The New Workforce: Is Your Organization Ready for the Gig Economy?
Independent professionals are fast becoming a vital part of our workforce. To cope with evolving customer demands, and uncertain operating environments, organizations are opening doors to a non-traditional workforce. Integrating the alternative workforce also offers options for future business continuity planning. According to a report by Deloitte, alternative workforce accounts for “36 percent of the US workforce, and this proportion is expected to increase. By 2027, this “alternative workforce” of freelancers, gig workers, and crowd workers is expected to become the majority of the US workforce.”
What is the gig economy?
The gig economy refers to an ecosystem where organizations contract temporary or contingent workers for short durations or specific projects. These gig or contingent workers include freelancers, contractors, individual professionals, and consultants.
As the gig economy gains prevalence across industries, the rise of this independent workforce is having an impact on the socio-cultural fabric of companies. Gig workers have an independent style of working that often does not comply with the norms of traditional organizations. Unlike the traditional workforce, they are not on the formal employment payroll of an organization. Contingent workers most often work for different organizations and projects, rather than confining themselves to one organization. This workforce comprises of people who are constantly looking for flexibility, inclusiveness and a non-traditional working environment.
According to Statista, “gig work will generate $455 billion in 2023, up 53% from 2020”.”Ballooning by 30% during the pandemic, the gig workforce is now on track to surpass the full-time workforce in size by 2027”. “To weather volatility during the COVID-19 pandemic, many companies have shifted to a more agile workforce made up of more independent workers”, as a McKinsey report states.
Why is it rising?
Cost reduction of labor plays a major role in the unprecedented rise of this workforce. Companies are increasingly understanding the need for cost reduction and skilled labor to achieve business objectives. Ernst & Young in an article on gig economy states that 55% of organizations see contingent workers as a mechanism to control labor costs and respond to the peaks and troughs in demand that come with seasonal trends.
The need for deep expertise in specific skills for a small duration is another key factor that has led to the rise of the gig economy. For instance, for an organization to meet its 3D animation requirements, an independent worker like a freelance professional can be hired for the duration of the project. By doing so, organizations save cost on training their in-house employees, and are also able to fulfil their requirement by hiring someone who specializes in that skill and is immediately productive.
Challenges posed by the gig economy
While the gig economy is gaining popularity across countries and industries, there are multiple challenges which organizations encounter as they see an increased influx of gig workers.
- Managing multiple off-role employees is a challenge and poses some unique information security related threats
- Increased usage of independent workers often hampers the development of full-time employees and restricts their learning
- Due to the lack of a formal employee-employer relationship, organizations often find it difficult to align independent workers with core business objectives
- A McKinsey report mentions that they often face challenges to their health and well-being, such as difficulty accessing health insurance and healthcare.
- The report also highlights that independent workers often have to deal with financial challenges, such as unreimbursed expenses that reduce their profits. These expenses can include things like vehicles, office space, and other business-related costs.
What can companies do to meet these challenges?
In order to mitigate these challenges, organizations need to adopt policies which ensure a smooth transition for non-traditional workers. According to Deloitte, there are some immediate measures companies can take to accommodate the gig workforce.
- As a best practice, HR and legal departments should be involved during the selection and hiring process of alternate workers to help deal with policy issues.
- A proper screening process should be adapted for off-role employees.
- Organizations must focus on building an inclusive structure that creates fluidity between internal and external employees.
- Over the long term, organizations should focus on building capabilities of their internal employees rather than solely depending on external expertise.
- To cultivate long-term relationships with the gig workers, the office culture should welcome them and integrate into group activities whenever possible.
There is no doubt that independent workers possess skills which can be leveraged to benefit the overall growth of an organization. In fact, the gig economy is expected to grow rapidly in the coming years. While organizations tap the talent of these independent workers, it is vital that they invest suitably on internal capability development. This would ensure a balance between the external and internal talent flow and could vastly improve the overall workforce stability of an organization.