The “gig economy” is a buzzword that, in recent years, has taken the workforce by storm. With the popularity of ride-share apps like Uber and Lyft, which employ millions of independent contractors, along with major retailers, such as Amazon, supporting independent delivery drivers or task based work, a foray into contingent work may seem like a solid career move. The truth is, contract work isn’t nearly as glamorous as these “platform provider” corporations make it out to be. Yes, the gig economy has its perks, but quite frankly, the benefits of employment far outweigh them. Don’t fall for the hype – here are the top 4 ways the gig economy is failing its workers.
Early supporters of the gig economy were drawn to the flexibility offered by freelance life. The independence that comes with contract work is still very appealing to individuals with responsibilities and commitments that interfere with a typical 9-to-5 schedule. But contingent work is far from the only way to achieve a solid work-life balance. There are plenty of full or part-time employment opportunities for workers who are seeking a more flexible schedule. There’s more to life than work, and whether you’re attending school or staying at home with your children, employment doesn’t have to mean sacrificing your priorities for a paycheck.
That said, as a contractor, autonomy is just about the only benefit that you receive. State and local minimum wage rules apply only to employees, meaning contractors can possibly make less than that after considering hours worked or expenses incurred. As an employee, state and federal tax contributions for sick leave, social security, and unemployment are all handled on your behalf, shielding you from big tax “surprises” at year end. Additionally, companies are responsible for workers’ compensation coverage, a mandatory expense that contractors must handle on their own. Eligible employees can also obtain company benefits like health insurance, 401k match, and more.
On the other hand, even if gig businesses wanted to give benefits to their contractors – they can’t. Companies legally can’t offer contract workers benefits, and the few perks they can provide to their workers, such as discounted services, don’t come close in value. Furthermore, contractors must pay social security and Medicare taxes – 15.3% of their full income – while companies cover half of these taxes for employees. Not to mention, contractors don’t receive the reduced group health insurance rates, if eligible, offered to companies, often forcing them to pay higher individual premiums for the same coverage.
3. Professional Development Opportunities
As an independent contractor, you’re not guaranteed future opportunities. Without the support of an employer, workers must constantly hunt for new work and can run the risk of not being paid on time, or at all, by shifty clients. Competition for “gigs” can be fierce, leaving many contractors twiddling their thumbs, waiting for work to present itself. The gig economy business model depends on this to make sure there is enough labor supply to meet consumer demand. Contractors have far fewer opportunities for advancement – they can work in a position for months, or even years, without the role turning into a permanent position. Also, their pay is likely to remain stagnant and they remain at the mercy of platform providers lowering their pay rates at any time, for any reason.
Alternatively, companies are more likely to stay loyal to employees. Working with individuals on a consistent basis builds camaraderie between decision-makers and their colleagues, allowing them to develop deeper interpersonal relationships. Working in groups with other employees provides great opportunities for networking and friendships versus contracting alone. This opens employees up for raises and promotions, while reducing the likelihood that they’ll unexpectedly lose their job. Companies also offer paid training courses and programs, so their employees can learn or develop different skill sets. As an employee, you’re not just a cog in the machine – you’re a part of a team.
Possibly the largest reason that the gig economy falls short is due to the personal liability that contractors take on. While an employee would more likely be aware of major internal changes, in the gig economy, contractors likely have little idea what’s going on at an organization. If a company unexpectedly goes bankrupt, they could quickly be out of unpaid wages. Due to the limited relationship between most contractors and businesses, independent workers also put themselves at risk of being underpaid or taken advantage of. Even companies that seem the most trust-worthy have been accused of inadequately compensating their contractors. If you get injured on the job or need a paid sick day, you’re most likely on your own. You also may have issues collecting unemployment insurance, should the need arise, as employers pay into that benefit on your behalf as an employee – not as a contractor.
Take the Smart Route
To put it simply, the gig economy isn’t all it’s cracked up to be. And the numbers agree – an in-depth study completed by the Bureau of Labor Statistics found that only about 10% of American workers were employed by “alternative work arrangements” in 2017. Despite the narrative that contract work is the way of the future, it seems that employees aren’t quite ready to part with traditional employment quite yet.
Many venture capital-backed disruptors are blatantly skirting around labor laws, hoping to grow large enough to absorb lawsuits as they take advantage of less expensive contract labor. Luckily, many states are taking preventative measures to avoid this in the future. In California, lawmakers recently passed an independent contractor test known as an “ABC” test. It targets entities using their workforce to deliver company goods and is used to determine whether an individual is legally an employee or a contractor.
Reap all of the benefits of employment without the stress that comes with contract work. Here at The Party Staff, we have a variety of flexible opportunities for hospitality workers, in addition to benefits like 401k match, health insurance, and paid training classes for eligible employees. Learn more about what a career with The Party Staff could mean for you.