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How to Protect Yourself in the Gig Economy

The internet is awash with articles about the benefits of remote working. Indeed, you don’t have to look very far to find evidence of increased productivity and happiness. The driver for this is the so-called ‘gig economy’, as people trade in their stable jobs for short-term contracts. On paper, it sounds like every employee’s dream.

According to research conducted by Intuit US, 40% of the US workforce will be independent contractors by 2020. Clearly, the freedom to float between jobs is going to change the way we live. But there could be downsides, and it’s up to individuals and employers to keep a close eye on the potential negatives of the approach.

Changing Approaches to Employment

The gig economy is a product of the internet and cloud computing. We can work from anywhere, and research information instantly. We can achieve the same output working at home as we do in the office.

As such, we are seeing a rise in entrepreneurship, and a new clutch of micro-businesses. People that would previously take up a lifelong permanent job are starting to work in a peer-to-peer marketplace instead.

Straight away, we can see a problem. While your 9-to-5 job ties you down to one employer, it lets you plan for the future, and it guarantees you paid holiday and parental leave within the framework of a regular wage. Being your own boss certainly has its perks, but a stable income often isn’t one of them.

Extrapolating from this, we can imagine a future where a large proportion of the workforce is not in stable employment. Without a safety net, the consequences for society could be far-reaching.

Invisible Costs

Millennials are driving better work-life balance, which will bring flexible working to the fore. But they want this within the framework of a regular salary. Outside that framework, the statistics are alarming.

According to research, independent contractors earn 17% more than their peers, but they will earn a staggering 28% less over the course of their career. This is partly because of a reduction in hours, on average.

We can accredit this to the lack of paid leave, in part, but the admin burden of self employment also has an impact. These invisible costs quickly suck time from the day, meaning many people taking on ‘gigs’ never work a full week – unlike their 9-to-5 colleagues.

Enforcing Rights and Responsibilities

Businesses like to outsource to freelancers. It saves money when it comes to ‘hiring and firing’, and it means resource can be drafted in the same day. It also lets the business manage its budget in an agile and flexible way. Figures suggest that remote workers are more productive, and more likely to bill by the hour, which means the business is less likely to be paying for ‘dead’ time or last-minute changes.

Individuals who choose to work in the gig economy need to price themselves at the right level, and put measures in place to protect themselves financially. That may mean saving for the VAT bill, putting cash aside, and checking that their life and health insurance covers them for self-employment. Increasingly, businesses also have a responsibility not to exploit the freelancers that are essentially propping up their company.