Everyone has had a friend that is a passionate─yet infrequent─artist or musician. Some talented guy or girl that goes around with a portfolio looking for occasional on-demand jobs. That friend has likely been part of a traditional freelance community and has probably lived as a self-employed person. Striving to generate some income in a context in which formal job opportunities are few.

Ten years ago, that was the common profile of an independent worker. However, nowadays, the effects of digital technologies have built a new reality, leading to the formation of the so-called gig economy.

To keep it simple, the term is used to refer to markets of people that offer their professional and non-professional services as temporal workforces. To make it even simpler, it describes the kind of communities that platforms such as Uber, Mturk, Aribnb, Upwork, and Freelancer, have been building.  There, independent contractors interact with possible clients, providing solutions to specific requests. No contract is signed, no person is hired, and working relations are temporary.

Unfortunately, since nothing can be that good, today we are bringing some insights about this controversial topic that once promised to influence talent management around the world.

How big is the gig economy?

The numbers are unclear. Independent workers among the US and the developed countries of Europe reach up to 162 million people.  That is to say, on-demand workers represent 20-30% of the workforces at working age in the developed sphere. To achieve that percentage, digital technologies were a key factor. The birth of software applications and online work networks led to an important trend: young millennials are choosing to join the freelance market.

In the particular case of the US and Europe, recessions and economic plights between 2008 and 2014 might have driven the forming of the fad. Led by a constrained professional market full of competitors, students and young bachelors decided to find alternative revenues. On the other hand, for Latin American, Asian and African developing countries, the motivation might have been related to the natural irregularities of their labor sector.

No matter the reasons that have eased the consolidation of this on-demand global market of services, most of the analysts argue that it will have major effects in the future of HR.

Working in the gig economy

McKinsey Institute reports that for most of the self-employed people from the US and EU, joining the freelance market was a choice based on preferences. Around 68% of American and European independent workers feel satisfied with their gig jobs; and for 56% of the people, gigs represent a secondary income behind their formal employment.

The motivations are usually similar: the flexible workday, the capacity of picking their clients, and the possibility of having several incomes from different projects. All these desires are coherent with the profile of the young millennial, reason why it feels that the gig economy is not more than a characteristic of this generation.

About the phenomenon in developing countries, for the big freelance communities of Malaysia, Venezuela, South Africa, Kenya, India and Philippines, another relevant driver is the easier access to foreign currencies (USD or Euros) and earnings above their national average. In countries where unemployment is a major national issue, laboring in informal job opportunities is not a decision based on mere preferences but a way to ensure life quality.

Therefore, while the discussion within the United States and Europe has focused on the consequences of work informalization; in developing countries, where informal labor is typical, the debate goes around digitizing informality, according to the Brooking Institute.

Ironically, no matter where the freelancer is from, the main inconvenience of working in the gig economy seems to be informality itself. Since the lack of contracts leaves self-employed people without important rights within working relationships, missing job protection is a fearsome fact. In that spirit, the Holy Grail of “no contract, no hiring” can also turn into unjustified dismissals, aggression, discrimination, and scams from clients.  

Employing in the gig economy

Following the last idea, platforms such as Amazon’s MTurk could be a solution for companies seeking non-permanent HR, but basing strategic planning on freelancers could be also a double-edged sword. Corporations like Uber or Homejoy, whose business model is based on the collaboration of independent contractors, are currently in the middle of the controversy regarding workers’ rights.

Of course, relying on on-demand talent is not necessarily a wrong betting. Conversely, it gives business possibilities such as developing short-term projects without adding people to the payroll, looking for specialized workers to solve very specific issues, and renovating talent in a faster way. Notwithstanding, companies that are seeking to capitalize those benefits most face important HR implications.

For those businesses, it is important to plan a way to ensure respectful and collaborative relations between them and their independent contractor, regardless the temporality. Likewise, recruitments should be redefined to adapt them to the usage of talent pool platforms, as well as education processes and strategies should go faster. In the case of on-demand HR projects that provide the talent, the million dollar question is finding a balance between their business model, the rights of the workers, and the needs of the employers.

Some platforms prove to have already achieved that balance. Servers like AIESEC’s Opportunity Portal are capable of providing temporary and skilled workers and interns with high levels of satisfaction for both parts. However, that’s not the common case. So for most of all on-demand talent pools, there is still a long way to go.

Conclusions

It is clear that this freelance movement will have an impact on the future of work. Since digitalization is reaching all aspects of society, the interaction between companies and workers will change progressively. Although there is still a lot of issues to solve about regulation and legality, self-employment networks seem to be a sneak peek of the near future for human resources. So that, the recommendation is obvious: don’t close the door to the gig economy.