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Learn about how the gig economy can impact your small business

Have you heard of the gig economy? Maybe you’ve heard that term thrown around a few times recently, but you aren’t quite sure what it actually means.

Gig, which is a term rooted in early 20th century jazz music, originally was a shortened version of the word ‘engagement’-referring to musical engagements. Nowadays, you are just as likely to hear someone discussing a gig in Silicon Valley as you are on the streets of New Orleans.

That’s because ‘gig-ing’ has expanded far beyond the world of musicians, and the term gig economy now refers to the growing number of people who are completing temporary jobs or tasks on a contract or freelance basis rather than as traditional employees of a business.

Here in the United States, it is estimated that a least 1/3 of workers participate in the gig economy, and that number is expected to rise.

How does this new form of work impact businesses? Is this a trend that small businesses need to be worried about? Or, is it something that small businesses should be excited for? As with anything, there are pros and cons to the growing gig economy as well as things you just need to be aware of.

Pros of a Gig Economy

There are a lot of things that businesses, especially small business can be excited about. Such as:

Less Expensive Top Talent

Do you remember in the movie, Father of the Bride, when Annie Banks first discusses her fiance with her father (Steve Martin)? She tells her dad that he is an “independent communications consultant.” Martin replies with:  “That’s code for unemployed! This is perfect! You meet an unemployed, amazingly brilliant non-ape that I’m going to have to support!”

While that may have perhaps been true in the ’90s, that is no longer the case with ‘independent’ workers. Because people choose to freelance for many different reasons, you can find some very talented people in niche fields. And, you can hire them as a contractor without the overhead costs and time of hiring a new full-time employee.

It’s Easy to Fulfill Seasonal Demands

Some businesses are just busier during certain times of the year. You can easily fulfill your company’s needs by hiring out independent contractors without the baggage of onboarding true new employees during the busy seasons.

Increased Diversity

Diversity is a major pro of the gig economy for small businesses

We live in a global age. Technology makes it so easy to be a part of the gig economy and hire workers from all over the world for gigs. Why is this such a good thing?

  • Diversity means new, fresh ideas and different angles
  • Diversity can help you appeal to different consumer groups
  • Diversity can help to make your company a more desirable one to work for

Cons of a Gig Economy

Nothing is perfect, so even though the gig economy has plenty of benefits to offer small businesses, there are undoubtedly still some negatives.

Decreased Amount of Available Workers

If all of these talented people are deciding to freelance and work independently, that significantly reduces the amount of available talent for full time employees. There are a lot of tasks in a company that you still want full time employees for.

Things to Know

You Should Be Knowledgeable about Tax Responsibilities

When it comes to hiring contractors, make sure you are playing by the rules. Julie Kliegman states, “It’s tempting to use independent contractors as a cheap workaround…However, the repercussions for classifying workers incorrectly are significant: back taxes, interest, and penalties calculated by the size of your entire payroll.”

You can check out the IRS website for information about whether or not you have an independent contractor or an employees on your hands.

There Needs to Be a Change in Managerial Style

The growing gig economy means that the role of boss and manager may take on a slightly new shade. Jeff Miller for Forbes describes this change, “Rather than consistent teams of full-time employees, the gig economy will require managers to oversee a much more diverse and shifting talent pool.”

This could be a big shift for some managers, and it could even make it necessary to find a person with a different skill set for the job.

You Will Need to Learn About the Millennial Workforce

Learning to work with millennials is part of the rising gig economy

Say what you want about millennials, they are making their presence known in the workforce. Of this large group of people, 92% of millennials have a desire to work remotely. Therefore, it’s impossible to talk about the gig economy without talking about millennials. If you want to take advantage of gig employees, you will need to invest time and learning into how they work. Check out this article for more information.

Are you looking for more advice on how to help your business grow and succeed? Contact us at Lumen Advisory and Finance!