The gig economy has boomed in recent years, with its flexibility appealing to the masses; freelancers now make up almost 40% of the workforce, compared to 28% last year.
Businesses are jumping on the bandwagon and monopolising independent contractors’ agility and specialist skills. Organisations are introducing a fresh perspective and particular expertise, driving their business in a fast-paced environment without committing themselves long-term to another person on the payroll.
There’s no argument that freelance work can be great for individuals and employers. However, from an organisational perspective, talent management of gig economy workers can be particularly tricky.
Freelancing often comes with little commitment and high turnover, meaning attracting, developing and retaining freelancers is no easy feat.
With the surge in popularity, organisations must embrace this new working relationship and learn how to work with the gig workforce and not against it.
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What Does ‘Gig Economy’ Mean?
The gig economy has emerged as a prominent and rapidly growing sector in recent years, transforming how people work and earn a living.
The term “gig economy” refers to a labour market characterised by the prevalence of short-term or freelance work engagements. These relationships are often initiated through digital platforms or apps. Individuals are hired on a per-task or per-project basis rather than being traditional full-time company employees. The gig economy can translate to most industries, almost most commonly food delivery, freelance writing, graphic design and seasonal roles.
This type of work offers several advantages over traditional employment. For example, it allows workers to have flexible working hours, choose their projects, and sometimes even enable individuals to work from anywhere in the world. Organisations also benefit from the gig economy because they can hire the required talent for specific projects without incurring the cost of hiring full-time employees.
Why Has There Been a Surge in the Gig Economy?
It is estimated that gig work contributes £20 billion to the UK economy alone. But why has there been such a significant hike in the number of workers opting for gig work over traditional work?
1. Gen Z entered the workforce
Generation Z (born between the mid-1990s and early 2010s) largely prioritise work-life balance and career flexibility. Unlike previous generations, Gen Z places importance on experiences, personal fulfilment, and the ability to pursue their passions. They seek opportunities to control their schedules, work from anywhere, and integrate work with other aspects of their lives. A massive 43% of Gen Zs have reported having performed freelance work.
Gig work is the perfect marriage of home life, pursuing personal interests and the necessity of working to get money. Ultimately, Gen Z is the future of the workplace, so it’s likely that the gig economy style of working will become more and more mainstream in years to come.
2. Advances In Technology
Research shows that around 3 in 20 working adults work via gig economy platforms at least once a week. Most people have smartphones and internet access, which has played a pivotal role in the growth of the gig economy. Digital platforms and apps have made it easier for individuals to get freelance jobs, connect with clients, market their services, and manage their work. This technological infrastructure has led to the rise of gig work as it’s becoming as easy and accessible as securing a full-time job (if not easier!).
3. Diverse Income Streams
Another contributing factor to the gig and freelance economy’s surge is the desire for diverse income streams. Many individuals, especially younger generations, are embracing the gig economy to supplement their primary income or pursue multiple income streams simultaneously.
The shift to remote working has enabled individuals to have their cake and eat it. Workers can now maximise their time and essentially cram more in. In place of the morning commute, individuals can put together a freelance project and then hop onto their laptops to carry on with their primary job.
Gig work allows individuals to leverage their skills and interests to generate additional income, create financial stability, and explore various career paths.
4. Entrepreneurial Mindset
‘Hustle culture’ is bigger than ever. People don’t want to rely solely on one source of income but instead, be in charge of generating their own money. Gen Z is particularly inclined to have an entrepreneurial mindset and become self-employed, as they are more willing to take risks and explore alternative career paths.
We are starting to see many people curating their personal brand, enabling them to work in areas they are especially interested in.
5. Changing Work Landscape
Ultimately, the traditional employment landscape is transforming in front of our eyes. The gig economy has emerged as a viable alternative to conventional nine-to-five jobs, offering greater flexibility and autonomy.
We’ve seen many organisations forced to cut back and make redundancies, showing that the security of a traditional job is less secure than we once thought. Many have turned to gig work as a way to navigate these changes and gain more control over their careers.
The Challenges of Talent Management in the Gig Economy
Although many organisations in the UK frequently opt to hire an independent contractor over a traditional worker, managing talent in the gig economy can take more work than first anticipated.
Recruiting is Hard
Recruiting is one of the biggest challenges of talent management in the gig economy. Since many gig economy workers need job security, they constantly seek new opportunities. This means that attracting talent can take time and effort.
As we’ve already seen, the surge in gig worker opportunities means the market needs to be more saturated with opportunities. Independent workers can be selective with the role they choose, so the job advert and the pay and benefits need to be as attractive as possible to make individuals look twice.
Difficulty in Retaining Talent
Another challenge of talent management in the gig economy is retaining talent. Gig workers are not tied to any single employer, which makes it easy for them to switch between projects and companies.
Freelancers have no loyalty to companies. If they don’t enjoy their work, they can often walk away. Unlike traditional jobs where you are required to work a notice period, a fixed-term contract job will sometimes have additional terms, which means that employees can leave without the organisation having time to fix the problem that caused them to be unhappy.
Challenges of Team Cohesion
As team members come and go, it becomes difficult to establish a stable and cohesive team dynamic. Gig workers frequently move from one project to another, resulting in frequent changes to team composition. Building strong working relationships and trust takes time, and the constant rotation of team members can disrupt this process, leading to a fragmentation within the team.
Limited Control Over Gig Workers
One of the biggest challenges of managing gig workers is companies’ limited control over them. Since gig workers are not employees, companies cannot control exactly how they work. This isn’t easy when it comes to performance management.
With direct oversight, employers may find it easier to ensure that gig workers maintain the same level of quality and adhere to consistent work standards. Varying levels of expertise and commitment among gig workers can lead to inconsistencies and potential organisational reputational risks.
Difficult to Develop Positive Culture
Developing a strong company culture is essential for any organisation but cannot be accessible in the gig economy. Since gig workers are not part of the company (or may only be part of it for a short period), they may need to be more familiar with its values and culture.
Freelancers may have a different level of integration and involvement in team activities, social events, or internal communication channels than permanent employees. This lack of integration can hinder their ability to understand and embrace the company’s culture fully. This can have a two-fold impact: firstly, on output only sometimes being on brand and secondly, on overall job satisfaction.
Hard to Build a Sense of Belonging
Building a sense of belonging can be a challenge in any organisation, but it becomes even more difficult in the gig economy context. With independent workers often operating temporarily or project-based, establishing a deep sense of connection and belonging can be elusive.
The transient nature of their engagements, limited integration into the company culture, and reduced opportunities for social interaction make it challenging to cultivate a strong sense of belonging among gig workers.
Difficult to Develop Talent
Finally, developing talent in the gig economy can be a challenge. Since many gig economy jobs workers are not employees, they may receive different training and development opportunities.
Not being able to develop gig workers impacts the organisation’s overall talent pipeline and the potential for long-term growth and success. With the ability to invest in the development of gig workers, organisations may take advantage of opportunities to nurture and enhance their skills, knowledge, and capabilities.
This lack of action can limit the organisation’s ability to tap into the full potential of gig workers. It may result in a skills gap or a lack of specialised expertise within the talent pool.
Additionally, lacking development opportunities may lead to decreased job satisfaction and reduced motivation among gig workers, potentially impacting their performance and overall organisational contribution.
Talent Management Strategies for the Gig Economy
As the gig economy continues to grow, HR functions must pivot and learn how to maximise the potential of this group of workers, not work against them. Here are some talent management strategies that can help companies effectively manage their gig workers:
Create Belonging
Foster a sense of belonging by actively including gig workers in company events, team meetings, and communication channels. Ensure they have access to necessary information and resources to perform their tasks effectively and feel like valued team members.
On top of that, organisations should communicate the business’s values, mission, and culture to gig workers, emphasising how their contributions align with these aspects. Encourage them to embrace the company’s ethos and provide opportunities to participate in projects that align with their skills and interests, not just the ones they’ve been hired to support.
Embrace Flexible Work Arrangements
One of the gig economy’s key attractions is its flexibility. Some organisations are pushing the ‘office is best’ narrative, even regarding freelancers. This can often discourage individuals from returning to the organisation as it negates the reason they’ve opted for freelance work in the first place. After all, research shows that 82% of freelancers prefer working independently at home.
To attract and retain gig workers, companies should offer flexible work arrangements allowing workers to choose their projects, work hours, and locations. By doing so, companies can create a network of loyal independent contractors willing to take on new projects and refer their colleagues to the company.
Build a Talent Pipeline
To ensure a steady talent supply, companies should build a talent pipeline that includes a mix of gig workers and full-time employees. This can help companies quickly and efficiently fill staffing gaps and ensure they have the right talent for particular tasks on each project. Building a talent pipeline also gives gig workers a sense of security, as they know they will have ongoing work opportunities with the company.
Encourage Continuous Development
To develop talent in the gig economy, companies should focus on and drive continuous learning and development in the workplace. This can include offering training and development opportunities, providing feedback and coaching, and encouraging workers to share their knowledge and skills with others. By doing so, companies can help gig workers improve their skills and performance, resulting in better outcomes for both the company and the gig workers.
Offer Great Pay and Benefits
To attract and retain freelancers and fixed-term workers, companies should offer competitive pay and benefits to their employees and gig workers. This includes paying gig workers fairly for their work and providing access to benefits such as health insurance, EAPs and well-being subscriptions. By doing so, companies can build loyalty, drive job satisfaction and create a positive work environment that encourages workers to take on new projects.
On top of this, paying freelancers on time is a big tick in the box and can boost your organisation’s desirability in the gig worker market. A study showed that 70% of gig economy workers said they would be more loyal to an organisation that paid them on the same day.
Leverage Technology
Finally, companies should leverage technology to manage their gig workers. This includes using online platforms to connect with gig workers, manage projects, and track performance. Using technology, companies can streamline their processes, reduce administrative tasks, and ensure they have the right talent for each project.
Here at Factorial, we have a great platform that allows organisations to do just that. Our platform enables both managers and freelancers to track and monitor their objectives. The platform can also make communication easy with its cloud-based technology, meaning individuals can access it with one tap via an app on their smartphone.
How To Implement These Strategies Well
Implementing talent management strategies effectively is crucial for organisations to maximise the potential of gig workers and reap the benefits they bring. Here are some key ways to do just that.
Setting Clear Expectations
Setting clear expectations is essential for effective talent management in the gig economy. As organisations will be unlikely to have a ‘gig worker handbook’ that provides information on all the customs and practices, it’s essential that employers clearly define the scope of work, deliverables, deadlines, and performance standards for each contractor.
Providing a detailed and comprehensive onboarding process can help gig workers understand their roles, responsibilities, and the organisation’s expectations from the offset. Clarity and transparency in expectations will cultivate alignment, reduce misunderstandings, and enable freelancers to deliver high-quality work.
Establishing Communication Channels
Establishing effective communication channels is crucial for seamless collaboration with independent workers. You can use technology platforms or project management tools to facilitate this. Try to maintain open lines of communication, promptly addressing any queries or concerns gig workers raise. By fostering a communication culture, you can ensure that gig workers are integrated into the organisation’s workflow.Providing Feedback and Recognition
Like any other employees, Gig workers benefit from constructive feedback and recognition. However, this is often missed by organisations that may be focused on recognising their full-time staff.
Regularly provide feedback on freelancers’ performance, highlighting strengths and areas for improvement. Recognise their contributions and achievements privately and publicly to boost motivation and engagement. Implementing a system for feedback and recognition shows appreciation for gig workers’ efforts and encourages their continued commitment to your organisation.
Ensuring Legal Compliance and Adhering to Best Practices
While gig workers may not be classified as traditional ’employees’, ensuring legal compliance and adhering to best practices is crucial. You can just familiarise yourself with legislation relating to workers – although they may have fewer rights than an employed individual, they still have several rights in the workplace, such as to be paid at least minimum wage and not to be discriminated against.
Treat gig workers fairly and ethically, providing them with best-practice protections and benefits whenever possible. Adhering to legal and ethical guidelines mitigates risks and strengthens your organisation’s reputation as a responsible employer.
Create a Positive Employee Experience
Ultimately, you want your organisation to be a great place to work. Creating a positive employee experience is critical to attracting and retaining top gig workers. Focus on building a supportive and inclusive work environment. Investing in freelancers’ wellbeing and professional growth creates a positive experience that promotes loyalty and motivates gig workers to deliver their best work.
