The Rise of Gig Economy

The Rise of Gig Economy

The way we work is changing and there is no denying the rise of the gig economy in recent years. From the changing dimensions of nature of work to organisations forced to become more flexible, agile and streamlined, it’ll be interesting to see how gig economy will stay and strengthen into the future and shape the future of employment.

The term “gig economy” was first coined by journalist Tina Brown in 2009. She wrote about the trend of workers pursuing “a bunch of free-floating projects, consultancies and part-time bits and pieces while they transacted in a digital marketplace.” The gig economy fundamentally changes three major dimensions of the nature of work: the work itself, who does the work, and where the work will be done. The gig economy isn’t a fad which will soon fade away, but it may change the way we indulge in Talent Acquisition. As per statistics, the gig economy is going to spread its wings and fly as high as it can. The research conducted by SelectHub states that a large percentage of Millennials and GenZ workers are interested in the gig economy either by becoming full-time freelancers or doing side- hustling. Companies are latching on to the Gig Economy and the ones that aren’t are losing out on good resources. Studies show that 30 percent of Fortune 500 companies are hiring through this channel.

Gig Workers and How Does the Model Work?

Gig workers are independent contractors, online platform workers, contract firm workers, on-call and temporary workers who enter into formal agreements with on-demand companies to provide services to them. Since gig workers are time rated, decisions need to be quick and to adhere to this system the top-down model that many organizations follow will become futile. Active social media networks are replacing traditional ways of working and this new collaboration and reciprocity among peers will surely defy the old hierarchical structures.

Technological Outlook

Gig economy highly depends on technology and advances in technology will keep fuelling further growth. According to the research by, 38.4% of US-based non-seasonal gig workers secure their projects through digital marketplaces. Though these platforms have been rapidly growing, they are also leading to crowded virtual job platforms. This leaves both the employer and gig worker in the conflict of finding the right match. Big data would come to rescue in such situations.

As per the report published by Noble House, hiring gig workers is showing a steady incline. The report takes into account the data provided by 150 companies and 300 HR managers. IT takes second place in the number of freelancers being employed by the companies. 81% of companies have used gig workers for a variety of reasons. 29.7% of them hired gig workers for project-based work, 26.5% employed them in the absence of a full-time employee, 24.2% hired freelancers for work that didn’t need 8-hour work shifts, and the remaining for a variety of other reasons. As many as 53% of these companies have absorbed 5-20% of the gig workers into their organization, and greater than 20% have absorbed up to 30% of gig workers. This just goes to show that if a talented worker is found, companies are keen on retaining them by adding them to their workforce. 

Machine learning (ML) powered algorithms enable assistance to employers with talent search abilities. These algorithms understand an employer’s demand and match it to the right set of gig workers. This, of course, comes at the cost of gig workers providing in-depth information about their professional projects and educational credentials. According to the report published by Noble House, 25% of companies prefer the use of online portals when hiring gig workers.

In another research, it is found that AI-driven recruitment is less discriminatory in nature and algorithms can successfully predict the candidate’s personality attributes. These features, when put together, can make the gig economy selection process more fitting, streamlined and efficient for all participants.

While some employers keep a check on the gig workers’ progress through a defined process, a large section of them does not have a system in place to monitor the freelancers. 49% of employers, as per the report by Noble House, don’t monitor the freelancers since they believe that as long as the work is completed, they don’t need to be constantly scrutinized.

Companies’ Best Practices

According to Forbes, regardless of the gig economy’s current pace of adoption worldwide, it is here to stay and strengthen into the future. Though there is no accurate estimate of the numbers, it is projected that gig workers will comprise half of the workforce by 2020 and as much as 80% by 2030. 

Jason Phillips, VP of Digital HR & Global Chief of Staff at Cisco, says, “Work flexibility is becoming the norm. The challenge is how fast organizations can provide it.” This will also serve as a huge advantage to companies as it will cut down costs, especially in the projects that are aimed towards testing. 

With this evolving trend of contractual or project-based work, organizations are working on restructuring policies to accommodate the millennial workforce. What are the laws/guidelines one should be cognizant of before hiring contract workers? When hiring a consultant, a contract can be put in place that makes sure to mention all the requirements that the company may want. These include the hours of engagement, the pay, a withdrawal clause, along with the code of conduct, intellectual property rights, software/hardware support, the method of payment, as well as a review mechanism, and a portal for the timesheet and compensation. If the work is given on the basis of deliverables, then it may be a professional gig worker and the payment is done based on the terms and conditions.

Companies are working with aggregator platforms as a single entity. These platforms will also provide legal/documentation support to enable smooth work. This model is cost-effective in most cases. All Contracts (GIG worker contract) should be vetted by a legal person and this is tailored for each person. This is still in exploration level and the government has not released any circular as of yet. The best course of action is to have interns who are in engineering schools. An alternative to that is to work with companies like Nobel House and The Birbal. Platforms like Upwork and Truelancer can also be tried.

The gig economy fundamentally changes three major dimensions of nature of work: the work itself, who does the work and where the work will be done. The gig economy isn’t a fad which will soon fade away, but it may change the way we indulge in Talent Acquisition.

For tax reasons, you may look at consultant contracts that save taxes for both the individual and the company. During the hiring process, special attention needs to be paid to the source of the worker i.e. whether they have been hired directly by the company or from an agency, a thorough assessment of the same along with what the consultant offers and background verification is a must. 

Companies are ensuring that contractors are not seen as Full-Time Equivalents (FTEs). They are doing so by making sure that contractors are only given general direction about the work without having to fully control over how the work will be done. Independence in contractors’ work output is safeguarded, making sure that they do not have a fixed set of working hours (US laws are very strict on this).

While some of the laws can be mirrored from the contingent workforce, this topic is still being explored in emerging markets. If we employ gig workers for 8/9 hours per day then the minimum pay guideline will apply. Payment to gig workers can be done against an invoice. They will be referred to as consultants and their TDS deducted will be 10% – 7.5% on the CTC. There will no retirals, i.e. PF/gratuity, as well as no medical benefits. They are considered professional workers and the relationship is driven by the contract which is signed by mutual parties. Some gig contracts do have medical/health insurance depending on the sector that they are part of and these terms are also driven by competition. Since the compensation is paid in consolidation, there will be no sub-elements for gig workers. We may have timeline pay or outcome pay. We can look at fixed pay to start with and attach variable pay based on performance. Bonus pay for gig workers/freelancers is not applicable but can be considered on the basis of the outcome. 

Since gig workers function without any authority and social context, it leads to a greater feeling of insecurity and disconnectedness amongst them. Thus, to make sure there is smooth coordination of team members with gig workers, HR should focus on building a robust online culture.

There are various ways in which companies can build an online culture. For example,

  • Having virtual collaborative tools for exchange of ideas,
  • Creating a balance with video meetings and not just relying on emails,
  • Explaining the company’s culture to gig workers, so they feel like a part of the project, etc.

Skills in Demand for Gig Workers

1. Software Engineering (4-10 Yrs.)
• Full Stack Developers and UX/UI design
• Data Scientists
• Software Developers and Database Developers
• Automation Testers and Technical Illustrators

2. HR (4-10 Yrs.)
• Compensation & Benefits and HR Operations
• Talent Acquisition Professionals

3. Sales and Marketing (4-10 Yrs.)
4. Legal (4-10 Yrs.)
5. Customer Service and Admin
6. Support (4-10 Yrs.)
7. Finance and Accounts (4- 10 Yrs.)
8. Cyber Security (5-15+ Yrs.)
9. Blockchain (5+Yrs.)
10. Graphic Design and Branding
11. Content Writing

Where Do You Hire These People from?

• Most of the corporates (~30%)depend on third-party agencies to hire gig workers.
• Whereas ~25% of employers use online gig platforms like Upwork, Fiverr, Nobel House, LinkedIn, Behance, etc.

Which Countries Hire the Highest Number of Gig Workers?

In recent years, the gig economy as a whole has been on a steady incline. Current trends show that countries like the US, Canada, France, Japan, Netherlands, and Germany are hiring the largest number of gig workers. This has in turn provided greater flexibility for employers as well as the workers, thus leading to a steady decline in the 9-to-5 work pattern.


Key Challenges and Way Ahead

Key Challenges

  • Understanding the Model and Its Benefits
  • Adoption Rate
  • Policy and Procedures
  • Dual Employment
  • Employer Data and IP Issue
  • Concept of FIT/FAT/Right Organizations

Way Ahead

  • Everything from sharing rides to ordering food is done by the gig economy. It’s about time to reflect on the evolution of the gig economy and what these changes mean for the future.
  • Companies like Oyo, Bharti, Mercer, Unilever, Axis Bank, Infosys, and Aditya Birla are already hiring gig workers- How is it working for them? We need to study in detail
    how the gig economy will reshape the future of work and employment.
  • Companies need to start restructuring their policies and hierarchical structures.
  • Software infrastructure for IP/ Dual employment needs to be created.

Key Takeaway

Everything from sharing rides to ordering food to freelance consultants, the gig economy has transformed the way blue-collar and white-collar workers are approaching work. Companies like Oyo, Bharti, Mercer, Unilever, Axis Bank, Infosys, and Aditya Birla are already hiring gig workers. With an increasing number of global workers joining the grey workforce, companies need to start restructuring their policies and hierarchical structures if they want to survive in this economy. 

With both the workforce and management accepting the gig economy, what are some changes that we will see in the future of work is still a question but some organisations have got the answer and it is working for them.

Vishwanadh Raju is a seasoned Talent Acquisition professional with over 17 years of experience in managing Talent Acquisition in Product Development and Investment Banking Captive organizations. Currently, he is Managing Global Talent Acquisition at AXISCADES, a well known Engineering Solutions Company. In his previous stints, he has worked with companies like Wells Fargo, Bank of America, Deutsche Bank to name a few. An alumnus of IIM, Bangalore, Raju’s expertise lies in both high volume and niche hiring, managing Global Talent Branding, Candidate Experience and University Relations. His specialities include- Staffing, PCMM, Psychometric Assessment, Competitive Analysis, Benchmarking, Franchising, Mergers and Acquisition.


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