The “Gig Economy” and the Issue of Portability

8-02-gig-economy-imageWhile the term “Gig Economy” is often vaguely defined (it depends on who is included in the definition), the Bureau of Labor Statistics describes it as a workforce characterized by “single project(s) or task(s) for which a worker is hired, often through a digital marketplace, to work on demand.”

Broadly speaking, Gig workers are individuals who maintain work arrangements without traditional employers or regular, full-time schedules – regardless of how long their jobs may last. Gig workers are spread among diverse occupational groups and include a variety of employment categories, such as independent contractors, temporary workers, contingent workers, freelancers, on-demand workers, and others. Individuals may be working more than one gig at a time.

Research from the Guardian Life Insurance Company reveals that a greater number of working Americans are participating in the “Gig Economy” (estimated to be about 25% of the U.S. labor force) working in part-time, independent contractor, or contingent positions (rather than full-time, permanent jobs), particularly in industries like hospitality, health care, and retail. The Government Accountability Office (GAO) estimates some 40% of the workforce is “contingent.”

A workforce at risk

For some individuals, Gig work provides supplemental income, while for others, it may be their primary source of income. Most workers in the Gig Economy have no minimum wage, no unemployment benefits, no workers’ compensation protections, no paid time off, no disability coverage, no retirement coverage, and even no minimum or maximum working hours. Such workers are, also, not protected by most labor laws.

Gig workers usually do not receive employer-paid benefits, like health insurance, retirement, and paid time off. Most rewards programs, including “traditional” employee benefits, and workforce protections are typically tied to the traditional full-time work arrangement with a single employer.

With about one-quarter of the U.S. labor force working in part-time, independent contractor, or contingent positions, the lack of employee benefits especially has made this population financially at-risk.  Many are falling behind financially because of being ineligible for employer-sponsored benefits.

Making a living, primarily as a Gig worker, creates many challenges, including inconsistent income and lack of benefits. What are some options to address these challenges?

Current federal rules require organizations to classify workers as either “employees” or “independent contractors.” Some have suggested a third category, called “independent workers.” The law on employment classifications really would need to be revised to address the realities of today’s workforce. However, worker classification is only part of the issue. The primary issue here is around portability. Portable workplace benefits will have to be a part of any new social contracts.

How can we make employee rewards programs more accessible and portable outside of the traditional employment relationship?

A coalition of Gig economy executives, labor leaders, business people, academics, and others signed a letter awhile back that supported the creation of a social safety net for workers in the Gig economy. The published letter, called “Common ground for independent workers,” provided principles for starting a dialogue around delivering a stable, flexible, and portable safety net for all types of work.

Some ideas that might satisfy some or all of the outlined principles are:

  • Multiple employers paying into a benefits account/funds which would follow workers from job to job (similar to what we have in certain industries, like construction, or multiple employer union plans)
  • Transferring of benefits from one to the other among multiple employers
  • Requiring online platform companies to charge a surcharge/user fee to customers, and then place the money into a benefit fund for workers that would be administered by a nonprofit
  • Offering universal retirement savings with government matching benefits
  • Providing a central benefits portal administered through a government entity

Any viable solutions have to be weighed against new costs on businesses and customers, but we definitely need to look for ways to broaden the social safety net from the single employer, full-time worker model to a more universal framework that accommodates a variety of alternative working arrangements.

Recently, U.S. Senator Mark Warner and U.S. Representative Suzan DelBene introduced legislation that attempts to address how rewards and benefits are delivered in the modern workforceThe Portable Benefits for Independent Workers Pilot Program Act would establish a pilot program at the Department of Labor for the authorization of competitive grants to states, cities, and nonprofits for pilot projects related to innovations in this area. We’ll have to see if this proposed legislation gains any traction.

We have a very mobile workforce in an increasing digital economy, so exploring new ways to offer portability in benefits and rewards programs in order to offer a level of financial security for individuals is really key as the world of work continues to evolve.

Is your organization hiring more individuals outside the traditional full-time classification to perform work? What are some of your ideas?