Talent Acquisition in the Gig Economy: All You Need to Know
The term “gig economy” was first coined by journalist Tina Brown in 2009. She wrote about the trend of workers pursuing “a bunch of free-floating projects, consultancies, and part-time bits and pieces” while they transacted in a digital marketplace.
The gig economy fundamentally changes three major dimensions of the nature of work:
- the work itself
- the person who does the work, and;
- where the work will be done
The gig economy isn’t a fad that will soon fade away. In fact, it may change the way we engage in Talent Acquisition. As per statistics, the gig economy is going to spread its wings and fly as high as it can.
Research conducted by SelectHub states that a large percentage of Millennials and Gen Z workers are interested in the gig economy either by becoming full-time freelancers or doing some side-hustling. Companies are latching on to the gig economy and the ones that aren’t are losing out on good resources. Studies show that 30 percent of Fortune 500 companies are already hiring through this channel.
In this article, we’ll take a look at talent acquisition in the gig economy. We’ll touch on the technological outlook, best practices, in-demand skills for gig workers, and key challenges. Let’s get started!
Gig workers and how the gig model works
Gig workers are independent contractors, online platform workers, contract firm workers, on-call, and temporary workers who enter into formal agreements with (on-demand) companies to provide services to them. Together, they form an organization’s contingent workforce.
For gig workers, time is of the essence, which is why hiring decisions need to be made quickly. To adhere to this system, the top-down model that many organizations follow will become futile. Active social media networks are replacing traditional ways of recruiting and working and this new form of ‘blended collaboration’ and reciprocity among peers will surely defy the old hierarchical structures.
The gig economy highly depends on technology, and advances in technology will keep fuelling further growth. According to research by PYMNTS.com, 38.4% of US-based non-seasonal gig workers secure their projects through digital marketplaces such as Upwork and Toptal. While these platforms have been growing rapidly, they are also leading to crowded virtual job platforms. This sometimes leaves both the employer and the contingent worker in the conflict of finding the right match. Big data could come to the rescue in such situations.
As per a report published by Noble House, hiring gig workers is showing steady growth. The report takes into account the data provided by 150 companies and 300 HR managers. IT takes second place in the number of freelancers being employed by companies. 81% of companies have used gig workers for a variety of reasons:
- 29.7% of them hired gig workers for project-based work
- 26.5% employed them in the absence of a full-time employee
- 24.2% hired freelancers for work that didn’t need 8-hour work shifts, and;
- the remaining group hired contingent workers for a variety of other reasons
As many as 53% of these companies ended up hiring between 5-20% of the gig workers into their organization, and more than 20% have hired up to 30% of the gig workers they employed. This just goes to show that if a talented worker is found, companies are keen on retaining them by adding them to their talent pool and, if the feeling is mutual, their workforce.
Machine learning (ML)-powered algorithms enable assistance to employers with talent search abilities. These algorithms understand an employers’ demand and match it to the right set of gig workers. This, of course, comes at the cost of gig workers providing in-depth information about their professional projects and educational credentials. According to the report published by Noble House, 25% of companies prefer the use of online portals when hiring gig workers.
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Research conducted on AI-driven recruiting, for instance with pre-employment assessment tools, shows that these systems tend to be less discriminatory by nature. Their algorithms can successfully predict the candidate’s personality attributes. These features, when put together, can make the gig economy selection process more fitting, streamlined, and efficient for all participants.
While some employers choose an ‘inclusive’ approach when it comes to their gig workers, tracking their progress through a defined process, a large section of them do not have a system in place to monitor their contingent workforce. 49% of employers, as per the report by Noble House, don’t monitor their gig workers since they are of the belief that as long as the work is completed, they don’t need to be constantly scrutinized. In our recent article about contingent workforce management, we discuss the benefits of including your gig workers in our HR cycle.
Companies’ best practices
According to Forbes, regardless of gig economies’ current pace of adoption worldwide, it is here to stay and it will strengthen into the future. Though there is no accurate estimate of the numbers, it is projected that gig workers will comprise half of the workforce by 2020 and as much as 80% by 2030.
Jason Phillips, VP of Digital HR & Global Chief of Staff at Cisco, says, “Work flexibility is becoming the norm. The challenge is how fast organizations can provide it.” This will also serve as a huge advantage to companies as it will cut down costs, especially in the projects that are aimed towards testing. Let’s take a look at a few best practices when it comes to integrating gig workers into the organization’s existing processes.
With this evolving trend of contractual or project-based work, organizations are working on restructuring policies to accommodate the gig workforce. What are the law related guidelines one should be cognizant of before hiring contract workers?
When hiring a consultant, a contract can be put in place that makes sure to mention all the requirements that the company may have. These include the hours of engagement, the pay, a withdrawal clause, along with the code of conduct, intellectual property rights, software/hardware support, the method of payment, as well as a review mechanism, and a portal for the timesheet and compensation.
Companies are often working with aggregator platforms as a single entity to facilitate the paperwork. These platforms will provide Legal/Documentation support to enable a smooth process. This model is cost-effective in most cases. All contracts (gig worker contracts) should be vetted by a Legal person and this is tailored for each person. This practice is still in an exploration phase and many governments have not released any circular as of yet.
For tax reasons, you may look at consultant contracts that save taxes for both the individual and the company. During the hiring process, special attention needs to be paid to the source of the worker, i.e. whether they have been hired directly by the company or from an agency, a thorough assessment of the same, along with what the consultant offer is, and background verification is a must.
Companies are ensuring that contractors are not seen as FTEs. They are doing so, for instance, by making sure that contractors are only given general directions about the work, and companies will not have full control over how the work will be done. The independence element in the contractors’ work output is safeguarded, for example by making sure that they do not have a fixed set of working hours (US laws are very strict on this).
In emerging markets, this topic is still being explored. If we employ gig workers for 8 or 9 hours per day then minimum pay guidelines will apply.
Compensation and benefits
Payment to gig workers can be done against an invoice. They will be referred to as consultants and their TDS deducted will be 10% – 7.5% on the CTC. Most of the time, there will be no retirement or medical benefits.
Gig workers are considered professional workers, and the relationship with the organization is driven by the contract which is signed by mutual parties. Some gig contracts do have medical or health Insurance depending on the Sector that they are part of and these terms are also driven by competition. Since the compensation is paid in consolidation, there will be no sub-elements for gig workers. We may have timeline pay or outcome pay. We can look at fixed pay to start with and attach variable pay on the basis of performance. Bonus pay for gig workers/freelancers is generally not applicable but can be considered on the basis of the outcome.
(Online) team building
Since gig workers function without any authority and social context and often from a different location than the rest of the workforce, this leads to a greater feeling of insecurity and disconnectedness amongst them. Thus, to make sure there is a smooth coordination between the full-time team members and gig workers, HR should focus on, among other things, building a robust online culture.
There are various ways in which companies can build an online culture. For example:
- Having virtual collaborative tools for the exchange of ideas, but also for informal discussions,
- Creating a balance with video meetings and not just relying on emails,
- Explaining the company’s culture to gig workers, so they feel like a part of the project, etc.
In-demand skills for gig workers
To give you an idea of the most sought-after skills for gig workers, we’ve listed some of the more popular ones below.
- Software Engineering (4-10 Yrs.)
- Full stack Developers and UI/UX design
- Data Scientists
- Software Developers and Database Developers
- Automation Testers and Technical Illustrators
- HR (4-10 Yrs.)
- Compensation and Benefits and HR Operations
- Talent acquisition Professionals
- Sales and Marketing (4-10 Yrs.)
- Legal (4-10 Yrs.)
- Customer Service and Admin Support (4-10 Yrs.)
- Finance and Accounts (4-10 Yrs.)
- Cyber security (5-15+ Yrs.)
- Blockchain (5+Yrs.)
- Graphic design and Branding
- Content writing
Where do companies hire these People from?
- Most of the corporates (~ 30%) depend on third-party agencies to hire gig workers.
- Around 25% of employers use online gig platforms like Upwork, Fiverr, Nobel House, LinkedIn, Behance.net, etc
Which countries hire the most gig workers?
In recent years, the gig economy as a whole has been on a steady incline. Current trends show the US, Canada, France, Japan, the Netherlands, and Germany to be the countries that hire the largest number of gig workers. This has resulted in greater flexibility for employers as well as the workers, hence leading to a steady decline in the 9-to-5 work pattern.
Key challenges and the way ahead
If we look into the future of talent acquisition in the gig economy, there are several key challenges we can identify:
- Understanding the Model and its Benefits
- Adoption rate
- Policy and Procedures
- Dual Employment
- Employer Data and IP issue
- Concept of FIT/FAT/Right Organizations
What is the best way to face these challenges?
When it comes to dealing with these challenges, we can look at some of the lessons learned by organizations that already have a lot of experience with gig workers. Think for instance of companies in the ride-sharing and food delivery industry. What have they done that worked well and what did they try that didn’t work?
Many organizations in industries other than the on-demand business have been working with contingent employees too, what can we learn from them? What best practices do they have to share?
Other than looking at these lessons learned by companies with more experience in the gig domain, companies will need to start restructuring their policies and hierarchical structures and they will need to create a software infrastructure for dual employment.
On a final note
The gig economy has transformed the way blue-collar and white-collar workers are approaching work. With an increasing number of global workers joining the contingent workforce, companies need to start restructuring their policies and hierarchical structures if they want to survive – and thrive – in this economy.