The gig economy is changing how we do our jobs and live our lives – but what does it really mean? The gig economy has implications for how we work at a fundamental level, changing traditional employment structures in ways that give people more flexibility to explore a variety of jobs and careers over time. 

The gig economy is not just for people who are in between jobs or looking to make some extra money on the side. Dr. Brown points out that “some workers choose to enter the gig economy for the flexibility, freedom, and personal fulfillment that it provides them.”

Employers are hiring freelancers for a variety of reasons including cost savings, talent acquisition & retention strategies, project-based needs, and seasonal staffing. The reality is that the gig economy is a huge stepping stone in transforming the way people from all backgrounds work and live. This means everyone needs to understand what it is and how they can compete in it. 

With the rise in freelance work, there are a few things you need to know about building an effective and compliant extended workforce. For starters, what are the most pressing issues around gig economy compliance? What does effective sourcing look like in the gig economy? In this article, we’ll cover all your questions so you can get started with hiring freelancers today!

The Most Pressing Issue Around Utilizing the Gig Economy: Worker Classification

One of the most pressing issues around the gig economy is compliance in worker classification. A slew of recent lawsuits are the result of all the grey area around worker classification due to how rapidly the gig economy is transforming work. Companies like Uber have made millions by utilizing the gig economy and are actively shaping today’s labor laws.

Worker classification is a legal determination. In essence, worker classification is determining what category a worker is in. Workers can be classified in different categories, depending on the type of work they do and how they do it.

There are several ways to classify workers. The two most common classifications are employee or independent contractor. The IRS states that worker classification matters because “it determines if an employer must withhold income taxes and pay Social Security, Medicare taxes and unemployment tax on wages paid to an employee. Businesses normally do not have to withhold or pay any taxes on payments to independent contractors.” 

Understanding the difference between independent contractor and employee classifications

Knowing the difference between an employee and independent contractor is vital. The IRS states, “It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.”

Many factors go into determining the differences between independent contractors and employees. An independent contractor doesn’t work exclusively for one company and has specific expertise that they use to complete jobs at various places. Employees usually have set hours and duties within their companies’ expectations. 

There are a number of issues that can come up when classifying individuals as either independent contractors or employees. California’s ABC test is proving to be an important standard for determining classification; even the federal government is looking to adopt the ABC test. Click here to learn more about the ABC test and find out if you are properly classifying your workers.

How to avoid misclassification

The penalties for misclassifying workers as independent contractors vary. Under the Biden Administration, the federal government is actively clamping down on misclassification.

Due to the confusing nature of classification, employers should consult with an attorney or accountant who specializes in this area to determine which category best fits their needs before proceeding with worker classification. 

You can also mitigate worker misclassification risks using the world’s first AI-driven classification engine. GreenLight’s innovative system uses all of the data and industry knowledge at our disposal in order to classify workers with an exceptionally high level of confidence. 

We’re classification experts who rigorously update and maintain our systems in compliance with the most recent laws, mandates, and court rulings. Our AI determines the correct worker classification and your workers either become employees of GreenLight or we hire them as an approved contractor. Either way, you get any worker you want from almost anywhere in the world without having to worry about government agencies.

With GreenLight, all you have to do is find the right person for the job. We’ll handle the rest. Schedule a demo today.

The Most Effective Way to Hire in the Gig Economy: Direct Sourcing

Having the right talent is the ultimate factor in competing in the gig economy. Due to the transformation of the gig economy, acquiring talent looks different than it did many years ago. Technology has made way for our favorite way to capitalize on the gig economy: direct sourcing.

What is direct sourcing? 

Symphony Talent writes, “direct sourcing is when companies search for and recruit their own talent rather than enlist third-party headhunters. Successfully recruiting and hiring top talent is integral to an organization’s success. After all, securing quality hires directly impacts revenue, as well as a company’s future direction.”

Direct sourcing can be seen as a practical and effective approach to hiring in the gig economy. It is a way of embracing talent who are owning their own career and getting what they want out of life. It also embraces that work today is about hiring people for outcomes and not simply punching the clock. People want work that is fulfilling just as much as businesses want workers who are motivated. Direct sourcing bridges this gap.

We aren’t saying, “Oh, just go find your own talent.” Direct sourcing in this day and age is different; today’s direct sourcing resources utilize cutting-edge technology and service in order to add value without increasing costs like a traditional headhunter. 

• You can recruit your own talent through platforms like LinkedIn that have job posting services, and you can even post that you’re hiring on your company’s social media channels. Referrals go a long way today just like they did in the past. However, today we have more ways of sharing our needs and connecting with these referrals.
• You can utilize self-service platforms like Upwork that have a talent marketplace and recruiting services for finding the right candidates to get the job done without the hefty headhunting fees.
• You can try a more concierge platform like Toptal if you’re looking for an exclusive network of the top freelancers working today.

The benefits of direct sourcing include reducing cost, time, and risk in acquiring talent. Talent marketplaces are a great place to start directly sourcing your talent. Here’s our list of 6 Reasons Why Using a Talent Marketplace Is Smart For Your Company. If you’re ready to start directly sourcing your talent, here’s our article on the Best Places to Hire Freelancers, Contractors, & Gig Workers. Once you’ve found your ideal talent, check out our article on the 4 Best Practices for Hiring Contractors & Freelancers in 2021. 

Armed with these tools you’ll be ready to compete in the gig economy compliantly and effectively in no time. No matter which route you choose to tap into the gig economy, GreenLight’s platform and service will be there to support you along the way. Book a demo with GreenLight so you can hire and onboard your talent in minutes.