The Gig Economy: How Financial Executives Can Better Tap into This Creative Workforce

by John Godfrey

The gig economy has evolved from a transient trend to a transformative force, with projections indicating that over 50% of the U.S. workforce will be engaged in gig work by 2027, valued at $455.2 billion in 2023.

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In today's ever-evolving business landscape, financial executives are grappling with a significant shift in the workforce: the gig economy. Once thought of as a transient trend, this dynamic labor model has solidified its presence, calling for the attention of corporate leaders and specifically financial executives. As the gig workforce grows, it becomes ever more necessary to strike a balance between accessing this expansive talent pool and sticking to legal and ethical frameworks for engaging them.

Beyond Transient: The Gig Economy's Here for the Long Run

The gig economy is not just a passing phase; it has become a transformative force. Reports tracking its growth confirm its sustained expansion, with the U.S. Bureau of Labor Statistics projecting that over 50 percent of the U.S. workforce will be engaged in gig work by 2027. Gitnux estimates the gig economy's 2023 value at an astounding $455.2 billion.

To fully harness this transformation, financial executives can consciously make the choice to recalibrate their engagement strategies with gig economy workers. To be part of this shift, it helps to have a good grasp of the motivations and capabilities gig workers bring while identifying skill gaps they can fill and better integrating them into existing teams. The cross-pollination of in-house staff and freelancers who can bring a broad outside perspective can deeply enrich internal culture.

A Delicate Balancing Act: Compliance and Creative Staffing

Navigating the gig economy's unique challenges, especially compliance and benefits, requires a nuanced approach. Unlike Europe and the UK, where stringent "co-employment" rules exist, the U.S. offers a little more flexibility, opening up the possibility for innovative solutions. However, extending benefits to gig workers without blurring the line between independent contractors and employees is a complex endeavor. Mastering this terrain calls for a careful understanding of tax classifications as well as taking in guidelines from the IRS and DOL. Any gray areas should be navigated with caution.

Understanding Gig Workers: Desires and Concerns

To engage effectively with gig workers, it helps to be aware of why they chose to be independent workers in the first place. For this group of workers, flexibility is paramount, with 63 percent of freelancers citing it as their number one reason to work this way. This flexibility enables them to better balance work and personal responsibilities.

However, pay equity remains a pressing concern, particularly the widening gender and minority pay gaps in the gig economy. In a study we recently ran on U.S. gig workers, as few as 8 percent of female freelancers held a pension plan. Addressing these disparities is both an ethical imperative and a strategic move to attract diverse talent.

Benefits: An Attraction and Retention Tool For gig workers, lack of benefits, whether healthcare or retirement, is a significant drawback. Health insurance, retirement provisions, and other financial safety nets often elude freelancers, highlighting the future financial risks they face. This is also where a freelance engagement that approximates traditional employment might become attractive to a gig worker. Companies willing to extend a form of

equivalency when it comes to traditional benefits, or contribute to them in some way, will gain a competitive edge. Healthcare benefits are a particularly crucial issue. However, regulations around offering gig worker benefits vary. Careful examination of options such as health reimbursement arrangements (HRAs) and extended group plans is essential. Similarly, addressing retirement planning needs is critical, particularly across genders.

There’s Room for a More Collaborative Future

The path forward with this growing group of workers involves a delicate interplay of compliance and creativity. Employers must balance hybrid work arrangements and flexible hours. Inclusive workplace cultures that foster collaboration, mentorship, and support can help counteract the isolation reported by gig workers we surveyed. This type of environment was especially appealing to the younger demographic we surveyed. Attracting freelancers with mentorship and teamwork opportunities can provide enrichment to both sides of the equation, allowing companies to tap into gig workers' expertise while providing them with a greater sense of belonging.

Charting a Course for Financial Executives and Gig Economy Workers

The gig economy's trajectory is undeniable, pushing out the boundaries of work. While every company is going to strike its own balance, this new model offers to draw on a much wider range of talent, leading to opportunities both for innovation and growth. By adopting an approach that navigates the legal nuances of offering benefits, financial executives can help foster security and loyalty among gig workers while benefiting from this immense talent pool. The gig economy represents a very real gear shift into the future of work, and financial leaders can serve as a vanguard for change and renewal by cutting a path that balances regulatory adherence with innovative staffing solutions.

[End Note: While the gig economy findings in this article are based on survey research conducted by Legal & General in late 2022, references to the evolving nature of laws and regulations are as recent as April 2023. However, it is essential to consult accounting and legal professionals for the most up-to-date and accurate guidance on retirement and healthcare benefits as pertaining to freelance workers.]

John Godfrey is Director of Leveling-Up at Legal & General.