What are the pros and cons of working in the gig economy?
The gig economy is likely to come under increasing scrutiny over the coming weeks, after news broke on Friday (September 22nd) that ride-hailing firm Uber looks set to lose its licence to operate in London.
Transport for London (TfL) has claimed the organisation is not fit and proper to perform private hire pick-ups in the capital because of “public safety and security implications”.
Uber leverages the gig economy to hire its drivers, and the company has claimed the TfL decision will see 40,000 people without a job.
But what is the gig economy? A recent report from the Chartered Institute of Personnel and Development (CIPD) revealed that just 20 per cent of UK adults have heard the term. Surprisingly, only 63 per cent of gig workers were aware of the concept, despite operating within the environment.
Here is an explanation of what the gig economy entails, as well as the advantages and disadvantages of choosing this career option.
Understanding the gig economy
Defining the gig economy has proven difficult. While it contains elements of freelancing, self-employment and zero hours work, none of these terms entirely encapsulates the phenomenon.
According to the CIPD:
“The gig economy can be defined as a way of working that is based on people having temporary jobs or doing separate pieces of work, each paid separately, rather than working for an employer.”
Sounds a lot like freelancing, so what’s the difference? Gig workers often leverage the ‘platform economy’, such as sites and apps, to seek and complete paid tasks.
Services such as AirBnB, Uber, BlaBlaCar, Deliveroo and Upwork all exist within the gig economy, with workers using these online intermediaries to secure their next job.
The CIPD claimed there are currently 1.3 million people choosing this type of employment lifestyle in the UK. But what are the pros and cons?
The advantages of gig work
Supporters of the gig economy claim there are various benefits for workers.
Work-life flexibility: As with any freelance employment, the gig economy provides flexibility regarding when and how often you work, as well as giving you choice over your assignments. This can be ideal for anyone who needs to work around personal commitments or other jobs.
Established infrastructure: Gig workers typically get most of their assignments through online platforms, which means a third party has already built the infrastructure and gained an audience. Traditional contractors have to advertise their services and generate interest through word of mouth; gig workers can plug straight into an app or website and reach potential clients.
Pursue a passion: Whatever your passion, there’s likely to be gig work available. For example, people who enjoy writing, designing or software development in their spare time can hone their skills and see whether there’s a market for their capabilities without having to give up their day jobs.
The disadvantages of gig work
Despite the above benefits, anyone considering the gig economy should also weigh up the potential downsides.
Inconsistent employment: Many businesses and online platforms can provide workers with a steady stream of assignments, but anyone operating in the freelance space must be prepared for project lulls. Employment is rarely guaranteed, which isn’t a lifestyle suited to everyone.
Lack of employment rights: Uber hit the headlines in October last year after it lost the right to classify its drivers as self-employed. On the whole, however, gig workers tend to have far fewer employment rights and benefits than full-time staff, which often includes no sick pay, holiday allowances or company pensions.
Tax obligations: Like all self-employed people, gig workers have to track and pay their own taxes. This can be particularly complex for those in the gig economy because they may be working a multitude of different jobs across various sectors.
What is the government’s stance?
The gig economy is still in its infancy in the UK. Currently, CIPD data shows only one-quarter of people who perform gig work say it’s their main source of income.
Nevertheless, this employment trend is a disruptive force for industry and the government.
Media reports suggest politicians are already fretting about the tax implications; Trades Union Congress estimates the gig economy costs the country £4 billion a year due to lost taxes and higher in-work benefits.
Business minister Margot James has already indicated the government plans to provide more “fairness for everyone in work” in the gig economy.
A review into how current employment practices can better reflect today’s evolving business models is already underway.
“Helping us to understand what impact modern employment practices have on workers will inform our forthcoming industrial strategy and also help us ensure our labour market and wider economy works for everyone,” Ms James said last year.
How will the gig economy affect the finance sector?
Gig work is already beginning to make inroads into the finance industry.
In the US, crowdsourcing models for trading algorithm development are becoming more popular. Instead of employing in-house staff, firms hold competitions or invite freelance developers to build code for trading strategies.
Martin Froehler, an Australian mathematician who created an online platform called Quantiacs – which is designed for gig algorithm coders – said the rise of finance industry freelancers could revolutionise how business is done.
“If our model is successful there will be no need for hedge funds any more,” he told the Financial Times.
“A smart guy with a laptop will be able to start his own hedge fund. It will be very challenging to the big incumbents. A very simple idea can prove very powerful.”
This is just one example. Gig work is likely to become increasingly common as a growing number of UK workers prioritise flexibility and a positive work-life balance.
Our 2017 Compensation and Market Trends Report combines our review of the prevailing conditions in the corporate governance recruitment market together with the results of our latest employer survey.
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