The gig economy continues to grow rapidly in the United States and around the world. Over 55 million people in the U.S. identify themselves as freelancers – a figure that represents 35% of the labor force.
Gig work is a buzzword that describes independent contractors, remote work, part-time employment, and temporary employment. If someone works for a platform like Fiverr, Uber, or Lyft, then they are part of the gig economy.
There are several pros and cons of the gig economy worth considering if you or your business are thinking about getting involved in this relationship.
List of the Pros of the Gig Economy
1. It gives workers more flexibility in the work they do.
Most freelance workers that take part in the gig economy find that their circumstances provide a lot of extra flexibility when compared to traditional employment. Some gig workers prefer to shape their hours around specific events in their life for better balance. Tasks are given to workers with an end date, but it is up to each person to accomplish the task in a way that utilizes their strengths appropriately.
If you like to work early mornings and weekends, then the gig economy can make that happen. When your preference is to stay at home and work traditional business hours, that’s a possibility as well. You can choose a remote office, a VPN at the beach, or anywhere else that is comfortable for you.
2. There is more worker independence in the gig economy.
Gig economy workers, including independent contractors, have more freedoms available in the completion of the work they do. There is no one looking over their shoulder in the office to micromanage results. Some workers don’t even work at an office, so they can be left alone to complete their assignments. This benefit can give people a tremendous boost of confidence, enhance the quality of the work they do, and enjoy the flexibility of being on their own timetable up until a deadline.
3. Workers have access to a greater variety of employment opportunities.
Instead of being stuck with the same monotonous task every day or forced to stay in a stuffy office completing administrative tasks, the gig economy gives workers the option to have more variety in their work. Freelancers stay in full control of their assignments, deciding whether or not to accept each contract or client. Every project might have unique elements that make the work more interesting as well, allowing for more creativity to be brought into the assignments so that the final outcome can provide superior results.
4. Gig workers can earn more money.
Freelance workers earn money based on their skill and expertise – over time. If someone decides to work for one company only, then the pay might be variable. It could even be less than what a traditional worker might earn. Some offer a higher salary since gig workers don’t usually receive any benefits. In exchange for this benefit, there is more control over extra time requirements like meetings or phone calls. This advantage makes it a lot easier to continue one’s education as well to become even more valuable to a potential future employer.
5. There can be zero commuting costs in the gig economy.
When you work in the gig economy, then your commute might be the time it takes to walk from your bedroom to your home office. If you live in a studio apartment, then you don’t even need to worry about that time either! The average time it takes for a traditional worker to drive to work in the United States is 26 minutes, which means you would go through 1-2 tanks of fuel each week for the privilege of earning a paycheck. That means you can save $30 to $60 per week, depending on the vehicle you drive, and that money can go directly toward credit card debt, rent, or a vacation fund so that you can take dream trips every once and a while.
6. It lowers the cost of doing business for companies.
Because agencies no longer have the need to pay benefits or training costs when hiring someone in the gig economy, freelancers have a lower cost than the average full-time employee. Even if they pay a slightly higher salary, the expenses are much less. Most freelancers will provide their own equipment to finish a project as well, which can be a significant reduction in cost too. Businesses get to pay only for the actual labor that they receive.
7. The gig economy gives businesses the option to scale quickly.
Startup companies and small business owners find that a freelance worker allows them to quickly scale their organization without paying a significant cost. There is no need to provide office space, equipment, or benefits when bringing people into the project. Small companies only need to find people who have their own computer and the capability of providing expertise. That structure makes it much easier to meet market demands, initial goals, and budget restrictions. Many firms can get moving without the need to start an HR program or healthcare arrangements.
8. It adds diversity to the pool of workers that are available to the company.
Companies that decide to utilize the gig economy will find that there is a lot more diversity available compared to the pool of local workers. Even if freelancers are working different hours, including late at night or early in the morning, this structure makes it a lot easier to meet the strict time requirements of some deadlines. You can even create a structure where collaboration occurs around the clock because a small company can hire people in different time zones around the world. The varying backgrounds offer a lot of new ideas that wouldn’t be available if the hiring process took place in a typical manner.
9. Workers don’t need to cater to the company culture anymore.
If you work as a freelancer, then you get to set the culture at the office because you can work from almost anywhere. Some people in the gig economy like to complete projects as they travel because it allows them to earn an income without being tied to a specific location. Workers can create a home office environment that lets them manage their family schedule effectively while volunteering in their community. There is no longer the need to participate in unwanted team-building activities, corporate rallies, and the politics of the office when you’re working by yourself. You get to be in control of the narrative.
10. The gig economy complements the creative worker.
People with creative minds sometimes need variety to keep themselves engaged. Someone might decide to drive for Lyft or Uber for half of the day, and then get involved in some graphic design projects for the remainder of their day. If you want to write a novel, then you could fill in some income gaps by taking on some editing or copywriting work. As long as you are turning in the projects on time, then no one is going to question your methods.
Businesses benefit from this advantage too because giving creatives the freedom to explore their full potential increases the quality of the delivered work. The corporate environment often restricts what someone with this skill can provide, which means there can be unneeded tension in the employee-employer relationship.
List of the Cons of the Gig Economy
1. There are zero benefits associated with the gig economy.
Most workers in the gig economy do not receive any benefits as part of their compensation package. Since your classification is not that of a full-time worker, even if you’re working 40+ hours per week, the laws regarding what you’re required to receive are usually different as well. Only a handful of businesses offer benefits to people in this situation, and even then, it usually requires a long-term commitment.
That means it is the responsibility of the gig worker to create and plan their retirement contributions, find healthcare insurance, and some of the other benefits that full-time workers receive from their human resources department.
2. Gig workers have a different tax situation to manage.
Workers in the gig economy receive direct payment for their skills. No one withholds the taxes that go to the government each time, which means it is up to each person to set aside the correct amount to ensure they stay in compliance with regulations in this area. If you work in the gig economy in the United States, you’ll want to plan on saving at least 25% out of each check to take care of this obligation.
The reason for this disadvantage is the structure of the employer-share payroll taxes for Social Security and Medicare. If you are a self-employed person, which is a status that includes everyone working in the gig economy, then you are responsible for the employee and employer expense in this area. That means you’re getting taxed twice one a full-time worker gets taxed once.
3. You will need to file your estimated taxes once per quarter.
If you work in the gig economy, then you’ll need to file taxes at least once per quarter with the U.S. government. This process involves the payment of estimated taxes based on the figures included in the previous year’s return. Some states require independent contractors and freelancers to register as a business, which means you might need to file another set of taxes each month. There may even be a need to charge sales tax on the services you provide. Every situation is a little different, but you might need to hold a city, county, and state operational license to work. Full-time employees don’t face that problem.
4. Some people will not understand your employment situation.
If you are working at home, then some people will wonder if you’re really being productive. It is difficult for some community members to grasp the concept of the gig economy. They will assume that you’re not working because you don’t go to a formal office. This disadvantage is strong enough in some communities that freelancers decide to use a work-sharing agreement at an office to avoid this conversation. You’re almost always on the defensive with strangers because the average person seems to have no filter in their criticism of your work arrangements.
5. The gig economy can lead to high levels of isolation.
Some people thrive in working conditions where they are on their own almost all of the time. Then there are the gig workers who find that they miss the social elements that come when you get to work in a traditional office. You don’t get to participate in any work parties except for rare situations, and there are no talks around the water cooler or while getting coffee. The added flexibility of being able to work wherever one wants is a tremendous benefit, but the advantages can sometimes disappear when someone feels removed from their family or friends.
6. Gig workers typically work more hours during the week.
Although you have the flexibility to set your own hours when you are a gig worker, it can be a challenge to find anyone wanting to hire you if there are specific circumstances that a potential employer must meet. You’ll find that you must offer high levels of availability and quick turnarounds on a project to receive contracts. When your prices are high and your turns are long, then it will become a challenge to fill up your schedule. That’s why the most successful freelancers in this part of the economy are working 60+ hours each week, seven days per week, to maintain their profit margins.
7. There is a lot more stress in the gig economy.
Full-time workers have confidence in knowing that their employment position is relatively secure. Although layoffs can happen, the risk of such a circumstance is fairly low for the average person. When you earn your money through the gig economy, then you’re always looking out for the next job. You must also be prepared for changes to occur in your current assignments. There are a lot of unexpected circumstances that can occur, including being let go in the middle of an assignment. When you add this stressor into the others that exist from being isolated from everyone else, it can be quite the challenge to cope with some situations. Your income is never really 100% secure.
8. Companies may find less reliability in their workers.
There are some freelancers who enter the gig economy because they believe that the work will be easier to do. Some contractors are less willing to work as hard for their pay when compared to a full-time employee. That’s why it is imperative for every business to thoroughly research each prospective gig worker before extending an offer to ensure that the results can be reliable. Setting up expectations before an assignment or money exchanges hands can help to lessen the risk of this disadvantage as well.
9. There are explicit regulations on the contractor status of gig workers.
If a business wants to hire a freelance worker in the gig economy, then there must be a complete understanding of the expectations of a contractor in that status. Most states in the U.S. take the “independent” description seriously, which means there must be freedoms in place to let the gig worker perform the work at their discretion. You may need to file specific paperwork and financial information that shows the agency is in compliance with this requirement.
If companies treat their gig workers in the same way that they manage their full-time employees, then that behavior may be enough legal justification for freelancers to demand benefits that are equal to what their co-workers receive already.
10. You must continue to up-level your skills.
Freelancers that started in 2010 with the gig economy cannot use the same skill set in 2019 to complete their work. You must continue to up-level your skills to get better because new gig specialists enter this field every day. The levels of industry knowledge that you receive must continue to increase if you want to keep receiving contracts or employment offers. Contractors must continue learning because the number of over-qualified people looking for industry-specific work continues to grow. If you’re unwilling to change, or a business is unwilling to look at different freelancers, then the creativity levels in the final relationship can stagnate. The marketplace is not going to wait for you to stay relevant.
11. Gig workers must budget in their own vacation time.
You could take a vacation whenever you want as a gig worker, but there isn’t the benefit of paid time off in this situation. Contractors must budget this benefit into their rates to ensure that they can take some time to decompress from the stresses they encounter throughout the year. You may need to give your employers 1-3 months of notice to let them know you’ll be unavailable as well. Even when you do everything right, you might find as a freelancer that some businesses will decide to move on from you if you take more than a couple of days off. If you fail to budget in the cost of your vacation, then it might be difficult to pay the rent since you won’t be earning money when you’re out of the office.
12. It takes longer to build a depth of experience.
When your grandfather first started looking for work, the first job they landed with a stable company would often be the only place of work they would have for their entire life. He would clock in, clock out, and repeat that process for 50 years before retiring with a gold watch. There was never a worry about where the next paycheck would come from each time. This structure allowed for a building of depth and experience that is unmatched compared to the gig economy today.
13. Recruiting executive leadership is a challenge in the gig economy.
The pace of change is accelerating in the world today. Trying to find people who can fill upper-level and executive management positions is becoming more of a challenge because the talent pool is shrinking due to the gig economy. Businesses are working with more temporary workers today than at any time since World War II. That means companies must invest in programs that empower freelancers to learn from one another, receive remote training, and have established protocols in place that control the quality of work received. If a company can thrive in this environment, then everyone can succeed. When one of the two parties struggle, then there is a significant risk of failure included in the freelancing arrangement.
Your career is always in flux in the gig economy. Most freelancers get their first jobs filling in for someone who is absent in an emergency. Trying to build up long-term, relevant experience for a career takes more time in this structure since skill-building requires mentorship and stability – two items that are in rare supply in the gig economy.
The gig economy provides flexibility for workers and businesses to create relationships that focus on needs and expertise. Instead of being limited to what is available in the local labor force, freelancers make it possible for agencies to expand rapidly while workers enjoy the flexibility of working their own hours at a location they prefer.
Regulations in the gig economy are in flux constantly, which means some of the advantages found in this arrangement today may not be available in the future. Adjustments to the corporate landscape can cause unexpected expenses when there aren’t proactive measures in place to adapt to the new environment.
Up to half of all workers in the 2030 labor force could be full-time gig economy workers. That’s why evaluating the pros and cons of this arrangement now are an integral part of what tomorrow’s opportunities could be.
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