Small business owners are faced with the challenge of growing their bottom line in the most efficient way possible. At some point, work overwhelms a business owner, and it becomes time to bring in some outside help. Gig workers, also known as freelancers or independent contractors, are one way to involve other workers to help carry the load when you aren't quite ready to hire full-time or part-time payroll employees.
Gig Workers Defined
Gig workers are professionals who provide work to one or more companies for a fee and without the expectation of permanent employment. There are many types of gig workers, including engineers, writers, accountants, social media managers, web designers and more.
Although gig workers provide services for you, they are considered self-employed. These professionals can work on a contracted basis for your company or remotely in order to serve more than one client at a time.
Gig Workers vs. Employees
Classifying your employees properly is important for legal and tax reasons. If someone is an employee on your payroll, you provide in-depth training, the equipment needed for work and benefits. When someone is an employee, this also means that you are responsible for payroll withholding taxes, which can be expensive for a small business that is just starting out.
If gig workers are providing services for your business, they own their own business and pay their own taxes so you don't have to. You do not pay their benefits, and you do not exert a lot of behavioral control or financial control over how they do their work. When you hire gig workers, they need to fill out a W-9 form, and you will be responsible for providing a 1099-MISC form. While you can require timelines and due dates, be sure to not dictate where or when they must work and allow them to supply their own materials.
Benefits of Gig Workers
As a small business owner, doing business with gig workers brings several advantages worth considering. Because you do not pay FICA and FUTA taxes for freelancers or independent contractors, it is less expensive to partner with them. You do not have to worry about paying for unemployment or workers' compensation.
Reputable gig workers are highly specialized professionals who tend to complete work in their area of expertise in an extremely efficient way. Because of this, you can expect to gain back some time freedom that you can use to grow your small business in other ways.
Limitations of Gig Workers
Although there are many types of gig workers to meet your small business's needs, and they provide significant financial advantages, working with them is not without its drawbacks. Because you must exercise limited oversight and control in order to comply with IRS regulations, it is important to work with someone reputable, or you might receive poor-quality work.
When working with someone new, you always assume a certain level of risk, and even longtime gig workers are under no obligation to continue working with you, leading to instability in your organization. In order to help mitigate the risks, you can choose to require a contract, a work sample or ask for a test run before moving forward on a project.
The Gig Economy
As more and more workers seek the flexibility of freelance work while business owners seek to reduce costs, it's no wonder that the gig economy is exploding, and 34% of Americans are involved as of 2016. Gig economy jobs allow small businesses to grow while workers maintain control over when and where they work.
As long as you maintain a plan for business stability and hire gig workers carefully, this could be a smart way to grow your business without getting in over your head with payroll.
- Gig Economy Data Hub: What is a Gig Worker?
- Investopedia: Gig Economy
- Recruiterbox: Freelance vs. Full-time: The Pros and Cons of Hiring an Independent Contractor
- Inc.: The Most Lucrative Side Hustles Offer More Than 6 Figures
- Inc.: Freelancer or Full-Timer: Which Worker Is Ideal?
- Western Governors University: The Pros and Cons of the Gig Economy
- Forbes: What Are the Pros and Cons of the Gig Economy?
- Wonolo: Data on the Gig Economy and How it is Transforming the Workforce