RULE #9
9
PLAN FOR MORE GIG ECONOMY WORKERS
We have entered a new era. Freelancing is changing how we work. In lieu of traditional full-time jobs with a single employer, more Americans are working independently. Instead of working 9-to-5, more are working project-to-project and gig-to-gig.
The Growing Market for the Gig Economy Workforce
The workforce of the future won’t be all full-time employees. It will be made up of consultants, contractors, freelancers, part-time employees, and other independent workers collectively known as the gig economy. The gig economy workforce is growing rapidly. According to a recent study by the Freelancers Union, freelance workers accounted for 34 percent of American workers in 2015, totaling nearly 54 million people and contributing $7 billion to the U.S. economy.1 By the year 2020, Intuit predicts 43 percent of the U.S. workforce—or 60 million people—will be gig economy workers.2 This data indicates that HR leaders will need to plan for a shift from managing a workforce of almost all full-time employees to managing a more blended workforce of employees and independent, gig economy workers.
Both employers and workers are driving the rise of the blended workforce. Qualified independent workers are now easier to find while workers themselves seek greater flexibility. A study by Ardent Partners found that 95 percent of organizations believe their contingent workforce is important to their company’s success and growth. They found that HR leaders are increasingly looking at a mix of contingent workers and full-time employees for talent.3 A recent survey conducted by Randstad similarly shows that nearly half (46 percent) of HR leaders are including independent contractors as part of their talent acquisition strategy.4 Our research, conducted with Field Nation, an online platform connecting businesses with freelance workers, for “The Rise of the Blended Workforce in the New Gig Economy” found 58 percent of top-performing firms say that 20 percent or more of their labor force is already composed of freelancers. These freelancers bring valuable skills to companies including: effective teamwork (38 percent), problem solving (36 percent), and self management (32 percent).5 Companies increasingly are recognizing the value of a blended workforce composed of full timers and contingent workers, and they are building competencies to successfully manage this blended workforce.
The Five Types of Gig Economy Workers
Who are these growing masses of independent workers who move from gig to gig and project to project, eschewing the traditional nine-to-five full-time job? As freelancer and entrepreneur Ritika Puri states: “The old stereotype, that freelancers are just people who can’t find full-time jobs, is years—even decades—out of date. The contemporary freelancer is an experienced professional with a specific set of skills, whose track record and personal brand are strong enough to support a thriving business.”6
Table 9.1 shows that the freelance workforce can be divided into five types of workers. As you can see, independent contractors make up the largest segment. Data on the gig economy workforce indicates that independent workers are mostly self-employed people who take on consulting engagements, contract work, and projects to build a portfolio of gigs.
Table 9.1 Five Freelancer Segments of the Gig Economy
In 2015, the largest increase in gig economy workers came from the “diversified worker” segment. This increase was driven by workers who have multiple sources of income, from both full- or part-time employment plus freelancing. For example, they may have a 20 hour per week job plus take on gigs sourced through online platforms such as Uber, Lyft, or TaskRabbit The number of these diversified workers who earn 10 percent or more of their income from side gigs has increased by over 50 percent in just the past year, from 9.3 million in 2014 to 14.1 million in 2015.7
It’s important for HR leaders to consider that many of your current employees are likely to already be participating in the gig economy. Workers in part-time, and even full-time, jobs are increasingly taking on side gigs, consulting projects, and contract work in addition to their day job and often without the awareness of their primary employer.
Freelancers and other independent workers are no longer “wannabe employees” who can’t land full-time work. Today’s gig economy workers are more likely to be highly sought-after workers in the battle for talent, with in-demand skills and expertise. Toptal, a freelance platform, screens software developers and designers from around the world to identify and offer companies the “top 3 percent” of talent. The CEO of Toptal, Taso du Val, notes that “five years ago freelancing was kind of silly, what the hipsters did out of college. Now it’s much more of a serious thing.”8
Miles Everson, vice chair of PwC and creator of Talent Exchange, an online marketplace that connects freelancers with job opportunities within PwC, believes mid-career professionals and senior professionals are two segments of workers who can leverage their skills and expertise into independent work. Everson describes the first of these segments as “the mid-career returning women who decide not to pursue full time work and choose freelancing as a way to gain new skills and have greater work-life flexibility.” The second segment Everson sees is “retired senior business or military advisors who have amassed specialized skills, certifications and security clearances that are of immediate value to organizations.”
The talent and expertise mid-career freelancers bring to organizations is reflected in their relatively high compensation, which is another factor attracting workers to the gig economy. A 2015 study by MBO Partners found that 16 percent of “full-time independents” surveyed earned over $100,000 a year.9 Compare this figure to the $52,939 figure reported by the U.S Census Bureau as the U.S. median household income for 2013.10
Kris Wallsmith, a freelance developer in his mid-thirties based in Portland, Oregon, told the Wall Street Journal: “I can make much more money working as a freelancer and picking and choosing my clients around the world and working remotely. Working full time in an office would limit my choices to what we have in Portland.”11
Millennials are also active participants in the gig economy, but due to their age and experience levels, they tend to have fewer skills and less expertise to offer employers. Millennials work primarily in the on-demand economy, using multiple technology platforms such as Uber, Etsy, Airbnb, and TaskRabbit to find work and sell services.
Benefits of Using Gig Economy Workers
Future Workplace’s research for “The Rise of the Blended Workforce in the New Gig Economy” study found 60 percent of HR leaders plan to increase their use of contractors and freelancers the following year with half (49 percent) planning to increase their hiring of freelancers by 30 percent or more. The HR leaders who participated in our research identified several benefits (see Figure 9.1) that companies are realizing by incorporating gig economy workers into their workforce. The top benefits include being able to create flexible teams based on business needs, more immediate availability, and access to niche skills on demand. Managing lower labor costs is also an influencing factor. Since companies don’t pay social security or Medicare taxes, make unemployment insurance payments, or provide benefits for contractors, the cost of hiring a contractor is often 30 to 40 percent lower than hiring an equivalent full-time employee.
Figure 9.1 Top five benefits that HR leaders see in using gig economy workers
Billy Cripe, chief marketing officer of Field Nation, an online platform for connecting businesses with freelance workers, says that “contingent workers are becoming a robust segment of the workforce and as important as full-time workers when it comes to meeting critical business initiatives.” PwC’s Miles Everson notes why gig economy workers are worth pursuing, “From an organizational perspective, we created Talent Exchange because we believe figuring out how to engage more contingent workers will give us access to top talent and better serve our client’s needs.”
It’s not just companies driving the growth of the gig economy workforce. Many workers prefer independent work to full-time employment because they value the control, autonomy, and flexibility that working in the gig economy offers them. Gallup’s “State of the American Workplace” finds that about 70 percent of employees are disengaged from their jobs—an alarmingly high level that is estimated to cost companies more than $550 billion a year in lost productivity.
Gig economy workers appear to be a happier bunch.12 Field Nation has found that three out of four freelancers prefer freelancing to traditional employment due to benefits such as “flexible working hours, the ability to be my own boss, and the ability to choose what I work on.” Nearly three-quarters (74 percent) of the independent workers surveyed admitted that they had no intention of going back to a full-time job.13
Research by Upwork found that the majority (60 percent) of freelancers work by choice today as compared with three years ago. Upwork also found that 70 percent of millennials considered quitting their current job to freelance, listing the flexibility to travel and freedom to set their own schedules as the reasons why.14 Surveys from the Freelancers Union reinforce how important a sense of control can be for workers, as one of their survey respondents noted, “I find it more rewarding, I work when I want to, I commute only if I choose to and my earnings are dependent on how much I choose to work, not on corporate politics.”15
With both companies and workers driving the demand for independent workers, we expect to see continued growth in the gig economy workforce.
The Unbundling of a Job
The growth of the gig economy is coming at the same time as a revolution in our thinking about how work is organized. With a highly talented, affordable, flexible, and available workforce only a click away, it is only natural that work is being redefined and organized in ways that aren’t a full-time job. A 2016 O’Reilly report notes that everything we think of as a “job”—from finding work to managing income and receiving benefits, training, and social connections—can be unbundled.16 We don’t need a job to obtain the components of a job. Author Nick Grossman describes it this way: “Do people need jobs or can we deliver what jobs provide some other way and in a potentially unbundled fashion? The ‘jobs of a job’ essentially include income, structure, social connections, meaning, and, at least in the United States today, healthcare.”17
This great unbundling is now impacting work itself. Freelance work is now easier than ever to find by signing onto one of the online platforms such as Field Nation, Upwork, HourlyNerd, Toptal, Work Market, PwC Talent Exchange, and many others. Supporting the unbundling of the job, new options are available for accessing the benefits of a job. The Affordable Care Act makes it possible to find and purchase affordable healthcare insurance as an independent worker. In the United States, there are several options—an individual 401(k), a SEP IRA, and a traditional or Roth IRA—for workers in the gig economy to save for retirement without a job. Coworking spaces like WeWork offer flexible alternatives to the office, as well as social connections.
One example of how organizations are unbundling jobs is in the newspaper industry. This industry has evolved from hiring full-time staff writers to now recruiting freelance journalists. In addition, the organizations have unbundled the writing job and are now predominantly staffing writers externally from the freelance market.
This is happening inside companies as well. Gianpaolo Barozzi, senior director, HR and Leadership and Team Intelligence at Cisco, is one of the HR executives behind the piloting of the Cisco Talent Cloud, an internal “virtual marketplace where assignments and talent can be brokered and screened against each other.”
Barozzi explained how it works: “One side of this virtual marketplace provides an opportunity for our business leaders to identify the work that needs to be done using an assignment profile. It could be a role for a couple of years, it could be a project, or it could be an assignment for a few months. On the other side, an individual employee completes a talent profile. This provides our people with the opportunity to share their aspirations for the next assignment they are looking for, the timeframe they will be available for a new assignment, and the type of assignment they are looking for (e.g., function, location, level, type of work) along with summaries of their professional track record. In total, this creates a picture of their professional reputation.”
Essentially, the Cisco Talent Cloud combines the flexibility of the freelance marketplace with the structure of a corporate environment. Cisco’s innovation is “taking the control, autonomy, and flexibility of working in the gig economy and combining it with the structure of the corporate world. It’s this combination that creates a compelling employee experience. For Cisco, the Talent Cloud initiative provides the company with greater ability to create flexible teams and access specific skills on-demand from internal talent.”18
With all new markets, there is the proverbial chicken-or-egg question. Which is the bigger challenge, filling the market with assignments or filling the market with the workers seeking assignments? Barozzi responded, “They are very related; you can only fill the market with workers if the manager starts setting them free.”
Some will say, “Well, that is exactly what professional services are doing, managing by project.” Barozzi states, “Yes, we are trying to insert the best of this into a corporate environment where the work to be done is internal and transparent. The best employees can move from assignment to assignment within our organization, allowing for choice and enabling a ‘one company, many careers’ journey.”
Barozzi foresees the Talent Cloud expanding beyond the organization’s employees. “For now, our leaders have access to internal Cisco people only. In the future, we are open to the possibility of opening up access to external assignment seekers.”
As an increasing number of workers forgo traditional employment and join the gig economy, both start-ups and traditional companies are stepping in to offer services that make it easier for independent workers to find work, learn on the job, and access a host of other benefits that were previously only available to full-time employees. Today, gig economy workers can pull together the components and benefits of a job customized to their needs, expectations, and desires. It’s the ultimate form of personalization: working when, where, how, and with whom you want to!
A recent announcement from Manpower and the Apollo Education Group offers the benefit of tuition reimbursement for contingent workers in a Manpower program known as MyPath. Created by Manpower and Western International University (a subsidiary of the Apollo Education Group), MyPath not only provides tuition reimbursement to Manpower associates who pursue a college degree but also includes many of the benefits of career coaching, assessment, and career guidance, normally only provided to full-time workers. Jonas Prising, CEO of Manpower, and Greg Cappelli, CEO of Apollo Education Group, the company behind this program, believe MyPath allows contingent workers to pursue a degree with the flexibility and support they need as they go through the program. Look for more programs like MyPath where contingent workers can add to their skills and enroll in college while businesses access a wider talent pool. As the gig economy grows, we expect to see more companies emerging to offer support services to workers unbundled from a job. A sample of these new services are outlined in the accompanying sidebar.
Support Services for Gig Economy Workers
• Finding work. Job discovery platforms allow contingent workers to search multiple work providers using new platforms and apps like Work Market, Field Nation, Dispatcher, Opus for Work, BlueCrew, and WorkGenius; these platforms also help freelancers manage their time, and in some cases, even provide them with a suite of traditional employment benefits.
• Managing finances. The problem of dealing with the administrative burden of managing finances, taxes, and other components of gig work is now solved with services like Even, Hurdlr, SherpaShare, And Co, and Benny.
• Acquiring benefits. The Freelancers Union and the Affordable Care Act have been joined by Peers, offering a portable benefits package including health, disability, and retirement and allowing multiple employers to fund a gig economy worker’s benefits.
• Controlling professional identity. Some start-up platforms such as Karma and Traity are helping workers with their online reputation, giving users the ability to generate and monitor a reputation score.
• Tapping tuition reimbursement. Manpower in partnership with Western International University now offers tuition reimbursement for its associates who can combine learning while earning.
• Finding space. Inc Magazine reported an 83 percent growth in the number of coworking spaces, with memberships increasing by 117 percent year over year. This is a global phenomenon, with the top 10 coworking spaces in the world including WeWork, The Surf Office, The Factory, Hub Impact, B Amsterdam, Hacker Lab, Punspace, BetaHaus, Co+Hoots, and Hacker Lab.
Source: Future Workplace with adaptations from “Serving Workers in the Gig Economy,” Nick Grossman and Elizabeth Woyke, and Ubiq Blog, 2014.
The Impact of Gig Economy Workers on HR
The growth in the number of gig economy workers is forcing organizations—and HR departments in particular—to reinvent talent management in a way that incorporates a blended workforce of both traditional full-time employees and independent workers. “The Rise of the Blended Workforce in the New Gig Economy” study found that 93 percent of HR professionals see work teams becoming increasingly blended, with full-time employees and freelancers working together to accomplish organizational goals.
As freelancers become an integral part of the workforce, HR departments need to source, develop, and manage them in a way that is consistent with their full time employer brand. We recommend that HR leaders ask their teams to address the following 10 questions about how to source, manage, engage, recognize, and reward the gig economy workers in your company:
1. How are we managing gig economy workers? Manually or via an online platform?
2. Who is responsible for managing gig economy workers? HR? Business unit leaders?
3. How could we onboard and integrate gig economy workers into the organizational culture?
4. How could we reward and recognize gig economy workers?
5. Do gig economy workers receive holidays like full-time workers? What if they earn more than full-time employees?
6. Could gig economy workers take advantage of mentoring, coaching, and career mobility services?
7. What types of training and certification could gig economy workers have access to?
8. What types of benefit or referral programs could gig economy workers have access to?
9. How could we measure the performance of gig economy workers?
10. What criteria could we use to evaluate the various online freelance platforms?
We recommend that HR leaders review their policies on remote and flexible work. HR leaders and employers are slowly coming to recognize that it is no longer necessary to be tied to a single office location or time zone in order to effectively perform one’s job duties. Through flexible working arrangements, remote work, and the use of off-site and outsourced contractors, work is being disaggregated from place and time. Research from both Harvard and Stanford business schools shows that workers who are given the flexibility to work where and how they prefer are more productive and more engaged.19
HR Strategies to Manage Gig Economy Workers
A workforce that includes steadily rising numbers of gig economy workers will pose both great challenges and great opportunities for leaders. Each organization must sort through options to determine how to best source, develop, manage, and engage gig economy workers. Our suggestion is to take a total talent management approach to the blended workforce. This approach helps HR leaders optimize the supply of independent workers, make faster and better-informed decisions about talent, and reduce the overall labor and infrastructure spend. To that end, we recommend six strategies to help HR leaders on the path to a total talent management approach: Incorporating approach, governance, partnerships, performance, analytics, and compliance.
1. Develop a strategic approach to sourcing gig economy workers. With the on-demand workforce already a key part of the talent pool in many companies, this approach begins with having visibility into all the talent your organization has today. What percentage of your workforce are independent? Next, examine how your organization is currently sourcing gig economy workers. Our research has identified multiple approaches, ranging from a centralized approach of posting on a preferred freelance platform to a decentralized approach where hiring managers create their own solution to find contingent workers. Finally, identify how your organization is sourcing and managing to provide clear visibility and data into the skill sets of your gig economy worker pool.
2. Define governance and success criteria for managing gig economy workers. The contingent workforce of today resembles the corporate training landscape in 2000. In the last 17 years, corporate training departments have moved from being fragmented and owned by multiple business units to being more centrally managed, usually by a chief learning officer, to maximize the business value of the investment.
Today we are at a similar juncture with gig economy workers. There is a wide disparity in how companies source and manage their contingent workforce. Some have procurement functions manage these workers; others assign this responsibility to HR or external service providers like temp firms. To avoid inconsistency and fragmentation, organizations should establish clear accountability and management of their gig economy workforce similar to how they manage their investment in other areas.
As the gig economy workforce grows, some companies may even consider creating new job roles dedicated to overseeing workforce management. Similar to having a chief learning officer, companies might create a chief gig economy officer to manage gig economy workers and develop HR practices targeted to independent workers, including reward and recognition programs, onboarding, and access to specialized skill-building programs.
3. Build a partnership between HR and IT to support and manage a blended workforce. Most HR processes involving talent are designed for full-time staffers, not freelancers or contractors. To better reflect the evolving workforce, HR can collaborate with IT to determine how to modify current information systems to support on-demand talent, bring consistency to the process of managing independent workers, and gather data on the characteristics and performance of those workers. According to research by Work Market, 42 percent of its sample of 1,000 companies still use a manual system for independent workers, while the remainder use some combination of vendor management systems, freelance management systems, and a managed service provider.20
4. Develop a range of strategies to ensure the performance of gig economy workers. Performance of gig economy workers is as important to HR leaders as performance of their full-time employees. “The Rise of the Blended Workforce in the New Gig Economy” study found nearly half the 600 companies we surveyed were incorporating HR practices similar to those for full-time employees to manage the performance of the gig economy workers, including reward and recognition systems, access to special training programs such as company onboarding and certification programs, and performance coaching and mentoring programs. Some companies customized their programs for gig economy workers to reflect the length of their contract, but overall, we found that companies are trending toward offering a set of HR practices for gig economy workers similar to what they offer full-time workers.
5. Use analytic tools to optimize engagement of gig economy workers. Managing the supply and availability of a contingent workforce is critical given these workers often work on multiple projects at the same time and have other deliverable and time commitments. It is therefore important for HR leaders to have data and visibility into what the company’s needs are in order to accurately source the right number and type of independent workers at the right time. Ardent Partners reports that many companies lack the HR systems that allow them to optimize their freelance workforce, with nearly half of today’s organizations possessing only partial visibility into their current or future total talent pool.21 Optimizing this more complex workforce requires new data, analytics, and forecasting.
6. Mitigate legal risk through systematic compliance management of gig economy workers. Finally, the major risk that companies identify in using independent workers is compliance risk. Because the labor cost savings are so great, companies have to create a rigorous review process to ensure that employees are not misclassified as independent workers. It’s important that HR leaders implement clear documentation and manager training to ensure that gig economy workers are both classified and managed appropriately as independent workers, and regularly reviewed.
The Future: What to Expect as the Gig Economy Workforce Grows
The gig economy is rapidly becoming the new normal for how businesses organize work. There are several demographic and technological drivers that are sparking the accelerating growth of the gig economy. First, as we look ahead to what’s fueling the expansion of the gig economy, we see increasing demand from companies for independent workers. Gig economy workers are cheaper, are more flexible, provide on-demand skills and expertise, and allow for a dynamic approach to talent management. As long as companies continue to obtain these benefits from adding gig economy workers to their workforce, they will continue to demand gig economy talent.
Shifting values and priorities of the workforce are also contributing to the rise of the gig economy, and it’s clear that more workers are seeking the flexibility, control, and autonomy that the gig economy offers. PwC’s Everson reveals that “in a study by PwC, the University of Southern California and the London Business School a significant number of employees across sectors and generations feel so strongly about wanting a flexible work schedule that they would be willing to give up pay and delay promotions in order to get it. Sixty-four percent of Millennials say they would like to occasionally work from home, and 66 percent would like to shift their work hours. This is feedback we take to heart at PwC, since almost 80 percent of our more than 200,000 employees globally are Millennials.”22 As millennials become managers and business leaders, their priorities and values will contribute more to shaping how work is organized and done.
Technology is making it easier, more convenient, and increasingly affordable to find talented, experienced gig economy workers. Leading third-party platforms like Upwork, Field Nation, Toptal, Work Market, HourlyNerd, and many others are another source in addition to traditional temporary staffing agencies to help companies identify and recruit independent workers. According to the “Freelancing in America 2015 Report,” 69 percent of freelancers say technology is aiding their ability to do so.23
As more professionals switch off the traditional full-time employee track to become gig economy workers, expect additional companies like PwC creating their own platform to source and manage freelance talent. Could this become a movement where certain industries, such as professional services, shift the bulk of their talent to independent workers? Will there be a new breed of Fortune 1000 firm with a core leadership team—a group of leaders and team members with specialized skills—and the rest composed of gig economy workers? Consider the high “contractor per employee” ratio at companies such as Uber and Lyft. Time will tell, but the growth and benefits of the gig economy point to the rise of a much more flexible and fluid workforce as a way to navigate the changes in the future workplace.
PwC is committed to attracting independent workers as part of its HR strategy because of the company’s belief that gig economy workers are the workers of the future. Everson concludes, “At PwC we have launched the Talent Exchange as a way to find top talent who want to work on their own terms. We simply cannot walk away from nearly 40 percent of the workforce in 2020!”
Another company that has decided that it can no longer ignore the gig economy is LinkedIn. LinkedIn is offering LinkedIn Profinder, a freelancer-buyer matching service, positioned as “The easiest way to hire top talent” with a menu listing 14 categories of white-collar skill sets ranging from accounting to writing and editing.24 The LinkedIn platform is one that over 420 million business professionals worldwide are familiar with, so LinkedIn’s entry into the gig economy provides a way to explore matching gig economy professionals with employers and test the market for expanding its own services.
Finally, demographics are also a likely contributor to the growth of the gig economy. Many studies have found that baby boomers—who are currently at retirement age—want to keep working well into their golden years. A 2015 survey by The Transamerica Center for Retirement Studies found that nearly two-thirds (65 percent) plan to work past age 65 or don’t plan to retire—ever.25 As older professionals continue to want to work well past the traditional age of retirement, the prevalence of “gray talent” will rise to become an even stronger force contributing to the growth of the gig economy.
While the growth in the gig economy workforce seems certain, what’s uncertain is what the legal implications will be of this rise in the gig economy. Courts have already started to wrestle with worker classification lawsuits that are testing the applicability of existing labor laws for contingent workers. While some advocate for a third classification as “dependent contractor,” others argue that it’s more important to ensure that all workers, regardless of classification, get benefits and protections.
The gig economy landscape is still in flux but growing rapidly. As we move ahead, blended workforces composed of full-time employees and gig economy workers will increasingly become the norm. We may see entire industries, such as professional services and law firms, significantly shrink their full-time workforce as gig economy workers become a more efficient, lower-cost, and flexible option to meet their business priorities. As the rate and pace of change accelerate, organizations will leverage gig economy workers to optimize for increasing uncertainties in the global marketplace.
MY ACTION PLAN
Myself
• If my paycheck were guaranteed, what assignments would I like to take on within the organization?
• What is holding me back from doing so?
• How would I advise a 21 year old about participating in the gig economy?
My Team
• How could we have our HR team review open roles and discuss new ways to fill these roles with gig economy workers?
• What would have to change for us to move from the concept of filling a job to filling an assignment?
• What is our approach for engaging with freelancers and gig economy workers?
• What new platforms, tools, and skill sets are needed for us to create a total talent management approach to the blended workforce?
My Organization
• How could freelance platforms impact our organization’s sourcing needs over the next three years?
• What new roles will need to be created to best manage gig economy workers?
• How will teams of stakeholders need to work together to govern and manage our gig economy workers?
• How are our competitors sourcing gig economy workers? For what job roles?