Career Development

Gig Economy: What Is It and How Does It Work?

March 30, 2021

Whether you are fully employed and interested in supplementing your income or are currently seeking a job, the gig economy could be the perfect solution for you. It allows professionals to earn income and build their resumes while still enjoying the flexibility of being self-employed. The gig economy also helps the overall economy by making it possible to deliver goods and services more quickly.

In this article, we discuss what the gig economy is, how it works and the primary benefits for professionals and employers. We also discuss some best practices for how you can use the gig economy yourself.

What is a gig economy?

A gig economy refers to a general work environment where large numbers of people work as independent contractors and freelancers instead of full-time employees. The gig economy is a deviation from the traditional economy of full-time employees who focus on lifelong career growth and stay with an employer for many years. The gig economy has been growing in popularity over the past several years, especially with the increase of service apps such as ride-sharing and food delivery.

Related: Becoming an Independent Contractor: Pros and Cons

How the gig economy works

Several aspects characterize a gig economy including:

  • Individual gigs are a small portion of total income.
  • Contractors find work via technology.
  • Workers operate as independent contractors.
  • Contractors are responsible for their own benefits and taxes.

Individual gigs are a small portion of total income

Each task, job or assignment represents a small portion of the independent contractor's income. However, when you add the income for all of their different jobs or tasks for different clients or companies, the cumulative income is similar to that of a full-time employee.

Related: Freelancer vs. Independent Contractor: What's the Difference?

Contractors find work via technology

Contractors in the gig economy are increasingly reliant on technology, whether through a website or an app, to connect them with companies. Some websites are even designed to focus on certain industries or niches, such as graphic designers, copywriters, web developers, warehouse help or dog-walking services. Several specialized skill sets are popular for gig workers such as:

  • Marketing: Social media marketing, brand and content strategizing, email marketing and SEO
  • Writing: Content writing, translating, copywriting, grant writing and resume writing
  • Technology: Software development, graphic design, website design and creation
  • Business: Accounting, consulting, financial management and analysis

Workers operate as independent contractors

Those who work within the gig economy operate as independent contractors. This means they set a rate for their services and their clients pay them based on the agreed-upon rate. Independent contractors have more control over how they complete the services with some basic guidelines to follow from the client.

Contractors are responsible for their own benefits and taxes

Because they don't work full time for an employer, gig economy contractors are responsible for paying for their own taxes, health insurance, retirement and savings accounts. Since they are self-employed, they also can take advantage of the tax benefits from operating their own business, including tax deductions for supplies and travel. Contractors should keep track of all of their expenses associated with their gigs by using a spreadsheet or app and keeping a calendar of when their quarterly taxes will be due.

Benefits of a gig economy

The gig economy helps the overall economy by making it possible to deliver goods and services more quickly. Here are a variety of reasons why the gig economy is appealing for people today:

Provides flexibility

One of the main reasons that people are drawn to the gig economy is flexibility. Professionals no longer have to commit to a full-time employment arrangement. Instead, they have complete control over their work schedules and can schedule assignments or shifts around other commitments in their lives.

Supplements income

Many professionals are only involved in the gig economy on a part-time basis. They may have full-time careers and then pick up gigs on the side to supplement their income, working on those freelance projects during the evening and on weekends.

Builds your resume

Other professionals are using the gig economy to gain more control over their career trajectory. By taking on challenging projects outside of their job, they can build a resume that shows they have achieved great results for different organizations. Not only will this gig supplement their income, but it will also help them secure more advanced positions at a higher pay level.

Related: How To Develop Your Skill Set To Advance Your Career

Offers affordable help

The gig economy makes hiring help more affordable for companies. Because employers aren't responsible for contributing to the cost of health coverage or retirement savings, the overall cost of hiring talented professionals is lower.
It's also useful when a company needs to hire a professional with a specific skill or for a special project, but there's no room in the budget for another full-time team member. In this case, hiring a contractor or business consultant for a shorter time may be well within the budget.

Related: How To Become a Consultant

Best practices for using the gig economy

If you're considering entering the gig economy on a full- or part-time basis, there are some best practices you should follow:

Set a schedule upfront

This makes it easier to assess which gigs fit into your schedule and reduces the likelihood that you'll need to make changes after accepting them. Maintaining a good reputation in your field will be key to getting repeat business with clients and referrals.

Find your niche

Identify a specific niche where you can use your existing skills and interests. It's easier to find jobs and justify a higher pay rate if you specialize in a specific industry. Identifying and marketing your personal brand while also having examples of your previous work in a portfolio can help boost a potential client’s confidence in hiring you.

Leverage technology

There are technology platforms specifically designed for different industries or people with different types of skill sets. Look for a platform that's ideal for marketing someone with your skills. This will make it easier to connect with clients and promote your services. Gig workers often use websites such as Indeed, Upwork, Fiverr or Flexjobs to find freelance opportunities and connect with potential clients.

Exceed expectations

Give every gig your all even if you're just doing a single project for the company. If you found the gig through a technology platform, a positive performance rating can help you secure future gigs. Even when there isn't a review system in place, a positive reputation is essential for a contractor. By continually exceeding client expectations, you can earn more referrals or recommendations.

Please note that none of the companies mentioned in this article are affiliated with Indeed.

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