The “Gig” Economy: How to Make Contract Talent Work for Your Business
Thirty-six percent of U.S. workers participate in the gig economy through either their primary or secondary jobs and that number is expected to keep growing rapidly—with freelancers projected to become the workforce majority by 2027. There are many attractive benefits to the employee over securing a traditional permanent position, whether they’re a freelancer, independent contractor, consultant or temporary worker—particularly in terms of flexibility and autonomy.
However, many companies still shy away from securing outsourced services and contract talent for part- or full-time positions.
Often, company leadership simply fears change—and the unknown that comes along with it, including relational, legal and compliance challenges. But if you’re among the business owners still ignoring this growing talent pool, you’re missing out on a segment Forbes deems essential to business growth.
Outsourcing services and labor to contract workers and organizations can open your business up to a broader pool of high-skill talent—without the overhead costs associated with traditional hiring.
Does hiring outsourced talent make sense for your business?
Hiring contract workers can make sense for businesses of all sizes and industries, but particularly for small businesses and solo entrepreneurs. Gig supplementation to your existing staff enables you to be more nimble than competitors, scaling up or down as needed to respond to market demands or changes in your business.
Outsourcing can also be a great option for business leaders who find they don’t have enough work for someone full time in a particular position, or who need a high level of expertise that you can’t afford full time in-house. Particularly useful in today’s current labor environment—which has more open positions than people seeking work in nearly every industry—there are many individuals and service-based organizations providing shared outsourced resources in critical operational areas.
While outsourcing is different than the “old school” way of thinking about employment, for those businesses willing to be open-minded, contract employment is an affordable and viable long-term option for many high-value positions including:
- CMO / marketing
- Customer support
- HR Director
- Information technology
- Industrial, such as a welder
3 things to consider when hiring contract workers
While taking advantage of gig workers can be a valuable differentiator for any growing business, it’s critical to understand the differences and legalities of managing a contract workforce to ensure a mutually-beneficial working relationship.
- Integration into your workplace culture
Even when hiring an outsourced resource who may or may not have a physical presence in your office, evaluating their cultural fit is just as important as when hiring a traditional employee. Ensuring they feel a part of your team fosters productivity and longevity, as with any associate—but it’s just as critical to ensuring your team feels they’re a fit in return.
Outsourced labor should be a beneficial resource for your entire staff, not a source of animosity. If you don’t factor in cultural fit to hiring and onboarding, you may incur the negative side effect of “office politics.” If traditional, full-time employees feel the outsourced worker is hindering, rather than boosting, operations or receiving unfair benefits, it can affect how the contract worker is treated, as well as your traditional staff’s performance.
Upfront communication from company leadership is key to preventing these issues. Is your staff clear on what the contract associate’s role is, and the responsibilities and schedule they’ll be maintaining to accomplish it? Do they understand the boundaries of their interaction with that individual, and know who the individual reports to for accountability purposes?
2. Management of schedule and workload
Hiring part-time or shared talent often affects their availability beyond what company leaders have come to expect from a traditional 9-to-5 employee working in an office. You may not have access to them throughout the entire workday, and/or every weekday.
It’s important you set expectations upfront with an outsourced hire regarding not just project scope, but how many hours they’ll be working and where, as well as how and when you can reach them. Take into account whether you will be their primary client, or if they have a portfolio of clients—and if that portfolio contains any competitors.
Contrary to what many leaders think, you will still need to establish a management structure for this person, as well. While a high-level professional expert should be able to right-size their time, you may need to do so for lower-level contract positions, as well as connect them to the hierarchy of command within your organization.
Do they know who are they reporting to and at what level? What’s the plan for their role each week, month and year? Do they understand how this ties in with not only the goals for their role but your big-picture company goals?
3. Ensuring employment compliance
Most importantly for a company leader diving into gig labor is the understanding that you can’t make any particular role within your business a contract position simply because you want to. There are strict laws and guidelines that determine whether an associate is a 1099 contractor or a traditional W-2 employee.
According to the Internal Revenue Service (IRS), before you can determine how to treat payments you make for services—including whether or not you have to withhold or pay any taxes—you must first know the business relationship that exists between you and the person performing the services.
Key factors include:
- Behavioral: Does your company control or have the right to control what the worker does and how the worker does his or her job?
- Financial: Are the business aspects of the worker’s job controlled by the payer? (These include things like how a worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
For more details on determining employment classification, tax obligations and tax guidelines for new employees, visit the IRS website and be sure to consult with your human resources professional.
An employment attorney can help you navigate any gray areas—an all-too-common pitfall resulting in unexpected, costly employment misclassifications.
Next steps: How to find quality outsourced talent
Once you’ve decided to outsource a role—such as human resources, finance or marketing—and determined the legalities with your HR provider, where do you look to find the right hire?
The best option is to tap your business network. Asking your peers and professional service providers will not only result in quality recommendations but ensure you’re able to secure an honest, trusted review. You can also leverage LinkedIn to search for experts by service field—and look for any mutual connections who might be able to give you more insight into their skillset and reliability.
For expert human resources assistance in hiring practices and employment policies—including help hiring the right contract employee for the right role, at the right time—contact the ConnectedHR team at (440) 876-0040 or firstname.lastname@example.org.