Some — child-care providers or Uber and Lyft drivers, for instance — perform services that require them to come in close contact with others in person. Independent contractors like these saw their workload evaporate overnight when the world essentially shut down in the early months of 2020.
One analysis found 19% of gig drivers collecting unemployment benefits in July 2020. The same report saw the number of other types of gig workers collecting unemployment cresting between 13% and 15% at the peak of the pandemic.
Meanwhile, some freelancers thrived. For example, San Francisco-based grocery delivery company Instacart hired hundreds of thousands of new gig workers in early-to-mid 2020 to help meet the growing demand for grocery delivery services.
The need for such services has leveled off since those early days of the coronavirus, and many gig workers have undoubtedly come up against hardships throughout the past 30-odd months. But there are signs that bode well for the gig economy’s long-term, post-pandemic outlook.
Gig workers are certainly enthusiastic about their future prospects, at least according to McKinsey’s latest American Opportunity Survey. In the survey of more than 25,000 Americans, 36% of employment respondents identified as independent workers. This number represents an 11% increase in comparison to McKinsey’s 2016 assessment of America’s independent workforce. More than a third of these gig workers say they expect to have more economic opportunities in the next 12 months.
Their optimism might be well-placed. The past three years have changed how consumers engage with businesses. More interactions are taking place online. Struggling to find talent to fill open roles and to work on critical projects, employers are expanding their candidate pools. And, maybe most notably, remote work has exploded since the pandemic’s onset, which means that more types of jobs can be performed by gig workers who can work anywhere, anytime.
This new reality has given more would-be gig workers the push they needed to strike out on their own as independent contractors. Others have seen their professional circumstances change instantly and drastically, and have felt forced to pursue gig work to either augment their suddenly-slashed paychecks or as a full-time source of income.
So, as the pandemic slowly recedes, will this trend hold? Will we see independent contractors become an even bigger piece of the workplace puzzle?
An Uptick in “High-End” Gig Work
Overall, the number of American workers classified as freelancers — including all types of gig workers — hasn’t radically changed since the arrival of the coronavirus. In fact, a December 2021 survey conducted by freelance platform Upwork found the percentage of U.S. workers considered freelancers remaining constant — 36% — between 2020 and 2021.
That same Upwork survey, however, saw a shift in the type of freelance work being done, with freelancing growing among the most educated and decreasing among the least educated.
“The higher-skilled nature of freelancing is clear,” according to Upwork, which found 51% of post-graduate workers doing freelancing — a 6% increase since 2020. In addition, the share of freelancers with high school diplomas or less dipped from 37% in 2020 to 31% in 2021.
Skilled remote freelancing continued to climb in 2021 as well — albeit slightly, according to Upwork’s poll, which found 53% of all freelancers providing skilled services such as computer programming, marketing, IT and business consulting. That figure represents a 3% increase from 2020.
Earlier this year, a Wall Street Journal piece noted the rising number of freelancers providing services in high demand such as computer programming, writing, business consulting, marketing and information technology.
“High-end gig work in consulting, marketing, writing and project management has gained more traction during the pandemic, independent consultants and recruiters for such project-based work say,” WSJ’s Kathryn Dill wrote.
“Once viewed as an off-ramp for executives drifting toward retirement or a life-raft for those struggling to re-enter the workforce after a break, independent consulting has emerged as a viable, and even attractive, option in today’s hot job market,” according to WSJ.
While professional gig workers reap the benefits of having flexible hours and control over the type and amount of work they perform, for example, employers “can tap a significantly broader talent pool to work remotely as they struggle to hire all the full-time staff they need,” wrote Dill.
Indeed, more organizations are likely to expand the talent tent to include independent freelancers to fulfill skilled roles in the days ahead.
Consider Willis Towers Watson’s (WTW) recent Global Reimagining Work & Rewards Survey, which adds evidence to the case for rethinking talent strategies to include more of these types of gig workers.
The study of 1,650 organizations employing nearly 12 million workers found more than 40% of companies saying they expect how they source talent to change in the next three years to include more contract and gig workers.
Around two in five of these same employers believe that how they source talent or the sort of jobs offered and type of work done will be “significant factors in how their work evolves over the next three years.” Close to half of the organizations surveyed said they believe that “building a talent ecosystem encompassing alternative work models will be an important HR capability” over the next three years.
The uptick in skilled gig workers “will only get amplified with supply chain and other acute global challenges, and inflationary pressure,” said Tracey Malcolm, leader of WTW’s future of work and risk practice.
“Organizations that are clear about the work that needs to get done, its value to them, and the best source to deliver that work have the winning equation,” she said. “They’ll be clear about the work and secure the best source for that work at a point in time for the most impact.”
Malcolm urged organizations to carefully consider how this approach to talent acquisition could prove to be a competitive advantage.
A company that needs digital marketing expertise to launch a product, for example, could screen, interview and hire a full-time employee, “even though this product campaign is really only targeted for their second quarter,” she said.
Or, the organization can create a digital marketing assignment and select a highly-rated, experienced freelancer for a term of, say, three months, she said. “Both options deliver, but one has a total labor cost associated with full-time rewards, while the other [only has] hourly work and the work assignment.”
The Talent Ecosystem Reimagined
For those who had given thought to becoming part of the gig economy in the past, the pandemic offered the opportunity “to test the waters and be their own bosses,” said Kathleen Duffy, president and CEO of the Duffy Group, a Phoenix-based executive recruitment firm. “[Those who flourished] were successful because of relationships. People trusted them with projects.”
This trend figures to continue, she said, “but only for those who can balance business development with client development and working on their own. The true entrepreneurs will succeed, while others will return to corporate America.”
From the employer’s perspective, seeking out gig workers to fill skilled positions, even in the short-term, enables the organization to get talented workers while taking a closer look at their operations, leaders and internal environment, said Duffy. As an example, she referenced a DEI consultant in her professional network who recently left a senior-level position at a Fortune 50 company because of the organization’s leader.
“He’s consulting while looking for his next opportunity, because he’s not sure about balancing business development and project work” said Duffy, noting that leveraging talent from the gig economy offers the opportunity to place skilled freelancers in roles all the way up to interim CEO. “This ‘try-it-before-you-buy-it’ concept would undoubtedly benefit employers and candidates alike.”
For many companies, the idea of relying on independent contractors to fill these types of roles is a novel one. And “there really isn’t an integration model” for incorporating freelancers into an organization’s workforce, said Erin Hatton, PhD, an associate professor of sociology at the University of Buffalo College of Arts and Science.
“If you want to use independent contractors, you have to treat them as such. That means they are fully autonomous, and it means that they fully control their work and their working conditions.”
Striking the balance between allowing independent contractors to remain truly independent — as employers are legally obligated to do — and ensuring that projects involving freelancers remain on track can be tricky, she added.
“Let’s say I’m a freelance graphic designer, and I’m going to design a website for your company. I can say, ‘This is going to take me X number of hours, and I’m going to charge you X amount of dollars. And I’ll give you a progress report every Friday until the project is done.’
“A manager can’t be hovering, asking freelancers what they’re doing, how it’s going and how they’re spending their time,” Hatton continued. “You can’t do that as a manager. And I would argue that it’s problematic if someone is trying to oversee [an independent contractor’s] work and working conditions if they’re not responsible for taking care of that person as an employee.”
This last point is an important one for managers and HR professionals hiring freelancers to keep in mind, she said.
“Managers can make themselves available to offer guidance to independent contractors they’re working with; they can say, ‘Hey, you can come in and use a desk here or you can check in with me by email or other means any time.’ You can give independent contractors that option, but you can’t make it a mandate.”
Classification Concerns
Determining how to classify independent contractors versus employees might seem straightforward on the surface. But that’s not so.
“What appears to be a simple issue is quite complicated,” said Andrew Berns, a partner and chair of Einhorn, Barbarito, Frost & Botwinick’s commercial litigation and employment practices. “The decisions as to how to classify workers and the companies that provide them with opportunities to work differs in each state.”
Generally speaking, the most critical issue in supervising workers identified as gig workers or freelancers is whether they actually satisfy the criteria to be considered independent contractors, said Berns.
Again, the standards differ from state to state, he said, “so it is difficult to arrive at blanket conclusions that will be applicable federally.”
New Jersey, for example, has adopted what is commonly known as the ABC test, designated to evaluate working relationships and determine whether workers and those providing them with work are classified properly, explained Berns.
The New Jersey statute starts with the proposition that the freelancer relationship will be considered one of employee and employer unless all three requirements of the ABC test are satisfied.
“Effectively, to be considered an independent contractor, a worker must show they are free from control by those providing working opportunities,” Berns said. “They must also demonstrate that the service they are providing is either outside the usual course of business for which the service is performed or the service is performed outside of all the places of business of the enterprise for which such service is performed.”
Finally, the individual being evaluated must be engaged in an independently established trade, occupation, profession or business.
Most workers classified as independent contractors like this designation, said Berns.
“They enjoy the independence, want to make their own decisions about where and when they work and have no concerns about not being eligible for unemployment compensation or disability benefits.”
Because many of the industries independent contractors work in have more available work than can be satisfied, there will rarely, if ever, be circumstances where a freelancer would qualify for such benefits, Berns added.
“Alternatively, workers who feel they are actually employees disagree strongly with policies which classify them as independent contractors and allow employers to deduct expenses from their pay, which they believe are proper expenses to be absorbed by what they consider to be their employer.”
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