But what exactly is the gig economy? The contingent workforce, known as the gig economy, is made up of contractors, freelancers, consultants, virtual or remote workers, and temporary workers.
Gig is defined as any job of short or uncertain duration.
Contingent workers are hired to help businesses fill gaps such as staff shortages, skills sets, special projects and in remote locations, as well as reduce costs associated with hiring permanent employees.
They allow organizations to be more agile in getting work done and meeting objectives.
The growth of the gig economy is due to changing economic and market conditions, skills shortages and shifts in general work patterns. Today’s rapid changes in business require a level of flexibility where the traditional permanent employer/employee relationship can be restrictive.
If an employer has a project requiring expertise for a short period, the project is staffed with no need to cover the costs of hiring someone on a permanent basis.
A new study by Angus Reid reports one-in-three Canadians of all ages and sectors have done at least some gig work in the past five years. According to this study, 17 per cent are currently engaged in gig work and another 17 per cent have done gig work at some time, but are not currently doing it now.
The Advantages of Contingent Workers
Using contingent workers can provide many potential advantages. Here are some of the more common benefits.
1. Filling the Skills Gap
Many organizations face skills shortages and are finding it difficult to find workers with certain required skill sets. Contingent workers provide a broad talent pool from which to choose candidates with the specific skills needed for a project that permanent employees lack. Hypothetically speaking, say your marketing department needs someone with graphic design skills to work on a project. Rather than hiring someone, that portion of the project can be contracted out to a freelancer.
Using contingent workers is beneficial for maintaining and adjusting staff levels. They allow organizations to quickly adapt to changing economic and market conditions without the burden of laying off permanent employees.
3. New Perspectives
Contingent workers bring in new perspectives. They can change the way certain parts of the business operate, allowing for improvement and stronger growth. Permanent employees can lead to a static workforce with little creativity and outside-the-box thinking.
4. Cost Savings
A contingent workforce allows organizations to pay for services when needed. It reduces costs of recruiting, onboarding and training that are involved with permanent employees. Contingent workers do not involve payroll costs such as benefits, vacation and sick pay.
The Disadvantages of Contingent Workers
Utilizing contingent workers often come with challenges. Here are some common challenges and ways to overcome them.
Communication is a major challenge that organizations with contingent workers face. Contingent workers should not be seen differently from permanent employees.
Dawn Longshaw, HR consultant and recruitment specialist at Vertical Bridge Corporate Consulting Inc., says, “The relationship between line managers and HR needs to be cohesive and openly communicative. HR’s role is to not only be clear on the nature of the contract with the vendor, but also establish clear expectations for performance and behaviours on the job.” As an example, Longshaw cites, “The employee handbook is a document which outlines expectations for employees. While it would not be appropriate to have contractor or contingent workers governed by exactly the same document, there are elements of the handbook which could be included in a code of conduct for contract/contingent employees”.
2. Lack of Understanding of Employment Arrangement
Challenges can arise from a lack of understanding of how employment arrangements for contingent workers differ from that of permanent employees. A contractor relationship is an agreement between two parties. Contingent workers are employed by a vendor or are self-employed. Since they are also accountable to the company, discipline can be a problem if behavioural issues arise. Longshaw says, “Managing contingent workers should not be overly challenging if expectations for performance and behaviour are clearly communicated with the worker and/or with the vendor.”
3. Fragmented Management/Visibility
Department managers are often given the responsibility to manage their own contingent workers without a unified strategy. This results in unsupervised workers who are disengaged, a lack of visibility and increased costs. To overcome this pitfall, it is essential to:
- Develop a detailed plan that brings all departments together.
- Avoid allowing departments to create their own management techniques.
- Develop an effective contingent management plan to be centralized in one place.
This prevents inconsistent pay methods and time-consuming administrative work. It also allows for greater visibility of workers, efficient payment, compliance and worker analysis.
Another way to reduce fragmented management and increase visibility is to use a vendor management system (VMS), which is cloud-based and central for managing a companywide contingent workforce. A VMS gives clear visibility into contracts, expenses, time logs, recruiting, onboarding, compliance and other information pertaining to contingent workers.
4. Recruiting and Screening
Another challenge is, generally speaking, screening rates are lower for contingent workers than permanent employees. Contingent workers often have the same access to company resources and sensitive information as their permanent coworkers. Gaps in screening processes can be risky since they can lead to employee theft, fraud, data security breaches, lack of compliance, legal costs and damaged reputation. It is essential for recruiters and organizations to develop comprehensive background screening policies that clearly state the types of screening for positions they are hiring for. Global screening processes should be included since organizations can be at risk of hiring migrant workers without legal right to work in Canada.
Redefining the Market
The contingency labour market is redefining the employer/employee relationship and will continue to grow and offer many benefits to organizations. There is no longer certainty in the employer/employee relationship. To adapt to the gig economy, business and human resources leaders must develop new relationships with recruiters and other contingent labour sources.