What is the gig economy – and why your HR team should care

The ‘gig economy’ is a phrase which has been in usage for more than five years now and in the public imagination conjures up images of hailing cabs and conjuring up takeaways with a swish of our phone.

But in reality, in 2022 the gig economy is so much more than a convenient way of catching a lift or having a pizza delivered – in an increasing number of sectors, it may well be the future of the workforce, and HR teams need to be ready.

So what really is the gig economy – and how do HR teams prepare for it?

What is the gig economy?

More than one-third of US workers (36%) take part in the gig economy, either through their primary or secondary jobs – around 59 million Americans. Across the Atlantic one in seven adults in the UK have worked a gig job monthly, contributing £20 billion ($27 billion) to the economy.

But a cursory analysis of Google Trends shows the term ‘gig economy’ only registered for the first time in the summer of 2015 and not really to an appreciable level until two years later.

Dr Mariann Hardey, associate professor at the UK’s Durham University Business School and a specialist in the area, says it refers “specifically to a group of workers who are working outside of traditional career activities concerning long-term contracts or permanent contracts within an organization or a company, whether it’s a small organization or large organization”.

Dee Coakley, CEO and co-founder of global employment platform Boundless, agrees, but adds “the reality is that it spans far wider than we realize”. “For years, private sector organizations have used independent contracting as an easier, speedier alternative to making full-time, permanent hires, essentially turning millions of people into gig workers without any job safety net,” she says.

“However, in recent times, the ‘gig economy’ has changed from a techtopian success story to a raging battlefield over the definitions of employment, self-employment, dependence and independence.”

This is the other thing that has seeped into the public imagination – that the gig economy is associated with employment disputes.

Essentially, the gig economy allows workers who do not necessarily want the traditional nine-to-five job in a corporate structure to opt into small chunks of mostly project and task-based work – hence ‘gig’ – usually through a technology-enabled talent platform.

These may be small tasks – fixing an iPhone or putting together somebody’s self-assembly desk – but also increasingly more longer-term projects that may involve a lot of intense activity over a 12-18 month period.

As Kate Palmer, HR advice and consultancy director at Peninsula, says: “The gig economy is a means for people to be matched with work, as and when it needs doing, and when they are available to do it. Typically, a digital platform is used to do this, and the work is of short-term duration.

“It offers individuals the ability to be flexible, and employers’ access to talent without making a permanent commitment.”

And this digital disruption is where the challenges come in for HR teams for whom having a workforce of contracted, full-time and exclusive employees has not really changed much since the industrial revolution.

How does the gig economy affect HR?

Flexible workforces

“For employees, gig working gives them flexibility and the option to pick and choose the projects they work on,” says Sally Hunter, managing director of EMEA and global accounts at Cielo.

“The modern workforce wants to work wherever and whenever they want, whilst maintaining high levels of development and fulfilment. The gig economy does just this – giving people unlimited flexibility whilst also allowing them to plan their own development with each project, rather than following a conventional career path.”

This is the opportunity as much as the challenge for HR teams in 2022 – having the infrastructure in place to offer this and thus attract the skills of the “digital nomads”, the generation content – WiFi permitting – to work from Bangalore as much as Baltimore.

Regulations

Last year saw a slew of legal and policy-based action from governments and businesses, designed to reflect the changing nature of work, balance the competing priorities of employees and employers, and clamp down on unlawful employment practices, all of which ultimately have an impact on HR decision making.

Coakley of Boundless says: “While 2022 will inevitably bring a raft of further changes to the employment landscape, HRs need to ensure that individuals are employed correctly and receive all their rights.

“This is because the repercussions of misclassifying employees include financial penalties, but can also impact company directors directly, leading to reputational damage and limiting their ability to attract talent.”

This is one area HR teams in 2022 need to follow closely.

Management

Although, as alluded to earlier, whether gig workers are employees has been tested by the courts, broadly: HR is not the gig workers’ full-time employer.

This, as Dr Hardey says, is a challenge when “one major factor in your roles and responsibilities working in HR is making sure there isn’t any kind of legal heavy-lifting or anything nasty that’s going to bite you on the bottom in the future with regards to employee behavior”.

She adds: “That’s a lot more difficult to control and mitigate for if you have a workforce that hasn’t signed a contract, isn’t formally working for you and may get up to no good.”

The challenge for HR, which has a duty to protect the welfare of its workforce, is how to bring the gig economy workers in line with the company’s expected standards without contracting them full-time.

Visibility

Another challenge for HR teams in 2022 follows on directly from that above – visibility. When a business relies on the pace and flexibility of the gig economy, the temptation will be there to cut HR out of the loop altogether. Why bother holding interviews and chasing references for a short-term hire when the digital disruptors can provide you with one with a tap of a screen?

The answer is above – let alone the dangers to security, cost control and the fact they may be handling sensitive material or data.

The challenge for HR teams is to make those arguments and ensure they are a part of the process in taking on gig workers in order to avoid what Dr Hardey warns could be “a complete minefield”.

How can your HR department prepare for the gig economy?

The gig economy offers big opportunities for HR teams. But, says Palmer of Peninsula, it is also “a very different relationship to that which HR is used to”.

She adds: “It can create something of a revolving door of workers, which can lead to disruption within established teams.

“As the relationship with these kinds of workers will be different, HR departments will also have to establish new ways of working, adapting company policies and benefits to be applicable to them and making the job worth taking.”

The urgency of these changes will inevitably increase as Generation Z, perhaps the first to value flexibility over job security, comes to dominate the workforce. That, says Hunter of Cielo, will require a change of mindset in how managers measure performances.

“The problem we’ve seen is that many employers only offer a slim degree of flexibility, but don’t fully embrace the concept,” she says.

“For example, gauging success by hours of input rather than quality of output. The gig economy, by nature, judges success on output, so is inherently more flexible – workers can effectively do what they like so long as the work gets done on time and to a predetermined level of quality.

“Businesses fighting against this whole concept simply disadvantage themselves against more progressive competitors.”

There is evidence, however, that organizational culture is changing of its own accord. In part, this is being driven by employees demanding better rights, benefits and protections and showing themselves willing to walk if their needs are not met.

But, says Coakley of Boundless, “it’s also down to savvy, progressive employers recognizing that they can gain a crucial competitive advantage in the battle for talent simply by treating people the right way and being legally complicit.

“Harnessing the benefits that gig economy workers can offer is about more than compliance. It’s about being a good employer who adopts ethical HR practices and values to protect their employees, no matter what their working status happens to be.”