No matter what industry you’re in, chances are good that you or your company has hired a “gig worker” in recent years. Also known as contractors or freelance workers, the number of workers in the “gig economy” is rising dramatically and transforming payroll and other payment practices. McKinsey & Company reports that up to 30 percent of people in the US and Europe are now considered gig workers, as the labor trend touches industries well beyond popular examples like Uber, Fiverr, and Upwork.
At this growth rate, Intuit forecasts as many as 40 percent of American workers will be working on a gig basis rather than on salary by 2020. As people find success in this flexible labor format, more executives are looking to hire experienced contractors instead of full-time employees. And, they’re more open to gigging themselves: nearly two-thirds of full-time executives would switch to become a contractor, given the opportunity.
Whether employers are driving this change or responding to worker demand, this seismic shift in the way people work and get paid is having a profound impact on business. Here are three reasons organizations must anticipate and be responsive to the gig economy:
1. Maintain a Competitive Advantage
Businesses have to be more nimble and responsive to the needs of various types of workers. You can adjust and stand out in a competitive market by providing gig workers with flexible payroll options. In fact, 91 percent of millennials say they want a full-time job—and for businesses that want full-time employees, a gig could be a great first step towards full-time employment.
Most gig workers also don’t want to participate in the tedious and expensive processes of picking up and cashing paper checks, and companies shouldn’t spend time or money mailing them. This may seem like a small consideration, but printing and mailing paper checks can cost thousands of dollars per month, and data shows that almost half of Gen Z (47 percent) and nearly a third of Millennials (31 percent) would turn down a job if they were unable to choose their method of pay.
Why? The reality for many contractors is significant fluctuation and inconsistent timing of monthly pay – especially for those working multiple gigs. Timely and reliable payments can have a significant life impact to help workers manage cash flow. Waiting for checks or dealing with delays if an error is made can also have a major impact on gig workers. More stability here means a more committed, productive, and loyal workforce focused on their work.
Progressive organizations like Flexwage are taking these and other issues off the table by providing payroll cards, on-demand payment, advances on accrued pay, and direct non-recurring payments for tips, gigs, rewards and more.
2. Avoid Problems Beyond Payroll and Keep Expenses Simple
In most cases, it doesn’t make sense for businesses to give gig workers a company credit card or petty cash for business expenses. Gig workers are often a team of one who are unwilling or unable to carry the cost of their client’s expenses and wait weeks or months to get reimbursed. Many also work remotely, making delivery of petty cash impractical or impossible.
In addition, the traditional reimbursement process can be a major source of fraud, and factors that lead to fraud can be exacerbated with non-employees who may be remote and hard to track.
Both of these issues can be addressed by replacing cash and reimbursement checks with prepaid expense and purchasing cards that offer real-time visibility into spending on a card-by-card basis and allow full control of spending by card. Cards issued to contractors do not extend the company’s credit to the contractor and can quickly and easily be deactivated or de-funded when a contract ends, keeping expense management simple and more controlled.
3. More Gig Workers Means More Payroll Activities to Process: You Must Automate
Even without gig workers, tech-enabled payments and automated processes are a must and the nature of gig work makes this even more important. Short-term and project staff means more transition, often a higher volume of people to pay, and more out-of-cycle payments. Contractors may negotiate various payment terms and invoice as projects complete rather than on a consistent monthly cadence.
As the lines between traditional payroll management and vendor management blur, finance and payment systems must be modernized and integrated to keep costs down and make processes as stable and efficient as possible. Businesses can do this by:
o Using technology and automation to decrease manual tracking, reporting and payments
o Improving real-time tracking and visibility into payroll and expense systems
o Reducing paper checks, postage costs, and reporting paperwork
It’s Time to Transform Payment Processes
It’s estimated that 13-15 percent of the US workforce has gone full-time freelance to replace a traditional job, and nearly 20 percent of full-time independents pull together multiple gigs to earn more than $100,000 per year. Clearly, the gig economy has become a mainstream part of corporate labor markets and will continue to influence how businesses compete for and compensate top talent.
Doing so requires big changes to payroll and expense systems, and it’s time for employers to adapt to stay ahead of the trend and remain competitive. Tech-enabled financial processes can keep payroll, payments and expense programs more stable, and costs under control, while also reducing risk and liability.
At the same time, businesses should start to look at their best contractors and other gig workers as potential long-term partners—and even future full-time equivalents, when it makes good business sense. Flexible and responsive payment solutions are a key element of a competitive and successful strategy to incorporate gig talent into your business plan.
Need help supporting your gig workers? Let’s talk.