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The Gig Economy and How It’s Influencing Your Workforce [part 2]

Posted by Michael D. Haberman

gig economy p2

In a previous article, we defined the gig economy and exposed some of the challenges it implies for HR. This article will continue to explore these challenges, focusing on the gig economy’s impact on workers and governments..

Challenges for Workers

While some workers have embraced the gig economy, not all have. As I wrote in another blog, Future Friday: The Independent Contractor will NOT rule by 2020:

 “As we have seen in many lawsuits to date, many workers are just not ready to be gig economy workers. As people have sued Uber, Lyft, Taskrabbit, and others, it is clear there are many people not yet willing to take on independence. Sure, they are willing to take on part-time work. People have done that for a long time, but they still see themselves as reporting to an employer and not being self-employed in that endeavor. Many workers are just not ready to embrace something other than the employer-employee model it seems. Too many have already started down the road of working for someone else and don’t see the possibilities of working for themselves as being viable.”

Right now, under the current structure, there is no parachute for gig workers in terms of insurance (other than Obama Care), no workers’ comp, no bonuses, no paid time off, no extra anything beyond the cash you make. The gig worker is responsible for their taxes, all of them, not just the half they would pay as an employee. If the worker is very good and makes a good deal of money, then these things are not an issue, but many do not.

As a result, many workers and worker advocates are calling for a change in the laws, policies, and procedures that would allow workers and employers to have a relationship that is more beneficial to the worker, without them becoming an employee. That is where the government comes in.

Challenges for Governments

Rather than embracing the new way of working, the federal and state governments are actually resistant to it. There is a large effort to clamp down on the “misclassification” of workers as independent contractors. The US Department of Labor and the IRS have a memorandum of understanding (MOU) to work together and enlist state governments in the effort to squelch the independent contractor status. In July 2015, they published an explanation of what the term “employ” means under the law. They said that some employers purposely skirt the law in order to avoid employment regulations. They also said that employees need to be protected from bad employers. It was also telling that in their explanation for clamping down on use of independent contractors they said, “Misclassification also results in lower tax revenues for government…” What they mean is that it results in “harder to collect tax revenue.” If people are earning, they should be paying taxes regardless, but it is harder to collect from individuals than it is to collect from companies.

We are dealing with employment and tax laws that are not set up to address the changing ways of working. Unfortunately, it may take many years of Millennials making their way into government before we see the changes needed to make the gig economy workable on the scale it is moving to.

Conclusion

The gig economy is going to continue to grow at a steady pace, despite some stops and slowdowns due to legal challenges. Companies, gig workers, and governments need to work together in order to face the many difficulties to make this new economy work in the most effective manner. Are we up to the challenge?

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About Michael D. Haberman

Author

Michael D. Haberman is Vice-President and co-founder of Omega HR Solutions, Inc., a consulting and services company offering complete Human Resources solutions. As the former founder and President of MDH Consulting, a Human Resources consulting firm, Mike has more than 35 years of experience in Human Resources, and he uses his broad-based background to help companies solve employee problems and deal with governmental compliance.

3 COMMENTS Join the discussion
  • Odette A. August, 01, 2016

    Soon the government will have to accept this new economy and to sustain gig workers as well as the companies that collaborate with them. In some cases, specialists earn more as a gig worker than they would as a full-time employee and they are enjoying the advantages of this type of work by having a better work-life balance.

  • Sadie E. August, 01, 2016

    A gig economy does not provide security for any party, especially for the government, and from this comes the resistance to create plans and programs to sustain the movement. 

  • Caitlin B. August, 01, 2016

    The gig economy consists mainly of Millennials. Their different approach toward working will eventually find a space in the government’s plans, since it’s the most common method of collaboration with companies for the new generation.

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