Last year I wrote a USA TODAY column outlining that my No. 1 small business trend was the rise of “the gig economy.” The gig economy refers to the rising number of employees who make a chunk of their income via various independent contracting and freelance work, or “gigs” (such as driving for Uber, delivering for Postmates, selling on EBay, or writing freelance content.)
Because the lines have become so blurry, it is fairly difficult to measure just how big the gig economy is (the Department of Labor is working on an official number). However, Intuit estimated that in 2015 there were about 3.2 million people regularly working in the gig economy, and that by the year 2020, that number will double.
So what explains this labor trend, and what does it mean for your small business? There are two driving factors.
The first stems from what I call the Not-So-Great Recession. Once the recession hit, a lot of businesses – large and small alike – came to the conclusion that they could avoid the expensive requirements that come with hiring full-time employees such as, benefits, payroll taxes, worker’s comp – you know the drill. As a result, we are seeing a dramatic spike in the number of part-time employees and freelance workers (in fact, a whopping 79% of gig workers work other part-time jobs).
The second factor is that the digital age has made creating a side-gig very easy. There are tons of user-friendly websites and apps that provide ready-made platforms for these gigs, sites like UpWork and Freelancer. And, given the fact that nobody can make a living with part-time wages, it naturally follows that a lot of those part-time workers are doing whatever they can to grow their income. This is not a huge challenge with additional sites and options like Uber, Lyft, Postmates, Airbnb, and Craigslist available.
Related article: A Guide to the Gig Economy
As a small business owner, you might be wondering what the gig economy trend means for your employees and for your business. Maybe you’re concerned that if you have an employee who works one or two or three other side gigs, they’ll show up to work distracted, tired, and stressed. These concerns are not unfounded, but don’t jump the gun and enforce any strict rules on your employees just yet. First, consider these four reasons why an employee may join the gig economy:
1. First, many employees feel underpaid or underworked, and that is part of the reason they are driven to create a side gig. If it is absolutely critical to you that your employee is focused solely on your business, you might need to seriously think about either giving them a raise, more hours, or more interesting work. You have to decide what is more important to your business: Saving that extra buck or having an employee who’s all in.
2. The gig economy is entrepreneurial. As any entrepreneur knows, taking control of one’s income and free time is very empowering and morale-boosting. You might find that your employee is actually more focused and present while at work because of it.
3. What used to make sense might not make sense anymore. That is, accepting this labor transformation is probably the way to go. As a business owner, you know how to adapt and expect change. It will behoove you to be flexible, thoughtful, and open to this shift.
4. Understand that the gig economy is happening everywhere. If you think this is just a local fad that will die out soon, you’re wrong. In fact, half of the U.K.’s workforce is expected to join the gig economy in the next five years. Furthermore, the E.U. experienced a 45% increase in the number of independent workers between the years 2012 and 2013 alone. This is a global trend to boot, and it is only expected to grow.
As a leader amidst all this development, it is always wise to assess where your business can accept change and where things need to remain the same. The growth of the gig economy appears to be inevitable, so it might be best to place this one in the former category. If you can accept it, work around it and encourage honesty among your employees, it might not be so bad.
It could even be great.
About Steve Strauss
Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can also listen to his weekly podcast, Small Business Success.© Steven D. Strauss.
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