Contributing to the Global Economy

Gig Economy Trends and Impact on Small and Medium Practices

Kristy Illuzzi, Portia Tang | October 4, 2021

Introduction and Definition

The term “gig economy” describes a labor market that comprises short-term contracts or freelance work as opposed to permanent jobs. In 1915, jazz musicians conceptualized the term “gig” in reference to live performances and the transient nature of their jobs. In the 1940s, World War II prompted the opening of the first large companies promoting gig-type work, offering temporary labor to businesses needing to fill workforce gaps. Since then, the gig workforce has grown grow exponentially.

The gig economy encompasses all sorts of contingent work arrangements, including the following:

  • Freelancers 
  • Consultants
  • Independent contractors and professionals
  • Temps (temporary contract workers)
  • Moonlighters
  • Outsourced teams and networks

One major shift during the pandemic was the progression beyond app-based drivers for Uber or Lyft to a more diverse and highly skilled gig workforce, including small and medium-sized practices (SMPs) around the globe that have started to look at gig workers as they faced headcount freezes and a need to bridge the resourcing and talent gaps.

Gig Economy Trends and Statistics

A 2019 study by Mastercard estimated that the global gig economy generates $204 billion in gross volume, and is expected to grow by 17% by 2023. In the United States, it has been predicted that by 2027, the country may have more “giggers” than non-gig workers. According to a 2020 report from Intuit, 25-30 percent of the U.S. workforce is contingent, and more than 80 percent of large corporations plan to substantially increase their use of a flexible workforce in the coming years. Intuit predicts that small businesses will develop their own collaborative networks of contingent workers, minimizing fixed labor costs and expanding the available talent pool.

While 58 percent of the gig economy worldwide is in the area of transportation (according to the Mastercard study), other industries are starting to see a rise in gig workers as well, including accounting & finance, legal, IT and other professional advisory services.

Some companies have had to be creative with hiring through the pandemic. In some cases, that could mean hiring temporary or freelance staff where decreased budgets may not be able to accommodate full time staff salaries along with the cost of benefits. It has also been found that workers in Generation Z may prefer gig work to full time employment in a more traditional office environment, so employers are trying to be responsive to those changing needs and appetites. Some additional advantages to gig work for the individual include the following:

  • Flexibility
  • Work-Life balance
  • Be your own boss
  • Digitalization provides more gig opportunities
  • Job exposures and career advancements
  • Provides an alternative income stream

Below we illustrate below the personality traits of the various generational groups in the workforce today, and how each of these generation groups will be able to fit into the gig economy by contributing their specific strengths and complimenting each other when working as a team:

While the trend of hiring gig workers has been upward for years now, the pandemic seems to have given those numbers a boost. According to Forbes, there were 24 percent more gig workers in the summer of 2020 than in previous years. Many independent workers prefer having greater flexibility, and this became crucial during the pandemic, especially for those workers that have young children or aging parents at home that needed to be cared for. Technology has also been a key driver, and new platforms have been developed where gig workers are able to sell their services or bid for work across the globe and work from virtually anywhere.

In July 2019, a CPA Australia survey of members and accountants in public practice found that the younger the firm, the more likely they were to rely more on gig workers over the next 5 years. For example, if a firm was less than 8 years old, over 48 percent of those firms surveyed expected to rely on the gig economy more than older firms.

How Companies Can Adapt

Companies may encounter challenges when they first start to hire gig workers. There are a number of things that they will need to consider. First and foremost, some countries, including the United States and the U.K. have been in ongoing legal battles regarding the classification of gig workers. The issues under consideration include how gig workers are treated for purposes of benefits, business insurance, and taxation.

For companies that are ready to move forward with a gig economy plan, below are the steps they should follow to change and adapt in order to get themselves ready for a gig workforce:

  1. Implement policies that promote flexibility
  2. Ensure legal adequacy by creating standard contracts and clear guidelines for both giggers and non-gigger employees on their abilities to provide gig work
  3. Consider remuneration package, benefits and/or alternative compensation for gig workers
  4. Improve employer’s branding and create a reputation as a great place to work in order to retain the best giggers.
  5. Review talent acquisition requirements and key attributes that the company should look for when hiring giggers
  6. Review the existing hiring structure to accommodate engagement of giggers, establish processes and controls to monitor the performance of giggers
  7. Enable technological capabilities, including remote work policies and enhanced IT procedures for issues like cybersecurity
  8. Complete with a flexible, sustainable and affordable resourcing strategy for now and for the future - look at “Resourcing” from a holistic perspective.

Being receptive, embracing change, understanding the importance of top-down transformation, leading the strategic implementation of the “future perfect team”, and encouraging growth for your team are all critical to ensuring a successful and sustainable gig economy strategy.

SMP Perspectives

In July 2021, the IFAC Small and Medium Practices Advisory Group (SMPAG) met to discuss some of the benefits and challenges of working in a gig economy and how their firms are leveraging a gig workforce. It became clear from the discussions that some countries are more hesitant to embrace giggers due to legal and governmental requirements placed on contractors in certain jurisdictions. Where SMPs are hiring giggers, it tends to be for very specific roles and responsibilities where it would not be cost efficient to hire a full-time employee.

Some examples of the types of work being outsourced to gig workers included IT, Finance, HR, entry level, routine or administrative and research functions. Some firms are even contracting with other firms, agencies, or firm networks to perform certain types of work. One example provided was bank field examinations (third party evaluation of collateral supporting a loan) being consolidated in certain markets by SMPs.

Some of the benefits for SMPs in hiring gig workers include:

  • Greater ease filling gaps in expertise when workload is insufficient to justify a full-time position
  • Handling workload compression and seasonality of certain work
  • The time differences around the globe can result in a 24/7 workforce
  • Access to a more diverse and skilled workforce
  • Cost savings, especially on shorter term projects or where deadlines are tight
  • Declining staff retention means replacing some with gig workers is not as big of a risk as it used to be for firms

Some of the drawbacks discussed include:

  • Limited knowledge transfer and development of internal capacity, which might in the long run be more costly
  • More difficulty building firm culture and developing long term relationship with clients
  • More challenges to training and quality management
  • Some gig workers take on too much work and have competing priorities with multiple firms/companies
  • Gig work is not always billable to a client therefore creating more overhead and administrative costs
  • Availability and loyalty of gig workers may not be as high as for employees
  • In many jurisdictions, gig workers are required to use their own technological devices, and this could result in greater technology and cybersecurity risks

SMPAG members also considered whether they see firms increasing the use of gig staff in the future. Many noted that this may be inevitable due to how the market is shifting, and some saw this as a way for retired partners to formally mentor the younger staff. Others believe SMPs need to create alliances to be able to compete, and that adding gig workers is one way to do that. Some SMPs are also hiring more temporary staff in an effort to save costs as they continue to navigate the economic impact of the pandemic.

Summary

It seems the trend towards hiring gig workers will continue upward, and expand to more skilled services, including those provided by SMPs. Careful consideration should be given to the benefits and some of the drawbacks to hiring gig workers, not to mention the legal implications in a given jurisdiction. Below are some additional resources related to the gig economy that may be helpful in navigating these decisions.

Additional Resources
 

Kristy Illuzzi

Principal, SME/SMP and Research, IFAC

Kristy Illuzzi is a Principal of SME/SMP and Research at IFAC. She was previously a senior manager with the AICPA working with their Technical Issues Committee. She was also the Controller at Engenderhealth, a global non-profit organization focused on reproductive health.  Kristy started her career in the audit practice of Arthur Andersen in New York City and later was an experienced manager at Grant Thornton working in their Not-for-Profit practice. See more by Kristy Illuzzi

Portia Tang

Director and Head of Professional Resources Solutions and Client Services, BDO Hong Kong

Portia heads two divisions within BDO Hong Kong, the Professional Resources Solutions (PRS) and the Client Services Divisions. PRS embraces the concepts of Gig Economy and Talent Sharing through the provision of professional secondment and resources outsourcing services to companies to help bridge their talent and resourcing gaps. She is also responsible for business development and managing the firm’s significant client relationships in the Business Services and Outsourcing area. Portia has over 20 years of experience in professional and management consultancy firms obtained in Hong Kong and Australia.  She has gained a wealth of experience in audit, IPO, M&A, transaction services, forensic accounting, project management, and further, in the recent 8 years, she became specialized in business services & HR outsourcing and talent acquisition & management.

 

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