Why your business should care about the gig economy

The gig economy

The gig economy has become a popular phrase used to describe a labour market of short-term contracts or freelance workers who take on temporary agency work, independent contracts, statement work projects or who access work through the human cloud.

This labour market has grown dramatically over the last few years and shows little sign of slowing down. Staffing Industry Analysts estimates that non-employees will represent between 20% - 50% of the global workforce by 2020.

The very existence of the gig economy is fundamentally altering society’s approach to purchasing services and to employment. Most notably, the gig economy has revolutionised everyday services for the mass population in terms of speed and efficiency - whether it’s ordering dinner via apps like Deliveroo, or tapping into Uber to order your cab. But gig workers are not just found in taxis or on bicycles delivering your takeaway, they are your software developers, your CAD designers and your stress engineers. And the growing population of people working this way is set to cause disruption to the conventional talent acquisition and management strategies of today.

A long-term disruptor

The gig economy is not a short-term disruptor – it could exponentially change the experiences of the hundreds of millions of people globally who are unemployed as well as significantly changing the operations of the employers hiring them.

Staffing Industry Analysts estimates that from the approximate $3.5 trillion revenue generated from the gig economy in 2016, the human cloud accounted for only $47 billion, less than  2%.  However,  McKinsey’s  research  shows that online talent platforms could add as much as $2.7 trillion to global GDP by 2025, creating an additional 72 million  full-time  equivalent jobs.

The human cloud

The human cloud is a sub set of the gig economy and is an increasingly popular way of attaining and attracting talent through online platforms. It can be broken into three key areas: Crowdsourcing, Online Work Services and Online Staffing Platforms which also includes Freelance Management  Systems.

Since its inception, human cloud work has been used predominantly by smaller businesses typically for IT, creative, legal and accountancy services. It has not yet extended widely into engineering services, however as the convergence of IT and engineering continues, it won’t be long before we can expect to see businesses turning to the cloud for cost-effective engineering analysis and design services.

However, while there has been a shift of larger enterprises moving towards contingent labour, so far most businesses have been relatively reluctant to include human cloud within supply chains and contingent workforce strategies. Among the reasons behind this is the risk of non-compliance, quality control and IP issues associated with remote working.

Holding a direct labour relationship can also mean increased employment and tax liability risk on businesses.

However, there is huge potential for this working style to be utilised by both large companies and SMEs. Businesses, large and small, should care about the gig economy for two primary reasons: cost efficiency and keeping up with the competition.

Leadership teams should be conscious that many businesses have already started to explore the option of the human cloud for parts of their businesses that they are currently outsourcing through service contracts with consultancy companies.

These businesses are recognising that by outsourcing work to the human cloud, they could save money. They are finding that with the support of gig workers, they can reduce spend with outsourced service providers and get more work done internally. By engaging with gig workers via the human cloud, they can also avoid costly overheads (desk space, IT equipment, etc) and minimise the amount of time their manager’s spend on managing internal resource. Ultimately, sourcing through the human cloud can lead to long-term cost efficiencies.

Larger businesses are increasingly utilising their Managed Service Providers (MSPs) to manage this type of sourcing. These MSPs take on the responsibility for engaging gig workers, allowing businesses to outsource any employment or tax risks by avoiding direct engagement.

As other companies are starting to transform their strategies for acquiring the services they buy, it is extremely likely they will be able to provide products to their clients faster and cheaper than their counterparts thus increasing their competitiveness.

Embracing a modern workforce

By embracing modern contingent workforce programmes, businesses may well be in a better position to build nimble talent pools. A recent survey by the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) showed that those aged 16-30 are the most likely to find gig work attractive so for companies wanting to attract a diverse workforce, they need to be prepared to adapt their sourcing systems.

The gig economy is transforming the world of work and as online platforms that engage directly with workers continue to evolve, so will the way in which people choose to work. Whilst traditional recruitment strategies are still important to consider, businesses and employees alike need to be ready to adjust as the human cloud develops across engineering and technology. The best starting point is to create awareness within organisations and to assess how utilising a more diverse workforce will positively impact business performance and profitability. The companies who are not ready to do so, risk being left behind.

 

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