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How entrepreneurs are leveraging the gig economy

Tuesday, October 11, 2022

Small business owners are used to the grind of hard work, but things have been extra hard out there for the past few years. The hiring crisis and inflation are making entrepreneurs juggle the need to stay lean with needing enough staff to keep their small businesses afloat.

While there are signs inflation may have peaked, supply chain issues and unstable energy prices remain — meaning that prices will likely remain higher for some time. And to say that hiring and keeping employees has been a challenge in the wake of the COVID-19 pandemic might be an understatement. According to a 2022 survey conducted by The Manifest, many small businesses admit to having issues with:

  • Filling open positions quickly (27%)
  • Maintaining employee engagement (26%)
  • Managing employee retention (25%)
  • Managing staffing costs (24%)

What can business owners do? Look to the gig economy to fill any operational gaps, absorb overload, and help relieve any pressure that is getting in the way of stability or growth.

What is the gig economy?

The Internal Revenue Service (IRS) defines the gig economy as earning income by providing on-demand work, services or goods, often through a digital platform like an app or website. Simply, it’s the area of the job market that’s made up of short-term and flexible freelance, contract and temporary jobs.

Also called sharing economy or access economy, gig work is now extremely common. Pew Research Center’s “The State of Gig Work” shared that 16% of Americans have ever earned money through an online gig platform. And it shows no signs of slowing down: The gig economy is projected to grow to $455 billion in gross volume transactions by 2023, according to a MasterCard and Kaiser Associates report.

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16% of Americans have ever earned money through an online gig platform

How gig work … works

No matter the app or platform, the concept of gig work is the same. Independent workers take on-demand flexible work arrangements for pay. The jobs could be anything from driving someone to the airport, delivering groceries, dogwalking or writing a website. Gig workers find these roles on apps and online platforms listing projects. People may take on gig work as a part-time side hustle, or they may be full-time freelance contingent workers or independent contractors taking on many gigs for their entire income.

Getting into the gig workforce can be as simple as completing an application for a gig work app or searching for a project on one of the many freelance websites that exist. People seek out gig work for a variety of reasons: supplemental income, flexibility, better work-life balance, being your own boss, controlling your income, having variety in projects or simply being able to work from home.

Whatever the reason, gig workers will be responsible for paying self-employment taxes, potentially paying quarterly estimated taxes as independent contractors. Gig workers won’t have access to employer benefits, so they’ll need to make up for the lack of benefits by purchasing health insurance, saving for retirement on their own and foregoing the perks of office life.

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Types of gig economy jobs

Gig work isn’t all ridesharing or food delivery. There is a wide variety of gig economy jobs providing convenience for customers. Here are some examples of gig work jobs and associated companies:

Creative tools

Creative freelancers

Whether you need a company logo, a brand voice, social media gurus or content writers: There’s a freelancer out there for you. Online platforms including Upwork, Fiverr, Guru, and Creative Market allow folks to share projects and have freelancers send you their bids.

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Developers

Everyone knows the importance of having a website. Small business owners can connect with developers looking for freelance jobs on sites such as Developers for Hire, Stack Overflow, Gun.io, and X-Team.

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Delivery services

Several delivery apps, such as DoorDash, GrubHub, Instacart, Shipt and Uber provide the time-saving convenience of having groceries, restaurant food, medicine or toiletries delivered to your doorstep.

Tools icon

Labor

The platforms Handy and Task Rabbit offer services including home improvement, housekeeping or someone to run errands.

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Ridesharing

Ride-hailing platforms like Lyft and Uber are some of the most popular types of gig economy jobs since all it requires is a smartphone and a car. Users schedule a ride, and the app assigns a driver to complete the trip.

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Virtual assistants

Find administrative assistants, receptionists and project managers looking for contract work on platforms like VirtualAssistants.com, Odetta, Upwork and Belay Solutions.

Why should business owners use the gig economy?

Businesses are having to take a critical look at their bottom lines thanks to inflation. Keeping the lights on may mean raising prices, cutting back staff hours or cutting job roles. Relying on a skeleton crew may mean some business-critical projects go on the back burner, and with it, growing the business.

Plus, it’s not easy to hire right now: 83% of small business owners and managers shared they’re having difficulties with recruitment and sourcing efforts, according to the Manifest. Prices have risen for consumers, and the pandemic highlighted the importance of work-life balance for many. Because of these and many other reasons, workers may be more discerning in their job searches. Finding the right fit for your role might be a timely, expensive search.

With efficiency and cost savings top of mind, the gig economy can help businesses:

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Get access to top-tier talent

A study from the Freelancers Union and Upwork showed that 35% of the American workforce (57 million people) freelanced this year. With the gig economy, you have access to skilled workers ready, willing and able to take on work without expecting full-time employment.

Ease the load for you — and your employees

Small business owners and their employees may have to learn things outside their core skill sets to get the job done. It’s the resourceful-by-necessity world of small business, but with so many tasks to juggle, it adds stress and the quality of work may suffer. Hiring subject matter expert freelancers to take on particular projects with distinct scopes of work and timeframes can get you what you need on your timetable without requiring you — or your staff — to be a jack of all trades.

Scale up and down with ease

You can add more agility and flexibility to your budget (while keeping an eye on your profit margins) to staff up or down without carrying the overhead of traditional employees.

Build an on-demand team

Using the gig economy can help you build a freelance dream team you can call on during busy months, for special projects and more. Using a team of trusted freelancers can help you access talent exactly when you need it vs. taking on headcount and not having enough work for employees when business is slow.

Try out talent before adding headcount

Before writing a job description, ask yourself: “Can this job be completed by a freelancer (or multiple freelancers)?” Seriously pondering that question before bringing on a part-time or full-time employee may save money. Bringing on freelancers can give you an opportunity to get necessary work done and potentially “try them out,” to see if they could be a good long-term fit should you want to create a position. Not all freelancers want to jump from gig to gig. They may want to find full-time employment with the right employer.

How small businesses can use the gig economy

Small business owners and budding entrepreneurs can use the gig economy, to take on projects like:

  • Investing in developing their customer experience
  • Streamlining operations to boost productivity
  • Creating an engaged and tactical social media presence
  • Creating a digital marketing campaign

Plus, using the gig economy can help business owners shift their focus to the bigger picture instead of getting mired down in everyday tasks. Hiring a virtual assistant or receptionist to take calls and manage a busy calendar can free up precious time. Hiring a project manager can help you manage schedules or tasks. You can even contract a team of workers to do research or skilled data work through a service like Odetta which boasts a contingent of highly educated but underemployed women in countries where women face constraints in the job market.

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When to use the gig economy vs. hire employees

It’s important to think carefully before hiring even in the best economic climate. Taking on headcount too soon can put your business at risk for cash flow problems and affect your profit margin. But, if you wait too long to bring on a new role, work can start piling up, and your commitments can outpace your capacity.

Do you know when you should bring a new hire on? When to choose a freelancer? Consider the following guidelines with your short- and long-term goals to see what’s best for your business.

New employee

  • Your cash flow can handle all costs of taking on an employee, which can include:

    • Background checks for candidates
    • Training
    • Employee health insurance and any additional benefits
    • Payroll taxes (Social Security / FICA), plus infrastructure, payroll software/service to withhold and pay those taxes
    • Workers’ compensation insurance
    • HR support
  • You want to bring outsourced tasks back into the business to save money

  • You, your employees or both are overwhelmed with work — and the tasks amount to an ongoing full-time workload

  • You need ongoing skill expertise on your team

  • Your employees frequently need to work overtime to handle the business’ workload

Contractor/freelancer

  • You can’t afford to pay health insurance, payroll taxes or other new-hire costs

  • You need access to a talent level you couldn’t afford to bring in-house

  • You need the subject matter expertise for only a set period of time

  • You need a large project completed by a person with experience leading similar projects

  • You have the time to devote to finding a person with the right skill set and price point for your business

  • The skillset you require doesn’t amount to a full-time workload and is outside the usual duties of your employees

Take control

There’s no shortage of problems facing small businesses today. Entrepreneurs can adapt to the changing climate by getting creative in how they solve challenges as they arise. We all have blind spots in our skillset; whether it’s in work culture, marketing or graphic design. During times like these, accepting that and addressing the gap with technology or using the gig economy can save your busy schedule and profit margins. Whether it’s HR, accounting, bookkeeping, payroll or marketing, you know best what skills need to be in-house and which ones are best left to professional services or technology to keep you moving forward.

It’s also a good idea to look at POS or payroll technology that can help you with some of the back-office tasks. If you and your staff are more efficient, you can save money and time to focus on revenue-generating activities. Consider leveraging your POS technology to keep track of inventory and take care of email marketing, social media management and payroll tasks. The right payroll processing and HR software can help you find the right talent, manage schedules and stay compliant with state and national labor laws.


About Heartland

Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind. Learn more at heartland.us.