Understanding The Gig Economy and Its Challenges

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Gig Economy

The gig economy is a term used to signify the general workforce environment with short-term contracts or engagements. Freelancers, part-time workers, and independent contractors may fall under the gig workforce. You might find other similar terms, including “sharing economy” and “collaborative economy.” Regardless of the term used, many people are now taking advantage of these short-term arrangements to gain extra cash.

The Rise of the Gig Economy:

Gig Economy

Workforces in various industries are continuously growing. Many people see a constant need for on-demand services that require specific skill sets. Customers may now acquire different products and services coming from companies in the gig economy for quick and precise solutions.

As per a press release from Upwork, an increasing number of people are choosing to become freelancers instead of 9-to-5 employees. The report states that 63% of freelancers in 2017 elected their career paths by choice. Also, that figure has risen by 10% since Upwork produced a similar study back in 2014.

Albeit there might be a growing demand for gig economy jobs, businesses who wish to partake in on-demand products and services aren’t without challenges. Firms need to know the various gig economy problems to find and uphold solutions for the benefit of their businesses.

What are the Challenges of the Gig Economy?

Gig economy businesses need to understand the different challenges or problems. Identifying these encounters before they happen will help firms prepare for adverse situations. Continue reading for the four challenges gig organizations may have to face.

1. Client Acquisition:

Like most businesses, finding the right clientele can become an exhausting endeavor. Firms need to strategize marketing techniques and use the right tools to find the right clients.

Companies may solve this problem through different methods. For example, you might charge low prices as part of an introductory promotion for your startup. Consequently, you can promote your business in social media and other marketing channels.

The first few months in the gig economy might be the toughest period many gig organizations have to endure. But once these firms get a steady upward flow of customers, it’s time for business owners to start thinking about growth.

2. Competition in Employment:

The continuous rise of the gig economy presents several opportunities for startups to advertise their products and services. However, it also supplies industries with competition in the employment sector.

Organizations need to think of ingenious benefits for people to seek employment. After all, many gig companies don’t have industry-standard payment schemes. Instead, these businesses operate on commission-based structures. So, if a gig worker can’t get customers, that individual may not receive any salary for a specific period.

Thus, firms may include extra benefits as part of the employment contract. For example, staff members may gain additional coverage for their health insurance. Otherwise, monetary bonuses might be in-store for employees who can cater to more clients for a particular period.

3. Employment is in a Gray Line of the Law:

Many businesses in the gig economy might have questionable employment packages. For example, when does a freelancer become an independent contractor? Also, is the gig worker considered a full- or part-time employee?

One example of this is taxi driving services: various companies offering taxi services consider their drivers to be independent contractors. However, the firm still determines the rate of pay. Also, business owners might decide not to offer any benefits besides the compensation received from doing tasks.

Thus, it might give off an unsettling feeling in the minds of gig workers. Service compensation may not be up to par with full-time corporate contracts. Unrest may begin to loom as workers might think that upper management can easily replace them with other people.

Companies need to explain their different employment contracts to their workers with excellent detail. Otherwise, the business might be looking at a high employee turnover rate.

4. Serial Multi-Tasking:

Multi-tasking is a skill owned by specific individuals sought by various employers. While this characteristic can bring extra benefits to the company, it can present additional challenges for employees.

For instance, multi-tasking may require more brain and physical energies for the successful completion of projects. There can be a division of attention and interests, which can put the tasks at risk of failing. Furthermore, handling various tasks may put tremendous stress on the workforce. Thus, it may lead to tardiness and absences.

Many freelancers are serial multi-taskers. These temporary employees find the flexibility of their work schedules to be endearing traits of their chosen professions. So, the on-demand worker might decide to let multiple employers contract their services.

Again, organizations may add to employee benefits to help tackle this challenge. Another potential solution is to hire freelancers for permanent positions.

Who is Part of the Gig Economy?

The gig economy may have three parts, them being:

a) The Gig Workers

Like most companies, organizations offering gig opportunities can provide products or services. Product suppliers may offer on-demand merchandise like clothing, crafts, and food. Conversely, labor providers in the gig economy may provide functions such as food delivery, taxi driving, and home repairs.

b) Companies Using Technology as the Main Platform

Technology platform businesses have similarities that separate themselves from other organizations. These commonalities include:

  • Using apps to facilitate transactions among consumers.
  • Creating flexible working schedules for gig employees.
  • Promoting portable and hassle-free online payment systems for the workforce and its customers.
  • Creating, modifying, and managing labor force profiles.

c) Consumers

Gig economy businesses still need consumer transactions to survive and prosper. Thus, customers still play integral roles in the growth of gig companies.

The Benefits of the Gig Economy:

Gig companies don’t have to deal with challenges regularly. Several benefits await organizations that can cater to the on-demand needs of customers and employees. The advantages of the gig economy for businesses include:

  • Reduced in-house costs thanks to freelancers working remotely.
  • Meet high seasonal demands.
  • On-demand employees might be easier to find than full-time staff members.
  • Potential integration of gig products and services to existing business models.

Several other benefits of hiring gig workers exist. But companies need to understand the challenges brought about by the gig economy to become successful in delivering on-demand products and services to target audiences.

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