Workforce Decisions: Do You Need a Gig Economy Worker or a W2 Employee?
From salaried employees and traditional workers to freelancers and digital nomads – the definition of work has changed, and the modern workforce is as diverse as ever. As a leader, choosing between hiring a W2 employee and a gig economy worker can be challenging.
It’s important to think about the specific needs and nature of the type of work you’re hiring for when making this decision.
As traditional employees, W2 workers typically offer stability, loyalty, and a deeper commitment to the organization. They may better fit roles that demand consistent, long-term engagement and benefit from a structured work environment.
On the other hand, gig economy professionals, also known as freelancers or independent contractors, bring flexibility and scalability to the table. Plus, hiring a gig worker might be a cost-effective solution if your project has fluctuating periods of demand or needs specialized skills for a short time.
This blog is here to make your decision easier. We’ll explore the gig economy—what it is, key considerations, and how it compares to W2 working arrangements.
With this knowledge at your fingertips, you’ll be ready to choose the right employees for you.
What is the gig economy?
In the gig economy, named after the jazz music industry’s use of ‘gig’ for performances, workers work on a contract-to-contract basis, enjoying the flexibility of a nontraditional workflow, though without traditional job benefits like health insurance.
These workers include freelancers, gig platform workers, and the self-employed. A few examples of gig jobs might include rideshare drivers, web developers, consultants, and other freelance contractors.
The freelance economy was already growing, but the pandemic, the great resignation, and labor shortages made it boom.
In fact, it’s predicted that the gig economy will be bigger than the traditional full-time workforce by 2027.
Because of inflation, businesses are cutting costs, and hiring gig workers helps fill the workforce gap by accessing a wider talent pool when they need it most.
Benefits of hiring gig workers
Working with gig workers comes with a unique set of advantages, including:
- Addressing the labor shortage
Right now, the gig economy currently makes up 35% of the workforce. These professionals offer a flexible solution to the challenges of finding skilled labor, allowing you to access the right talent at the right time and fill gaps in expertise.
- Using technology platforms
To foster business growth, businesses of all sizes need to identify the kinds of workers they need. The gig economy is ripe with experts spanning sectors like IT, graphic design, data science, analytics, engineering, and other remote-friendly fields.
- Adapting to inflation
The gig economy provides a cost-effective way to manage resources during economic changes like inflation. The ability to scale up or down based on project demands allows you to smoothly navigate economic fluctuations.
Benefits of W2 employees
On the flipside, traditional workers offer their own unique set of advantages, including:
- Consistent and reliable
W2 workers provide a stable workforce with regular schedules, making it easier for businesses to plan and manage long-term projects.
- Loyalty and team integration
W2 employees tend to be more loyal and integrated into the company culture, fostering effective teamwork and positive workplace dynamics.
- Investment in skills
Employers often invest in developing the skills of W2 workers, ensuring a well-equipped workforce for the company’s long-term success.
How to leverage the gig economy
To leverage the gig economy and get the most out of what it has to offer, take the following steps:
- Offer flexibility: Give gig workers flexibility in their schedules and the option to work remotely, helping them achieve a healthier work-life balance.
- Cultivate a purpose-driven culture: Build a company culture based on a clear mission and vision, making sure all workers, including gig workers, feel a meaningful connection to your organization’s overall purpose.
- Improve performance measurement: Set up systems to measure performance and work quality, offering constructive feedback to gig workers and helping them enhance their contributions to your projects.
- Establish fair pay scales: Cultivate transparent pay scales for project work, making sure gig workers are fairly compensated for the value they bring.
- Use staffing agency platforms: Identify user-friendly platforms connecting businesses with workers from staffing agencies, making it easy to hire temporary workers for specific projects or tasks in the gig economy.
What are the laws and legal issues to consider with independent contractors?
When navigating the legal landscape concerning independent contractors, it’s important to consider the following:
IRS 20-point checklist
Consider the IRS 20-point checklist as a comprehensive guide to ensure proper classification and compliance when engaging independent contractors.
State-specific protections
Keep in mind that certain states, like New York and California, have implemented laws to safeguard freelancers. Being mindful of and adhering to these state-specific regulations helps ensure legal compliance and fair treatment of each independent contractor.
The role of agile workforce planning in determining your employee needs
Here’s how to use agile workforce planning to help you identify your employee needs:
- Evaluate your team: Assess skills, strengths, and performance for insights into your current capabilities.
- Define goals: Clearly outline short- and long-term objectives, aligning projects accordingly.
- Forecast workload: Estimate project requirements, considering external factors influencing workload.
- Identify skill gaps: Highlight areas where additional expertise is needed for upcoming projects.
- Use technology: Leverage workforce tools and analytics for real-time data on skills and performance.
- Promote flexibility Embrace a flexible approach by incorporating freelancers or part-time employees.
- Encourage feedback: Establish regular channels for employee feedback to fine-tune your planning.
- Develop talent pipelines: Identify potential hires and opportunities for upskilling within your organization.
- Monitor trends: Stay informed about industry trends and market dynamics to adjust your plans.
- Regularly review and adjust: Conduct periodic reviews, adjusting plans based on performance and feedback.
Closing thoughts
When choosing between gig economy workers and W2 employees for your workforce, consider project duration, scalability, and company culture. Gig work offers flexibility for short-term projects, while W2 employees provide stability for long-term commitments.
Strategically leveraging the gig economy requires thoughtful planning, especially amidst workforce shortages and inflation. Don’t forget about legal considerations, including the IRS 20-point checklist and state-specific regulations, to guarantee compliance when hiring for freelance jobs.
Understanding the unique benefits of gig and W2 employees allows you to make informed decisions that align with your organization’s goals and optimize your workforce for success.
Refine Your Workforce with Deliver Workforce Solutions!
Whether you’re assembling a team of gig workers, W2 employees, or a blend of both, Deliver Workforce Solutions is here to assist with a thorough workplace assessment to help you define your needs.
