After the massive layoffs that the UK, Ireland, and other EU countries, as well as the U.S experienced during and after the financial crisis, many young professionals turned to freelance work to support themselves. This was ideal for cash-strapped businesses who struggled to fill every role with full-time staff. Now, a decade later, businesses all over the world rely on this new, often digital gig economy workforce as a part-time or irregular skilled labour pool.
Freelance labour comes with many advantages for businesses. Unlike employees, they only need to be paid for the specific work they do, they can be laid off quickly and easily, and they aren’t entitled to any benefits. However, like all new things, this new labour model also comes with a few surprises. Many businesses find themselves unprepared to operate successfully in the gig economy. Due to a lack of planning and inadequate processes, businesses often mistakenly rely on freelance workers like they would their employees, and pay them as they would a business supplier.
The typical result is that the business finds itself being fired by its freelancers. Often lacking a proper contract, and having no plan in place to deal with overnight personnel losses, businesses are forced to interrupt projects, and often redo work entirely, resulting in significant costs.
Independence goes both ways
The biggest incentive for businesses to use gig economy labour is the lack of long-term obligation involved. It’s important, however, to remember that this goes both ways. Freelancers often cultivate working relationships with many businesses, including direct competitors. They aren’t obligated to remain with a client who they aren’t happy with and need to act aggressively in their professional self-interest in order to maintain a steady income.
To effectively make use of the gig economy, businesses need to put procedures in place to improve labour retention, and to manage the departure of gig workers.
Pay freelancers on time
The most common mistake that businesses make is to treat freelancers as business suppliers. Businesses typically operate at least partly on credit, and excruciatingly slow payment is, unfortunately, the norm. Supplier payments are made when revenues come in and are often delayed by days or weeks. Freelancers, however, are not businesses.
As private individuals, they rely on regular payment just as heavily as traditional employees do, and a few days’ delays can result in serious personal financial difficulties. A gig worker who isn’t paid on time might finance an invoice once or twice to manage the shortfall, but they won’t turn to financing to deal with the issue in the long term. Instead, they’ll simply find new clients, and fire the delinquent business at the first opportunity. To avoid this, it’s essential that businesses implement specific processes to pay gig workers in a timely manner. That means briefing managers on the importance of approving freelancer invoices and ensuring that they’re properly processed in the current payment cycle. Freelancers, for their part, should be informed by what time invoices need to be submitted to be duly processed, and when payments will be issued.
Always operate under contract
Businesses often attempt to avoid signing any official contracts with gig workers, preferring a more informal relationship, especially with regard to international or digital workers. Lacking a contract, no clear legal relationship exists. This removes any potential barriers to laying off a worker instantly or delaying payment as needed –sometimes indefinitely. Particularly digital workers often operate internationally, and usually lack any recourse in situations like this. Not only is this kind of behaviour unprofessional and damaging to its ability to work with other freelancers in the future, it also leaves it vulnerable in turn.
Contracts always exist to protect both signatories. Through a contract, a business can clearly define their project, as well as the associated responsibilities of both parties, and precisely what happens if one party fails to honour its end of the transaction. A contracted freelancer can be bound to give notice before ending a relationship and can be required to return documents, or to destroy sensitive data at that time. This latter point is critical, because an uncontracted freelancer in another country has no such obligations, and could instead attempt to capitalise on it. In return, the freelancer can ensure that they are similarly protected from potential pitfalls by defining payment terms and the precise scope of their responsibilities.
The gig economy offers a powerful and flexible tool for businesses who learn to use it effectively. By taking the necessary steps to manage the particularities involved, freelance labour allows businesses to cut costs while improving their financial flexibility and gaining access to a broader pool of talent than would be available through traditional means.