The Rise of Gig Economy

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.

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.