COVID is Accelerating the Gig Economy. What You Need to Know
On November 3, amid all the hoopla surrounding the presidential election, a momentous initiative passed in California, one holding great significance to the future of the so-called “gig economy” in the nation’s largest state and perhaps the nation as a whole.
Proposition 22, which passed soundly with a vote of 55.4 percent to 41.6, re-classifies ride-hail and delivery companies, like Uber, Lyft, Grub Hub and Door Dash, so they are exempt from the recently passed California state law (AB-5 [2019]) classifying most part-time and “gig” workers as company employees. (As such, the workers were subject to minimum wage protections and entitled to healthcare, sick leave, insurance, and other benefits enjoyed by traditional full-time employees.)
The passage of Prop 22 was supported by the largest ad campaign in California history for a ballot initiative. All told, an estimated $200 million was spent supporting the proposition, much of it coming from Uber and Lyft themselves, the companies claiming AB-5 restrictions fundamentally alter the nature of their business models. (Ironically, many drivers also supported the measure because becoming “employees” would eliminate the flexibility and independence, making these part-time jobs attractive.)
Perhaps it is no coincidence the employee/independent contractor issue should come to a head in the midst of the worst viral pandemic the United States has faced in over a century. Millions of men and women have lost jobs due to the crisis, turning to gig-type work to provide them with income. Such gig jobs can range from ride-hail driving and restaurant/grocery delivery work to freelance professional and creative services, like bookkeeping, accounting, copywriting, commercial illustration, website design, and business consulting. In fact, with even regular full-time employees working from home, doing short-term gig work as a sideline or a full-time occupation may become the dominant income model as we move into the third decade of the 21st century.
The importance of understanding this transformation as a wider business culture trend cannot be overstated. Pressures put on companies and their workforces by COVID-19 has only accelerated a model that has been growing for several decades. Outsourcing as a concept came into vogue in the 1970s when companies began to realize they could increase efficiencies and bolster competitiveness by farming operations to specialty companies — many of them overseas — rather than trying to produce everything in-house.
The phenomenon really took off in the 1990s when the Internet created an inexpensive, reliable conduit through which companies and their service providers could exchange information and data virtually instantaneously anywhere in the world. Through the web, companies could engage the services of technical and creative specialists on-demand, paying them only for the limited amount of work provided. At the same time, providers could hire themselves out to any client willing to pay their fees. Commuting was no longer mandatory. Neither was the traditional 8-5 workday. Freelance workers could set their own schedules. Thus, the “Gig Economy” was born.
Today, numerous tech platforms, like Catalant, Crowdspring, GIG, TopTal, and Fiverr help connect freelancers and other gig workers with companies worldwide. The industry is truly international, with American companies regularly hiring from overseas and foreign companies actively seeking American specialists with advanced technical skills or knowledge to make inroads with U.S. markets.
As a business leader, you need to position your company to meet the needs of the exploding gig economy in the age of COVID-19. Today’s forward-looking organizations cannot afford to not identify where outsourcing can best serve their operational/financing requirements. It behooves you to ascertain those opportunities likely to provide you freelancers with the skillsets your business requires.
Some key points to keep in mind:
Even with the passage of Prop 22, most companies doing busines in California must still operate under AB-5’s restrictions. (The proposition’s exceptions only apply to a small group of industries.) This means it’s still very difficult, or not possible, to hire gig workers or other freelancers to do jobs being done by people who are already on your payroll without formally classifying them as “employees” and giving them all the benefits you provide your full-time workers.
It is imperative California employers consult competent employment legal counsel to determine if, and when, they may legally hire independent contractors under AB5.
If you do hire freelancers, it’s incumbent upon you to effectively manage them so as to deliver solutions and profits, and ensure they fit in with and enhance your organization’s culture.
You must also establish the kind of compensation structure to attract — and keep — top-line freelance talent. After all, businesses require a stable of gig workers just as reliable, responsive, and proficient as the in-house staff, even after the COVID crisis has passed.
As company leadership and culture specialists, my team can help your organization take full advantage of the benefits the gig economy offers. To learn more about our approach, please read about me in Forbes. We can not only help you establish fair, mutually beneficial protocols for using freelance labor, but also assist with establishing a compensation structure to acquire the best thirty-party workers in your industry.
Want to know more how your company can flourish in the gig economy today? Write me at laura@conoverconsulting.com.