tax penalties. Under the 2017 Tax Reform Act, those penalties were removed; freelancers, entrepreneurs, and other business owners are no longer mandated to purchase health insurance. Some of these independent workers were healthy and are now exiting the health insurance marketplace permanently.
This situation leaves insurance carriers in a precarious position. The government subsidized marketplace may now only receive “the sickest of the sick” applicants, which will undoubtedly drive up insurance costs. The result may be an uninsured gig workforce that is at higher risk for health issues or gig workers may seek to return to the traditional workforce to access benefits.
Companies struggle to find qualified full-time staff while maintaining a relationship with qualified gig workers. Offering voluntary benefits to gig workers, such as accidental or critical care insurance, or cash benefits for insurance programs, may be one way to entice and secure the loyalty of gig workers.
Insurance companies are revisiting voluntary benefits and the mini-med plans of old to create alternatives for the gig workforce. Employers may also revisit the definition of “employee” and expand it to include gig workers.
Despite the benefit issues, companies large and small see the advantages of using gig workers due to their specialty and overall lower costs. Freelancers benefit from working for large companies by developing relationships and leveraging their names to attract other clients.
However, managing gig workers can be challenging. Freelancers that align with your corporate values and are accountable for results are highly sought after. Managing a remote freelance network of gig workers has become a reality for American businesses.
In addition to benefits, companies are innovating methods to attract and retain valuable freelancers. On Upwork, the largest freelancer online marketplace, companies can create a private talent cloud that vets freelancers and makes them available to the entire organization. Other companies create in-house talent pools, on-boarding freelancers with compliance training to meet corporate standards. Companies see the value in engaging freelancers and keeping them as a short-term resource.
Traditional employment offers security and benefits, but more companies are focused on creating an employee experience that mirrors that of the freelancer. Making sure all types of employees are engaged and happy in their work is of increasing importance especially in a robust economy where skilled talent is in high demand.
As the marketplace for employment changes, organizations need to think differently about what and how they offer benefits. For more information about employee benefits and the gig workforce, contact your Woodruff Sawyer Account Executive.