What you need to know
The term "gig economy worker" seems to be popping up everywhere these days, but as this terminology is relatively new, many people still don't have a full understanding of what the gig economy is and how people work within it. The gig economy seems to be here to stay—at least for a while—so it's a good idea to improve your understanding. Learn the basics below.
What is gig work?
Gig work is work that is performed by independent contractors or freelancers, rather than by employees. Usually, the gigs are tasks which the contractors can perform one at a time, at their convenience. The workers are paid by the task, not by the hour. They typically have to use their equipment to complete the work, and they set their own schedules.
Uber and Lyft are examples of companies that work within the gig economy. Their drivers are not employees, but rather they are independent contractors who can log on and work whenever they want using their vehicle. There are similar gig-based companies that offer dog walking services, food delivery, and even translation services.
What are the benefits of gig work for the workers?
One of the primary benefits of gig work is that workers can set their schedules. (In most states, if the company were to set workers' schedules, they would have to be designated as employees.) This makes gig work a great option for college students and for people looking to earn some extra income in their spare time. Workers can easily squeeze in a few gigs between classes, in the evening, or before work in the morning.
Most gig work takes place outside of the office. Whether workers are walking dogs or delivering food, this gives them a sense of independence and freedom.
What are the benefits of gig work for companies?
Companies benefit financially from hiring workers as independent contractors or gig economy workers rather than as employees. From a tax perspective, gig workers are considered business owners, and as such, they have to pay all of their social security tax. (If they were employees, the company would have to pay half of their Social Security tax.)
Hiring gig workers also allows companies to scale up or down their services without laying anyone off. If there are no tasks available, there are no tasks available; they can still keep their workers on the roster for the next time that work picks up.
What are the challenges or shortcomings associated with gig work?
While gig work does have benefits for workers and companies, it does also have some drawbacks. Independent contractors, or gig workers, are responsible for paying their taxes. They have to remember to set money aside for taxes and make estimated payments throughout the year.
Workers can also suffer from a lack of consistency in work availability. There may be hundreds of gigs available one week, but only a few available the next week.
For companies, relying on gig workers can leave clients without services if there happens to be a day when few or no workers log-on to work. Gig workers also tend to be less loyal to their companies than employees.
Gig economy workers now account for a decent percentage of workers in the United States. While it may not be a good idea to take on gig work as a full-time endeavor, it can be a great way to boost your income with a few part-time hours. And if you are a business owner, hiring gig workers can be an affordable way to satisfy your clients' needs.