How do Business Employers Benefit from the Gig Economy Industry?

During the past decade, employment has changed. In fact, it’s still changing – the workforce today looks vastly different than it did during the 20th century.

Economic factors like globalization, recessions, and innovations in technology have reshaped how we look at employment.

Today, the gig economy is taking over traditional employment and changing the way professionals work. In place of long-term, full-time careers with benefits and set hours, many professionals are turning to home-based positions and independent contracting.

The gig economy is good for workers in many ways. It gives them the freedom to work for more than one organization, take control of their hours and wages. They can alsohone their skillsand shape the career they’ve always wanted. It’s clear why so many professionals are choosing gig-based positions instead of full-time careers.

But why are our employers starting to favor a gig-based economy as well? As a business owner, what’s in it for you to work with independent contractors over full-time employees?

As it turns out – there are a lot of reasons for business owners to consider gig-based employment. In short, hiring freelancers and independent contractors can save a significant amount of time and money.

When a company hires an independent contractor, they are subject to different labor laws than they are with full-time employees. This can lead to immense savings for many businesses that make it worth investing in freelance staff.

 

Hiring Freelancers Creates Possibilities: Gig Economy Benefits for Employers

By 2025, millennials will make up more than 75% of the global workforce. Why does this matter?�

It’s no secret that millennials have a different view of work than Gen X’ers or Baby Boomers. They don’t look at careers and workdays the same way – they approach employment with a unique set of expectations that are changing the way companies treat their employees.�

According to a recent study by Forbes, 92% of millennials would prefer to work remotely. Another study shows that 87% of millennials prefer to work around their own schedules.

If your company isn’t open to hiring independent contractors, you’re missing out on a large demographic of workers who want to work from home. You can generate more talent for your team by saying yes to remote based positions an opening up your recruiting possibilities.

Hiring remote workers also give you access to talent you couldn’t recruit in person due to distance. The perfect team member for your business may be on the other side of the world, and with the gig-based economy, it’s easier than ever to bring that individual on board.

Simply put – if you aren’t hiring remote, you’re missing out on a large sector of opportunity. Embracing the gig economy is an effective way to appeal to millennial employees and upcoming Gen-Z talent, helping you bring on the absolute best team members for your project.

 

The Gig-Based Economy Encourages Diversity

Diversity is becoming increasingly important in the workplace � especially among Millennials and Generation Z. In fact, according to a study by the Institute for Public Relations, nearly half of millennials prioritized diversity and inclusiveness when they search for jobs. If your company isn’t embracing diversity, you’re alienating potential employees.

If your company employs gig workers, you’re choosing from a wider talent pool than businesses hiring on-site staff only. Hiring remotely gives you access to talent around the world, regardless of a person’s nationality.

These trends make the gig economy exceedingly popular among people living in underdeveloped countries, minorities, and women. Applicants representing these demographics may not have access to many jobs because of their location, remedied by a growing presence of remote work in today’s interconnected global economy.

Furthermore, remote hiring can minimize unintentional biases as compared to traditional employment. Women and people representing minorities often feel overlooked in the hiring process � whether it be gender harassment, racism, homophobia, or transphobia, workplace discrimination takes many forms.

 

How bad is discrimination in the workplace?

Unfortunately, it’s still common. According to a study by the Pew Research Center, roughly 40% of employed women say they’ve experienced gender discrimination in the workplace. This type of discrimination takes many forms, one of which being denial from positions or promotions due to gender.

Racial discrimination also plays an unfortunately large role in traditional hiring. According to the Harvard Business Review, racial discrimination in the workplace hasn’t declined in 25 years. Between 1990 and 1995, the study found no change in hiring rates for African American applicants based on a total of more than 40,000 applications for 20,990 positions.

Members of the LGBT community faced the highest rates of workplace discrimination, with roughly 43% of gay and transgender workers reporting harassment or bigotry in the workplace at some point during their career (according to the Williams Institute on Sexual Orientation Law and Public Policy). Of these individuals, 17% say a company passed them over for a position or fired them due to their gender identity or sexual orientation period.

 

When companies hire remotely, these statistics change.

Telecommuting discrimination is less pervasive than workplace harassment because hiring managers do not interact with their applicants face-to-face. If you apply to a gig or remote position, your resume, cover letter, and pitch speak for themselves � the hiring manager doesn’t see your personal side. There’s less of you for them to judge � they’re only evaluating the parts of you that matter for the position.

In fact, by hiring remote employees, a hiring manager may not know if they are working with a person of color or a transgender person until after they bring the individual onboard. This levels the playing field significantly for applicants and gives the company itself the advantage of diversity.

 

The Benefits of Diversity in the Workplace

Hiring diverse employees is beneficial for everyone – not just the workers. During the past few decades, diversity has grown into a major priority for many companies. But why?

According to a study by Deloitte Australia, gender-inclusive teams are 80% more likely to outperform others in team-based assessments. McKinsey & Company conducted their own research to learn about diversity and workplace performance, which found the following:

• Companies with gender-diverse staff are 15% more likely to outperform their peers than gender-exclusive companies
  
• Companies with ethnically-diverse staff are 35% more likely to outperform their peers than racially-exclusive companies

Another study by Catalyst showed that companies with a larger percentage of women employees are more likely to outperform their competitors over an ongoing period of time, further highlighting the importance of gender and cultural diversity in the workplace.

But what do these studies mean when they say diverse teams “outperform their peers?”

Studies show that diverse teams increase creativity in the workplace. It makes sense: if your employees share similar backgrounds and struggles, where are you going to find unique perspectives to solve problems?

By onboarding employees with varying perspectives, socioeconomic circumstances, and cultural traditions, you’re inviting their unique ideas into your company. Employees with diverse backgrounds will offer diverse solutions for your team, helping your company outperform your competitors.

Workplace diversity also increases productivity. It’s a natural result of increased workplace creativity: if your employees are creating innovative solutions, they’ll feel more inspired to keep working on the task at hand.

In fact, another study by McKinsey shows that companies in the United States with diverse executive board members have an 85% higher return on their equity investments than teams with gender or racially-exclusive employees.

 

How does this relate to the gig-based economy?

As we discussed above, if you’re hiring remote workers, you’re opening more opportunities to hire a diverse staff. You can hire ethically- and gender-diverse team members from around the world to bring their unique, creative ideas to the table. You aren’t limited to employees within driving distance of your office, nor do you need to pay for relocation costs – you can reap the benefits of a diverse staff without drawbacks.

 

Hiring Remotely Saves Money

Will you hire a full-time employee, there are laws and regulations you need to comply with according to legislation in your state. This includes supplying benefits packages, health insurance, retirement savings, and more depending on where your business is headquartered.

Ultimately, the salary you’re paying an employee isn’t the total cost to keep them on board. You need to factor in their paid vacation time, there paid sick leave, parental leave, Social Security, Medicare, 401K matching, health insurance costs, relocation costs and more when you make your budget.

This doesn’t necessarily apply when you hire free agent talent.

Freelancers and gig workers aren’t subject to the same regulations as full-time employees. You don’t have to give them the same benefits, saving you labor costs overall.

It’s true – many freelancers charge higher rates upfront then you’d expect to pay a salaried employee, but in many cases, the amount you save on benefits, paid time off, and more will outweigh the added wage expenses.

But how much can you save on labor costs by hiring freelancers?

 

The Real Cost of Hiring Full-Time Employees

According to a study by Kelly Services, 43% of businesses hiring gig workers are saving at least 20% in labor costs as compared to businesses hiring full-time, on-site employees.

And it’s no surprise � the cost of employee benefits alone plays a major role in these savings.

According to the Massachusetts Institute of Technology, a full-time employee making $50,000 in annual salary will cost a company the following in benefits:

• $150 for life insurance
• $2,000-$3,000 for health insurance (single individuals) or $6,000-$7,000 for families
• $250 for long-term disability insurance
• $240-650 for dental insurance

With these statistics in mind, the same article states companies should expect to pay between 1.25 and 1.4 times a person’s base salary in benefits � and that’s for each full-time employee.

If you’re paying a person $50,000 a year in salary, you’re actually spending between $62,000 and $70,000 to keep them on board � and this doesn’t factor in recruiting costs, employment taxes or space you need to house the employees.

Employment taxes another way your company will save money by hiring freelancers. When your company prepares its personnel budget, you need to include allowances for FICA/Social Security. Currently, these allowances are 6.2% of an individual’s salary (up to the first $90,000 they earn). Unemployment/FUTA allowances are also 6.2%, capped at the first $7,000 of a person’s annual income, and Medicare allowances are currently 1.4% without a salary cap.

If you need to relocate someone to join your team, that’s an added labor cost to consider. All these factors add up, making salaries the most expensive part of running most businesses.

Saving Money with Free Agent Talent

If you’re hiring standard full-time employees remotely, you’re subject to the same laws and regulations as if you were hiring them for on-site work. In fact, it may be more complicated because you must take their local regulations into account, which may change the benefits you must provide or the taxes you’ll need to pay.

However, this doesn’t apply to freelancers and independent contractors.

When you sign a contractor with free agent talent, you aren’t onboarding them the same way as a full-time employee. They pay their own taxes, arrange their own health care benefits, and are not entitled to paid vacation/sick leave.

Furthermore, hiring freelancers puts your company at a lower financial risk.

Onboarding a full-time employee is a commitment. Unless you’re hiring them for a seasonal position, you’re taking a risk that you will need their services beyond the near future.

You may hire a full-time employee during your peak season and realize you no longer need their assistance with time. But because you hired them full time, you’ve dug yourself a whole in terms of salary in payroll.

When there’s a down point in sales or business, you’ll either need to lay off the employee-in-question and supplement unemployment benefits or continue paying them when you don’t need their services. With freelancers, this isn’t a common issue.

Instead of working in one position continuously, freelancers usually do their work on a project-by-project or hourly basis. This means you can pay them when you need to and let them go when you don’t. If you only need a freelancer’s help for one project, you aren’t committed to paying them for future work, although you may seek their help again for future tasks.

You’ll also save on training costs (in most cases). If you’re hiring a freelancer, you’re giving them a specific task to complete. It could be writing a blog post, developing a social media marketing strategy, or developing back-end code for your website � whatever the case, you’re utilizing their talents in a specific area of expertise.

Unlike full-time employees (which you may need to train), experienced freelancers can start working after you brief them of your instructions. You don’t have to pay a copywriter to learn how to write for the web or a back-end developer to learn PHP � when you hire freelancers, you can find individuals with your preferred qualifications without teaching them yourself.

 

Maximize Your Company’s Potential with the Gig-Based Economy

Hiring on-site employees mean one of two things:�

1. You’re limited to the talent within a commutable distance of your office or workspace
2. You’ll pay relocation fees to onboard talent who cannot commute to your office from their current location

Both options are limiting for your company � you’re either sacrificing potential or increasing your overhead, which can heavily impact your brand, net profits, and work environment.

If you’re hiring independent contractors, you aren’t limited to talent within a commutable distance of your office. You can hire talent from around the world and find the perfect new addition to your team.

It also allows you to hire specialists for different tasks. If you’re hiring a full-time employee, you may want them to take on various roles so you’re “getting your money’s worth” out of their salary. With freelancers, you can hire different individuals for project-based tasks, curating their abilities.

For example, you may hire one full-time individual as a digital marketer. Their tasks may include creating content for your blog, designing advertisements, and using growth hacking strategies for your social media accounts.

By giving one individual more than one major responsibility, they have less time and energy to focus on each task at hand.

With freelancers, you can benefit from various individuals and their relevant skills. You may hire one freelancer to write content for your website, another to manage your social media pages, and onboard a full-time employee to manage to advertise.

Whatever the case is for your business, working with freelancers gives you access to top talent you wouldn’t otherwise hire due to distance or overhead.

 

Free Agent Talent Offers Fast Turnaround and Immediacy

Freelancers work with different goals in mind than full-time employees. Because employers pay them by the hour or by the project, they’re not making money if they’re sitting around – they need to work if they want their paycheck.

If you’ve ever worked in an office-based position yourself, you know this isn’t necessarily the same for full-time employees.

You’d like to think they’re working each minute of each hour that you’re paying them, but this isn’t usually the case.

Wasting time at work is an epidemic across the United States and its plaguing productivity in offices everywhere.

According to a study of more than 3,200 people conducted by Salary.com:

• 64% of respondents said they visit websites that are unrelated to work during work hours
• 66% reported wasting time at work in some way
• 21% said they waste up to 5 hours per week while they’re being paid
• 41% said they visit Facebook during work hours
• 35% said they waste time at work because the work isn’t challenging
• 23% said they waste time in the workplace because they are bored
• 34% said their work hours are too long, so they waste time

If your employees are wasting time in these ways, you’re wasting money by paying them.

Freelancers are less likely to slack off during work hours because they aren’t getting paid for work they aren’t doing. There’s no such thing as “downtime” for a freelancer – their primary goal is to complete their work as efficiently as possible to increase their profits and maintain fast turnaround times.

If you’re hiring freelancers, you’re more likely to see results quickly then you are with full-time employees. There’s more motivation for them to complete tasks with immediacy, helping your business achieve its goals faster.

Additionally, deadlines play an important role in most freelance positions. Instead of assigning a task and letting your team members completed at their leisure, you can set a deadline and request they complete the assignment by that day. this can give your business a better sense of structure when tackling goals and creating strategies.

 

The Gig Economy: Drawbacks to Consider

Unfortunately, hiring freelancers isn’t all sunshine and rainbows. There are some drawbacks to consider before hiring free agent talent, depending on your industry and the role you’re trying to fill.

We mentioned above how freelancers offer more immediate turnarounds than full-time employees. The flip side to this is their availability.

When you hire a freelancer, you need to work on their schedule – not yours. They may offer everything you need when they are accessible, but if they’re out of the office or declining new projects when you need them, you’ll need a backup plan.

Investment and loyalty can be additional drawbacks if you hire free agent talent. Full-time employees are more likely to feel committed to your business. They come into work every day, bond with their coworkers, and are usually more motivated to sustain your bottom line.

Freelancers, on the other hand, are usually focused on individual success. They want to keep you as a client and they want to grow their independent contracting business, but they may not be as invested in your company’s success as a full-time employee.

Additionally, it can be hard to supervise freelancers to monitor the work they’re doing. For some companies, this isn’t an issue, but for many, it’s a major hurdle to overcome.

When freelancers work on a project by project basis, supervision will be less of an issue. They can’t get paid until the project is finished, and before you pay them, you can review the project to make sure it’s up to par.

Hourly freelancers do not share the same circumstances – you may worry they’ll overcharge you or invoice for hours they didn’t work. Without supervision, it’s hard to guarantee you’re getting your money’s worth with hourly freelancers.

Finally, it’s important to understand that the same circumstances which save you money by hiring freelancers can be challenging to understand. The amount of control your company holds over a team member determines their classification as a freelancer or an employee.

If you want to hire free agent talent and you don’t want to pay them benefits, you should be able to defend this choice to the Department of Labor or the IRS if they audit you. In general, the IRS defines independent contractors as individuals controlling their own business, while employees do not govern their own entity.

 

Final Thoughts

The gig-based economy has reshaped how companies hire employees. It’s irrevocably changed the landscape of modern employment, redefining how companies develop their workforce.

Fortunately, many of these changes are beneficial for all parties involved. The gig economy simultaneously creates opportunities for freelancers and businesses, helping each create mutually beneficial relationships that create growth, inspire change, and help businesses achieve their goals.

If you aren’t hiring free agent talent for your company, you could be missing out. Start by working with an intuitive service provider that�s dedicated to workforce engagement, like ShifPixy! With the right attitude, you can find highly-skilled independent contractors who will bring immeasurable value to your team, bringing your company into the 21st century.