There is a widespread belief that gig workers are just looking for “extra pay” or a way to save for “something special.” However, in a study by Edison Research, for 44% of gig workers, their work in the gig economy is their primary source of income. The assumption that gig work is simply supplemental ignores important realities in pay inadequacy. Consider the following:
By recognizing wage stagnation in traditional employment, it's easier to understand why gigs look attractive. However, there are two obstacles to earning through gig work.
The first is consistency. It can be difficult to string together enough gigs to make a living. While gig platforms advertise an hourly rate, many gig workers are paid by the gig.
There are some gig platforms, such as Amazon Flex, that provide a "shift amount." However, note that this shift amount is fixed, meaning if the worker hits traffic or delays, the clock doesn't stop, their hourly rate just decreases. While this isn't necessarily unique, (truckers, for example, have had to deal with this sort of wage for years), it does make the hourly rate a little misleading.
Consider another example: Grocery delivery workers may need to wait in the parking lots of large retailers in the hope that an order will come through for pick-up. Since this wait time is non-compensable, it dilutes the gig worker's pay. For gig workers, maintaining a steady stream of income means maintaining a steady stream of gigs. Without any type of cross-platform gig aggregator, gig workers must juggle many apps and contracts separately.
The current economic squeeze isn't making gig availability better. Gig workers are already seeing their paychecks shrink and opportunities dry up because gig platforms have been flooded with recently laid off workers. The disconnect between the time spent and the wages being received can also be difficult for workers to track or understand. Some companies use algorithmic pay models that change over time, based on factors not visible to the worker. As a result, their pay for a task can be discounted with little to no explanation, accountability, or recourse.
Because machine learning helps gig platform algorithms recognize "best offers" and acceptance ratios, the platforms are able to pit equally qualified and available workers against each other in a fight for the lowest cost. For example, you, internally, decide you won't accept a gig under $15. When a gig comes through for $10, you don’t accept it. If no one else does, it might pop up for you later as a $12 or $15 gig. However, if someone else takes the $10 gig, you lose the opportunity entirely.
The second is the hidden costs. The advertised rate on a gig platform website often does not account for taxes or any of the other associated costs (i.e., car maintenance, tolls, laptop, creative software). As "independent contractors", gig workers must also set aside funds for their own income tax payments (at least 15%), health insurance premiums, and retirements savings. Employers pay wages after the correct amount of at-source deductions have been withheld. Taxes, premiums, and garnishments can decimate a gig worker’s earnings, sometimes unexpectedly. Being considered an employee provides more benefits than the hourly rate.
Although the instant gratification of more frequent payment for gig work may be appealing, it’s important for employers to know that option is not unique to the gig work industry.
Flexible pay technology or on-demand pay is available for traditional employers to offer their employees. With the right payroll partner, employers can maintain their regular pay cycle, and also give their employees the flexibility to take out their earned pay when and where they want to between pay days. There are options available that don’t involve more work for payroll or hidden costs for employees.
Side hustles will always have a place, but traditional employers can stay ahead by addressing the problems of pay inadequacy. Employers can demonstrate that, though gigs might provide something extra, the trade-offs may not be worth it.
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The Ceridian Institute provides forward-looking insights that build awareness and advocacy of the trends and challenges facing the workplace. The Institute is composed of industry leaders from Ceridian’s Industry, Value, and Solution advisories, reflecting the team’s research into the future of work and business intelligence.View Collection
Rachel Disselkamp is a Sr. Manager on Ceridian’s Go-To-Market Sales Strategy team. Rachel has deep knowledge in the HCM space, and has held a variety of roles that contributed to that expertise. She was the Development Editor for a 650-page textbook on Workforce Management (WFM), the owner of the Association for Workforce Asset Management (a certification body for WFM), an independent WFM consultant, and even an Enterprise Solution Advisor at Ceridian. Rachel has also worked within the Healthcare Supply Chain industry, and serves as the acting Industry Principal for healthcare at Ceridian. She regularly posts videos and thought leadership articles on key issues and events in the HCM space.View Collection