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The Gig Economy and Its Effect on the Employee Value Proposition

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The pace at which organizations embrace Industry 4.0, also known as the 4th Industrial Revolution, will ultimately determine their survival. As with each successive industrial revolution, we are seeing social upheaval, new ways of working and new demands for skills and talent.

The rise of the so-called gig economy is one trend driven by the convergence of technology that enables individual workers to choose how and where they want to work as well as powering digital labor-matching platforms. Although, true gig workers currently are defined by the UK government as those “involved in the exchange of labor for money between individuals or companies via digital platforms that actively facilitate matching between providers and customers, on a short-term and payment-by-task basis,” the term often is used more broadly to cover other types of flexible or contingent workers who are nontraditional employees. This includes those who are self-employed, zero-hours, agency and temporary workers.

In June, new data from the U.S. Bureau of Labor Statistics suggested that 16.5 million people are working in “contingent” or “alternative work arrangements,” with nearly 6 million people in contingent jobs and another 10.6 million working as independent contractors, on-call workers and temporary help-agency and contract-firm workers. In the United Kingdom, it’s estimated that 5 million people are employed in this type of capacity, while a 2016 McKinsey survey estimated about 20% to 30% of the workforce in the United States and European Union belongs to this category.

What’s clear is that the construct of our workforce is transforming, which ultimately means we need to revisit our employee value propositions (EVP) to ensure they embrace the more diverse nature of employees.

The Changing EVP
Gig economy leader Uber is a clear example of where a well-defined EVP would have been invaluable. The startup exploded with a strong corporate brand, but the legal challenges and reputational damage it has faced since highlight how well-advised it would have been to simultaneously develop an employer brand that worked for its diverse workforce.

An EVP is the unique set of benefits that an employee receives in return for the skills, capabilities and experience he or she brings to a company. From an employer’s perspective, an EVP is about defining the essence of your company — how it is unique and what it stands for, and how it aims to give you a competitive advantage in the war for talent.

While some have evocative headline statements, the EVP is really about what you deliver in terms of the work environment, company culture, talent development and rewards that define the employee experience. And these policy frameworks need to adapt considerably. Consider some of the key challenges.

Employment Rights
The rights of gig workers are playing out in courts around the world. The primary debate is that many who work as contingent workers have limited employment rights. Yet, by law, they actually are a category of self-employed individuals who are entitled to basic rights (e.g., paid holidays, minimum wage and protection from discrimination).

In the United States, the U.S. Department of Labor’s Wage and Hour Division (WHD) offered informal regulatory guidance on gig workers under Barack Obama’s presidency. WHD said it would pursue investigations into complaints about worker classification and subsequent pay disputes. However, current President Donald Trump’s labor secretary, Alex Acosta, removed that guidance. With the lack of clarity from the U.S. government, the courts have been left to define and rule on rights.

In the United Kingdom, the Taylor review of modern working practices suggested the problem is confusion in the law, or the inability of the law to keep up, both which can result in workers being inadvertently deprived of rights to which they’re entitled. Clearly, those setting the law and businesses using gig workers need to adapt to a structure of working arrangements that better supports the well-being of contingent workers while still retaining the flexibility required by all participants.

Talent Sourcing Challenges
While digital platforms can facilitate direct connections between employers and the vast number of talented individuals in the market, engaging and managing the right talent becomes trickier thanks to such abundance.

Recruiters must be more data focused to find the best talent for the right gig as well as be able to speed up their interview processes to compete for highly mobile talent. Though recruitment can be done online, there may still be a need for screening of skills suitability or even cultural fit.

From an employer’s perspective, there also is some work to be done on organizational design to move from the traditional view of work needing to be delivered by employees in jobs to a more diverse view of work that can be completed via outsourcing or by deploying temporary or contract skills. This really requires a shift in approach from “I need to hire a person,” to “I need to complete a task.” Managing this task-oriented worker is the next challenge.

Talent Development
The PWC “Workforce of the Future” study found that less than one-third of employers base their future talent strategies on the rise of the portfolio career, even though 46% of HR professionals expect at least 20% of their workforce to be composed of contractors and temporary workers by 2020. The need to adapt to a more flexible talent management approach is apparent.

There is a view that contingent workers are only working this way because they are unable to find permanent employment. Although many gig workers evolved out of economic necessity after the last financial crisis, many have successfully built careers that provide them with flexibility and fulfilment, and they have no intention of returning to permanent employment.  These workers have become masters of their own destiny with the flexibility to work when and where they want. And by working for multiple employers, they have developed broader experience and skills.

However, this tends to apply to the higher paid and more skilled contingent employees. Some thought needs to be applied to how low-skilled and more vulnerable minimum-wage gig economy participants also can benefit from new career experiences and skills acquisition.

This is a critical element to the EVP: What can you offer the flexible mobile employee that your competitors cannot in terms of skills and experience?  

Rewards and Benefits
Rewards and benefits — particularly benefits — are where there is huge difference in the treatment of permanent and contingent workers. Many of the legal cases in play focus on workers’ rights and access to holiday pay and other benefits. The legal definition of “employee” needs to catch up with the changing nature of work, and then this will help employers refine their rewards and benefits offerings to different types of employees without the risk of litigation. We also need to see labor market policies such as the minimum wage, benefits, family leave, workers’ compensation for on-the-job injuries, and retirement schemes evolve to accommodate the nature of independent work.

With the growing diversity of the workforce and the need to leverage different types of talent, we must broaden our approaches to rewards to think about engaging and attracting these different types of employees. We’ve seen this demonstrated successfully in the benefits arena with the focus on employee choice, but less so in mainstream compensation. It’s time to do away with a one-size-fits-all model of rewards and, instead, bring increased personalization to the rewards element of the EVP. The key to success here is combining these different approaches within an overarching rewards philosophy, with common key rewards principals. 

Adaptability Is Key
Economists, politicians and business leaders all recognize that the successful growth of the gig economy could have many tangible economic benefits, including raising labor force participation, providing opportunities for the unemployed and potentially even a much-needed boost to labor productivity.

Managing a talent pool and developing an employee value proposition that works across a blend of permanent and portfolio workers requires all people management processes to adapt. Messages and policies must be defined for specific groups through audience segmentation delivered alongside, overall brand messaging.

About the Author

Ruth Thomas is an industry principal with Curo Compensation (@curocomp). Connect with her on LinkedIn.

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