Independent contractors and gigs have been around for years. So, when you put independent contractors together with gigs, you get temporary workers in the gig economy. That said, gig economy workers are independent contractors but are sometimes called a few different names like contingent workers, independent workers, temporary workers, and so on.
An independent contractor is someone who does short-term assignments for a business without having the classification of full-time employment.
But the difference between whether people are classified as independent contractors or actual employees isn’t as straightforward. To distinguish between the two takes some deeper looking at labor and employment laws, then applying that to who define as gig workers.
Full-time Employees vs. Independent Contractors
The first step in determining whether you’re going to hire independent contractors or regular employees is to look at the Fair Labor Standards Act (FLSA). FLSA outlines the standards for minimum wage, overtime pay, and employing young people in public and private sectors for local, state, and federal governments.
This act by the labor department looks at employment status in three different areas to determine the type of employee.
When you work for a period of time for someone, they control your behavior or how you do your job. So, determining whether someone is currently employed or an independent contractor instead begins by asking the following question: how much control does the employer have over how the employee does the job?
Contractors and gig workers have autonomy over job completion and, in essence, are their own bosses. Gig workers can come to work without losing employment or fear that they can be fired at any time.
Their entire employment is temporary, and the ending is always the conclusion of the contract. The most significant benefit for the company is that they can avoid paying unemployment insurance and typical employee benefits and still receive the labor they need.
Workers that work full time, solely for the same company, are W2 employees or on the payroll. Gig workers can contract with multiple employers at the same time and aren’t on the company’s payroll in the same way.
The next question asked by FLSA is whether the employee is on payroll and receives a paycheck from the employer. Many gig workers receive payment from a gig app or outside service, not the employer themselves. But even if they did, the job may have other nuances, making the service fall in the realm of independent contractors.
Relationships between businesses and employees are never a cut-and-dry determination, but the FLSA attempts to make it so. When classifying an employee or gig worker, asking whether the work is temporary or permanent comes into play. Temporary work falls under the realm of gig workers, even if that work is ongoing or extended after the initial contract.
Another part of this relationship is whether the worker has his own materials to do the job or needs these items from the employer. Take a food delivery driver as an example. The driver provides the vehicle, car insurance, and gas required to complete the “job” of delivering food.
None of this comes from the restaurant. Some gig apps, such as ShiftPixy, do provide car insurance and other benefits for the gigster.
Economic Realities Test
The Fair Labor Standards can be hard to interpret, so the Economics Realities Test helps determine the classification between independent contractors and employees. This test analyzes how dependent the worker is on the business for income. For example, if the gig worker gets a significant portion of their income from that company, the higher chance that person qualifies as fully employed by that employee.
It looks at the reliance of the worker on the company for employment. If the worker relies on the employer for work, the chances are that the individual qualifies as an employee, not an independent contractor.
The test also factors in skill level, the importance of the work, goals of the parties, and payment of benefits and social security taxes.
Benefits of Being an Employee
Being an employee does have some advantages and disadvantages. The biggest ones are consistent work, employee benefits, and workplace protections.
Despite the doldrum of clocking in and out every day from the same place, not having to constantly hustle for a side gig provides stability. But keep in mind, even if you have full-time employment, you can still do some gigs on the side.
Employees usually have health insurance, paid time off, and retirement benefits. The employer pays for unemployment insurance, and if you get laid off, you can take advantage of this unemployment benefit.
Independent contractors or gig workers typically don’t qualify for this benefit. But the CARES Act did give all independent contractors pandemic unemployment assistance.
Protection Against Discrimination
Being an employee gives you protection against discrimination but not when you’re an independent contractor. Employers avoid paying payroll taxes for gig workers and may not be accountable for workplace discrimination, age discrimination, sexual harassment, or wrongful termination under federal discrimination laws.
However, some states define “employee” and discrimination laws differently than the Department of Labor (DOL), so checking your status within your state may change what protections you have against discrimination.
Benefits of Being a Gig Worker
Now that you have the benefits of being an employee, let’s look at why so many people are gig workers and the advantages.
Getting a taste of sweet freedom may make you a gig worker forever. Gig life gives you the freedom to choose any job you want at any time. Your schedule is your schedule. You’re not accountable to one job or one boss when you become a gig worker. The sense of not being tied down to one job is liberating and the main reason so many people take the plunge into the gig economy.
Full-time work lacks flexibility. The entire premise of gig work is being flexible. Gig workers can work anywhere they want at any time, and for whomever they desire. If a gig worker intends to add in an extra shift, they can.
Or if the gigster wants to cut out early, no problem. That long vacation is theirs for the taking. The absolute flexible nature of gig work is extremely attractive and may make any downside worth it.
Gig workers can earn moola on their own terms and accept only the jobs they want. Employees can’t do that, and when the job scope changes, they usually have to suck it up or face possible termination. Gig workers can experience the joys of flexibility, freedom, and independence that regular employees don’t experience each day.
Find a Gig Platform You Can Trust
The best way to find gig work is to sign up on a gig platform. But not all gig platforms offer you the same benefits or safety net. ShiftPixy combines the best of both worlds— employee and gig worker.
You experience the freedom of being an independent contractor with some sweet employee benefits like health care, retirement benefits, and unemployment insurance.
When you settle in with ShiftPixy, you’re an independent contractor with love.