The way we work is constantly changing, with a growing number of people choosing to work for themselves doing short-term contracts knows as ‘gigs’, instead of opting for long-term employment. Companies like Uber have contributed greatly to the rise of the gig economy, in which contractors and freelancers use their knowledge, skills and expertise to complete tasks and projects for businesses as independent professionals.
We’ve been providing accounting for contractors for many years, so we understand the emergence of the gig economy and its appeal. So, before you consider this type of work, it’s vital that you’re aware of what the gig economy is and whether this is the path for you.
What is the Gig Economy?
The gig economy contradicts traditional full-time employment and workers who choose a lifetime career without switching roles or positions often. The focus is on flexible and temporary jobs that typically involve contacting and connecting with clients online. In a gig economy, people work temporary and part-time jobs, which leads to cheaper services. Workers get paid by completing jobs or gigs and are not paid on a regular basis. Many different types of positions and jobs can be included in the gig economy category, from part-time teachers to IT professionals and food delivery drivers.
Each job is considered a gig and is given, typically, through apps and online platforms. However, some gigs can be offered by more ‘traditional’ companies; for example, if a business requires someone to fill in for an employee who went on maternity leave or if a company is just starting out and can’t afford to offer full-time employment.
If working for just one employer, individuals may need to operate through an umbrella company to ensure you stay outside IR35. If you choose this operating structure, you will have to submit your returns and timesheets to the umbrella company, who will then invoice your client.
The Rise of the Gig Economy
The way people work has changed significantly over the past few years with the emergence of smartphone technology. The ability to stay connected to social networks and to pick up a gig via an app is invaluable to the rise of the gig economy. It’s fair to say, therefore, that the gig economy is driven by technology that enables communication between providers and clients, coupled with the challenging nature of finding traditional, long-term work.
Typically, people choose to participate in the gig economy because they want to supplement their income, are unable to find full-time, salaried jobs, or find this type of work suits this lifestyle. Because technology and digitalisation have allowed more people to work remotely or from home, contracting has become a lot easier than before, especially if the contractor or freelancer doesn’t need to commute to an office or site. Companies don’t need to hire people based on location; with the internet, individuals can work from anywhere.
Currently, there are 4.7 million gig economy workers in the UK, a number that is set to continue rising. After all, in a study by the Trades Union Congress (TUC), one in ten adults were found to work on gig economy platforms, while this figure was one in twenty in 2016. The report also found that almost two-thirds of those working once a week through the platforms are aged between 16 and 34 years old, that men are more likely to carry out this type of work and that most people use several platforms.
The PwC estimates that, by 2020, the ‘global online marketplaces that fuel the gig economy could be worth around £43 billion’.
The Benefits and Downsides of the Gig Economy
Just like any other type of work, there are advantages and disadvantages to gig economy work. Being aware of how you can benefit from it is important, as is learning about its downsides before you actually take the plunge into the gig economy.
Advantages of the Gig Economy
With a gig economy, people have more autonomy to do the jobs they actually want to do at their own pace and schedule; if you’re a night owl, you can simply work throughout the night and sleep during the day. You can also take as many breaks as you wish, be it to relax a little, walk the dog or run errands, and can work the number of hours you prefer as well, instead of a full 9-to-5.
The gig economy also allows contractors and freelancers to choose the businesses or people they wish to work with, which is something permanent employees are unable to do. Many individuals also opt for gig work because it allows them to have a better work/life balance and more flexibility when it comes to hours worked; due to this, they can juggle other important commitments more easily, from family events to university work.
So, this flexibility is one of the main attractors to this type of work, given that it allows workers to work from home while raising their children, pursue a side project part-time while still being able to pay rent and to take time off whenever they want. In a gig economy, there are also many different options when it comes to the type of work performed. Individuals don’t need to conform to one specific job role but can, instead, go down different career paths or switch positions as they see fit.
Independence is another major reason why people choose gig work. Permanent employment means dealing with daily deadlines or a boss or manager looking over shoulders, which not many individuals find conducive for productivity. Completing a job their way and receiving good feedback for it can boost workers’ self-confidence as well.
It’s also noteworthy to consider that, should a traditional job fall through, having the option to continue working on-demand can cut down the stress of job hunting and still allow people to carry on paying their bills. Due to the part-time nature of the gig economy, this means that individuals who still wish to be permanently employed will have time to continue job hunting at their leisure and have the opportunity to be more selective.
As contractor accountants, we know that, usually, more traditional contractors will have to promote their services through several types of medium, from social media channels to job boards and networking; gig workers, on the other hand, can simply take advantage of an established technological infrastructure. Websites and apps that can be accessed from mobile phones allow an individual to quickly find a potential client.
Companies benefit from the gig economy as well, since it can save them time and money. There is often no need for recruitment costs or for interviews in person, for instance.
Disadvantages of the Gig Economy
The quick rise of the gig economy and its outlook for the future appear to indicate that this is how work will be done; however, there is also the question of job security, lower payments and fewer benefits. Gig economy workers are considered independent contractors, which means they are not protected against unfair termination, have no rights to redundancy payments, don’t have sick or holiday pay and don’t have the right to the national minimum wage. For this reason, contractors need to have insurance, in order to protect themselves and their livelihood.
The gig economy can also make it harder for full-time employees to develop their careers, since there are cheaper and more flexible options in the form of contract work. And, while most contractors and freelancers thrive on the flexibility of work offered by the gig economy, for others, this can actually disrupt their routine, daily activities and even sleep. Flexibility often means that individuals have to be available at any time in order to be able to get a job and make money, and they also have to be constantly searching for the next gig.
Because the gig economy is growing, competition is also on the rise. Employment depends on supply and demand, so a market saturation due to an oversupply of services can lead to reduced payments and lack of job opportunities.
For some, working alone can also be problematic. If a worker thrives in an environment with other people, and where everyone helps each other, he or she may struggle with gig work. Working remotely can be very difficult for individuals who miss socialising on a daily basis, since most gig workers will end up spending the day alone. So, while working from home or a coffee shop allows you to have flexibility, it can also cause feelings of isolation.
Long-term relationships between companies, clients, partners and workers tend to disappear in a gig economy, since people and businesses don’t have a big incentive to invest in a relationship that lasts beyond the gig.
The Gig Economy and Worker’s Rights
As seen above, some of the risks associated with gig work are the difference in worker’s rights when compared to full-time employment; more specifically, issues like the lack of job security and sick pay, lack of minimum wage protection and lack of overtime pay, for instance. These rights are not guaranteed in a gig economy, since workers are not permanently employed and are seen as independent contractors. This will, of course, help businesses to cut down costs and improve their bottom line. However, it will make it more challenging for workers.
The solution appears to be a middle ground between contracting and full-time employment, with some benefits and protections that are, currently, absent. TUC believes that, if workers are not paid correctly, the government will miss out on taxes and national insurance, so it’s in the country’s best interests to ensure that workers’ rights are a given.
Due to these concerns, the government is now overhauling employment rights to improve working conditions for millions of workers across the nation. The changes come from the ‘Taylor Review’, a series of recommendations which have led to stricter implementation of holiday and sick pay rights, as well as higher fines for those exploiting gig workers. These changes will also include the right to request a more stable and predictable contract, to have a written statement of terms before the first day of employment, and to be informed of key information ahead of time (such as type of contract).
Seek Professional Advice
Working for yourself can be a very attractive option. However, it’s also a complicated matter, especially when it comes to issues such as PAYE or tax returns.
If you’re interested in gig work, you should be aware of all its ins and outs and how your taxes work. Request the advice of professional accountants that will ensure your paperwork is filled out correctly and on time. Not only do we offer advice honed by years of experience and knowledge here at Gorilla Accounting, but we also provide access to FreeAgent bookkeeping software, a tool which allows you to keep on top of your finances, be it expenses, transactions, payments or taxes. FreeAgent is also Making Tax Digital-compliant.
