Talent management: The growing gig economy

Gig workers in the gig economy. They represent a shift from traditional employment, from an employee-employer relationship to a worker-payee relationship, a shift we discussed in The Big Book of HR.

Who are these gig workers and what percentage of the labor market do they represent? Different studies provide different answers, and those studies are not always consistent.

The rise of gig work

According to HR Brew, the Bureau of Labor Statistics estimates around 14.5 percent of the US workforce had contingent or alternative employment as their primary job in 2023, while 5.5 percent held multiple jobs. However, non-government research suggests otherwise. A 2023 Upwork study found that 38 percent of US professionals did freelance work, and a 2024 LinkedIn survey found that 31 percent of US employees were balancing a side hustle or project.

Who are gig workers?

Some of the confusion in defining who they are and what percentage of the labor market they represent lies in understanding who these gig workers are. Only then can you measure their impact on the labor market and the economy and the challenges they present.

Gig workers can include any of the following:

• Independent contractors (or self-employed freelancers) who provide their individual services directly to an organization and receive a 1099 at the end of the year. These individuals are free to provide services to any number of clients—often working for many clients simultaneously filling a need those clients don’t require on a continuing basis. These client requirements can be long or short-term.
• Contractors who work for a staffing firm that provides services are often considered part of the gig economy or contingent workforce. They differ from independent contractors because they are employees of the staffing firm, and they receive a W-2 at year end as well as other benefits. 
• Employees balancing side hustles in addition to their full-time job (usually freelancers) may or may not be captured in studies of gig workers.
• On-demand workforce in industries such as Uber Technologies Inc., Lyft Inc., DoorDash Inc., but also trucking, construction, journalism, or financial services that rely on contract arrangements.

Of course there are artisans, performing and creative artists, independent contractors who provide services to individuals, day laborers, and the list continues to grow.

Millennials are the leading generation of gig workers according to TransUnion, with 78 percent currently earning income from one or more gig platforms. Gen Z and Gen X workers followed closely behind, at 67 percent and 65 percent, respectively; but only 36 percent of Baby Boomers reported earning income from one or more platforms. Millennials and Gen Z workers are most likely to use gig work as a primary source of income.

What’s driving the expansion?  Several factors contribute to the reasons people are turning to gig work.

• Flexibility ranks high on the list. The ability to be free from a set schedule and a desire for more control over work schedules are often-cited reasons. Flexibility allows individuals to create a balance between their work and personal life.
• Disillusionment after layoffs, which may become more common if the economy moves into a recession.
• Recently laid off employees, including former government employees, are reporting they are realizing that having lots of clients rather than one employer is a more secure situation.  A survey of 1,000 knowledge workers found that those sentiments are becoming prevalent leading many to go to ditching the staff job altogether for free-lance work.

Nearly three-quarters (73 percent) said recent layoffs made freelance work more desirable, with 64 percent losing trust in the stability and security of full-time employment. Among laid-off workers, one-quarter were switching to freelance work or starting their own businesses.

Reliable source of income per Tracey Lazos, senior director of TransUnion’s Gig Economy Business. According to their research, the gig economy has a strong reputation as a reliable source of income, and the trend is likely to continue as more seek gig work as primary or supplemental income.

What are the challenges?

For workers

Despite the reputation of gig work being a reliable source of income, gig workers and independent contractors lack access to traditional benefits and often have to procure such benefits on their own. Indeed, we discussed this in The Big Book of HR, along with Virginia senator Mark Warner’s proposals for expanding unemployment insurance to gig workers and providing for portability of benefits, including retirement investment accounts.

According to Matt Bahl, vice president, market lead, workplace financial health at nonprofit financial services consultancy Financial Health Network, there are some interesting examples of employers granting access to part-time benefits, removing waiting periods, extending access to part-timers for retirement and health insurance. “But doing so for gig workers would blur that line for 1099 and W-2 employees.”

For HR and leadership

As the gig economy expands, leaders will have additional challenges to balance. For example:

Recognizing how alternative forms of employment fit into talent strategy

As the gig economy grows, less workers, including those affected by layoffs, may be available to accept full-time employment.

Proper classification and compliance with DOL and IRS guidelines 

Leaders will have to carefully balance between productivity and exercising “authority and control” over gig workers to avoid treating them as employees.

Workforce planning

Changing mindsets from replacing lost talent to identifying where and when specific talent and skills are needed to fill the gaps and having this talent “parachute in” on an as-needed basis will require a major shift to traditional workforce planning.

Examining pay models for gig workers

Considering what it takes to procure benefits outside of the traditional employer-employee model, HR leaders must examine different pay models.

Organizations are likely now in arrangements with gig workers using consultants or staffing firms. But as the trend grows, it’s important to have a strategy to incorporate their services and talents.

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