If You Use Gig Workers to Quell Comp Costs, You Better Read This

Gig work is on the rise, and freelancers who contract for these tasks and projects can be a great talent outlet for specific skills while allowing organizations to rein in corporate compensation and benefit costs.

But independent contractors lack the safety net of benefits and a fixed salary, so they are especially vulnerable to inflation.

In a tight economy, employers that want to retain their top freelance talent should consider ways to enhance the compensation proposition and more, according to the 2025 State of Gig Work Report from Zety, a career-builder website.

The study, based on a survey of more than 900 U.S. gig workers, showed:

• 88% of responding freelancers have taken on more gigs because of inflation and rising living costs.
• 55% rely on gig work for more than half their total earnings.
• 47% fear a lack of health insurance and retirement plans will hinder their economic viability, while 24% say they can’t always cover basic living expenses.
• 33% cite physical or mental burnout as a major concern.

“Freelancers are essential to running modern companies as they fill skill gaps, smooth out surges and keep costs flexible,” said Shekar Nalle Pilli Venkateswara, a senior director of work of rewards at WTW. “Unlike full-time employees, they face rising costs without salary adjustments or benefits. When employers ignore their challenges, they risk losing scarce digital, creative and analytical talent.”

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The flexibility/viability tug-of-war has real consequences, agreed Jasmine Escalera, a Zety career expert.

“These findings should raise a red flag for employers who rely on freelancers and gig workers to deliver quality services and critical projects,” she said. “Burnout directly affects the productivity and creativity these workers bring to a company. If gig workers are stretched too thin, juggling multiple jobs and battling exhaustion, companies ultimately face the consequences in the form of reduced output, weaker results and delays in work product.”

Providing Meaningful Support

How might total rewards (TR) professionals help address the situation?

First and foremost, employers must be forward thinking in how they treat their gig workers, said John Land, the chief advocacy officer at Vantage Circle, a recognition solutions company.

“We humans have long memories and we talk,” he said. “Treating your gig workers poorly will be remembered long past this period of inflation.”

The experts interviewed for this article recommended that TR pros support the organization’s freelance talent pool through:

• Fair and competitive pay. Review rates at least once per year against market data, Venkateswara said — and pay quickly, ideally within 15 to 30 days. Reward loyalty with small rate premiums or bonuses for repeat projects. And, keep things clear: Use straightforward contracts that outline scope, intellectual property (IP) rights and payment terms.
• Stipends. Explore how stipends, bonuses or other perks (e.g., financial planning services) may help gig workers offset the cost of insurance (health, vision, dental, etc.), Escalera suggested. Provide stipends toward basic costs such as home office setups, software licenses and internet fees that inflation has made harder to absorb, Venkateswara said.
• Inclusion and recognition. Invite freelancers to relevant meetings, share corporate updates with them and publicly recognize their work, Venkateswara said, adding, “When you link their contributions to innovation, delivery and agility, you build a more resilient workforce that can flex when the market shifts.”
• Flexibility. Autonomy over schedules and work processes is a key motivator for many gig workers and helps them balance multiple projects. Remote or hybrid workplace options reduce the need to commute, saving significant money and time.

Avoid Misclassification

Being kind and caring to gig workers can be a game-changer, but Land noted that organizations should ensure they aren’t crossing the misclassification line.

“In fact, if you are kind and caring, most gig workers will give employers the benefit of the doubt versus jumping right to legal action,” he said.

But, he said, knowledge of — and compliance with — laws such as the Fair Labor Standards Act in the U.S. is critical.

Venkateswara shared three guidelines to avoid misclassification issues with your freelance workforce:

• Don’t control the work or blur boundaries. You can define “what” needs to be delivered but not “how.” Avoid setting fixed hours or managing their daily tasks. Don’t force them to use your systems or tools unless it’s essential for IP protection. And keep clear lines: no employee-style titles, no organization chart placement, and no managing staff or doing performance reviews.
• Keep contracts project based. Tie freelance work to specific projects with clear deliverables and timelines. Avoid open-ended or “rolling” contracts that look like ongoing employment. Don’t offer employee-style benefits like health plans, retirement programs, paid leave or corporate stock — instead, offer access to optional third-party benefits that maintain independence.
• Take compliance seriously. Classification rules differ across countries and even U.S. states, so one policy won’t fit all. Get local legal input, especially in stricter places like California, and keep your paperwork airtight — maintain contracts, invoices and clear scopes that show independence. Finally, don’t call someone a contractor just to avoid taxes or benefits. If they work full-time hours doing the same job as your employees, regulators will treat them as one — the short-term savings aren’t worth the legal and financial risks.

“When freelancers feel undervalued, you lose the flexibility and innovation they bring,” Venkateswara said. “Over time, organizations that neglect these relationships find themselves slower, less adaptable and blind to how much of their work actually depends on external talent. Competitors who treat freelancers as true partners build trust, loyalty and access to scarce skills.”

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Benefits
• Employee Compensation
• Finance and Budgeting
• Total Rewards