Gig Jobs: Are They Bad for Small Business?

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Gigs used to be what garage bands did on Friday and Saturday nights after they finished their homework. These days, you don’t have to be a musician to refer to your work as a "gig". You could be a website designer, a landscaper, an administrative assistant or a dog trainer. There are many more examples of gig economy jobs; the list is pretty much endless.

What Is a Gig Job?

Gig jobs are becoming more common every day. Like the booking of a band, gig jobs are usually short-term, noncommittal employment. They don’t include benefits, and they don’t offer career growth. Another term for gig jobs is freelance jobs.

Gig workers are paid per specific task or job. When the work is done, the worker has no further commitment to the employer, nor does the employer have any commitment to the worker. Sometimes, gig workers use the services of large companies like Uber, Lyft and Care to connect them to people who need a ride or babysitting or caretaking. Sometimes, they work independently, marketing themselves and securing their own jobs.

At first glance, gig jobs sound like a pretty good deal for both the worker and the employer, but there are downsides. From the workers' point of view, there are no benefits, and sometimes, when they need work, there’s none to be had. From the employers' point of view, no one with the right skill set might be available when they need the help. Also, a gig worker is unlikely to have the same sense of loyalty and dedication that a regular employee would have.

How Prevalent Are Gig Jobs?

It’s estimated that one-third of U.S. workers have gig jobs. Some also have regular jobs and moonlight with gigs to supplement their income. Others rely strictly on gig jobs for their entire income. There is absolutely no indication that this trend won’t continue growing.

One big reason is automation. It’s eliminating more jobs every day. Employers have figured out that pulling in human workers on an as-needed basis is less costly than keeping a full staff. They don’t have to deal with payroll processing, they don’t have to offer benefits and they’re not responsible for workers’ compensation insurance.

Another reason for the growth of the gig economy is online shopping. Now that consumers can buy just about anything online instead of going to a brick-and-mortar shop, there’s little need for a sales staff. Amazon represents 2.5 million sellers and “stocks” around 120 million different products. Why drive around and have to look for a parking space?

So, This Affects Me How?

This, of course, is great news for the Ubers of the world, but what does it mean for your small business? Some of the same benefits that gig workers bring to big businesses can also be brought to yours. You won’t have to carry them on your payroll during slow times, and you won’t have the extra work or costs associated with payroll, benefits and workers’ compensation insurance. However, gig workers usually cost more per hour.

If you hire a gig worker through a middleman like Guru or Toptal, a percentage of the worker's pay goes to the company that helped you find the worker. So, the worker's rate basically includes a commission. If you’re lucky enough to find someone on your own, through Craigslist for example, he will still often charge more per hour or project than a regular employee because the extra pay helps make up for the lack of security and benefits.

Small businesses are more likely to rely on quality than quantity for their income. So, you may have justifiable concerns about how to maintain high-quality products or services with temporary plug-in workers. Additionally, one reason customers frequent small businesses is because they’ve developed a connection with you and your employees. They’re greeted by name, and when they say, “the usual”, it appears in front of them by the time they finish the sentence.

Pros for Small Businesses

The gig economy isn’t going anywhere. In fact, it’s growing like crazy. The U.S.’s gig workforce increased from about 10% in 2005 to almost 16% in 2015. By 2018, it was 29%. Gig jobs are the new normal. So, as a small business owner, you must embrace it.

One of the great things about the huge number of gig workers that are available is that you can usually find someone with the skill set you need exactly when you need them. Plugging in a gig worker during an especially busy time can help ease stress and prevent burning out your regular employees. It can also help your bottom line. Yes, you may pay more per hour, but you may save in the long run by not having to pay people when business is slow.

Some gig workers are dedicated to staying free of commitment to any one employer. However, there are plenty of others who would love to have a regular job. If you're looking to hire for a permanent position, you can try out any number of people until you find exactly the right one and then make her an offer.

Cons for Small Businesses

If you’re determined to look at the glass as half empty, check out the reasons people become gig workers. There’s myriad individual rationales, but consider the three big ones:

  1. They’re gigging by choice because they love the flexibility and freedom that gig jobs offer.

  2. They’re doing it to supplement the income they’re making from their “real job”.

  3. They’re using it to stay solvent until their own new business gains traction.

Take a closer look at the third reason and hypothesize. You have a small but thriving graphic design company. You occasionally land a bigger job than you normally handle, so you grab yourself a gig designer or two. If those gig workers are actually trying to start their own graphic design firms, noncompete agreement or not, there’s a risk of them walking off with some of your customers.

A noncompete agreement may not hold up in court. There are so many variables, and you would be well advised to forego LegalZoom and hire an attorney to draft one for you (read: It will cost you). Further, if it does come down to going to court, do you really want to take time away from your business and pay your lawyer even more money to maybe or maybe not win the case? If you do win damages, there's little to stop the gig guy from declaring bankruptcy so that you never see a dime.

The Double Underlines

How does that Bob Dylan song go? "Come gather 'round, people wherever you roam/ And admit that the waters around you have grown/ And accept it that soon you'll be drenched to the bone/ If your time to you is worth savin' and you better start swimmin' or you'll sink like a stone/ For the times they are a-changin'."

It’s always been true that to keep your business thriving, you need to adapt to the times. Blockbuster didn’t, and they are very nearly extinct. Polaroid didn’t, and they went bankrupt twice: the original Polaroid in 2001 and then the new and improved Polaroid in 2008. (A company called Impossible Project purchased what was left of Polaroid in 2017, and it’s so far making a respectable comeback.)

It’s simple — you have to keep up and better yet stay one step ahead. If gig workers are what we have, then gig workers will be whom we hire. Small business owners are resourceful and action oriented, so stay focused on your vision, keep an eye on trends and adapt to changes as they occur.

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About the Author

LeDona Withaar has over 20 years’ experience as a securities industry professional and finance manager. She was an auditor for the National Association of Securities Dealers, a compliance manager for UNX, Inc. and a securities compliance specialist at Capital Group. She has an MBA from Simmons College in Boston, Massachusetts and a BA from Mills College in Oakland, California. She has done volunteer work in corporate development for nonprofit organizations such as the Boston Symphony Orchestra. She currently owns and operates her own small business. In addition to writing for PocketSense, she writes for Bizfluent, Budgeting the Nest, Legal Beagle, PocketSense and Zacks.