Payroll on Point: How To Transition Into Hiring More Gig Workers

In our last post, we discussed the gig workforce and how gig workers might fit into your organization. In this post, based on our second episode of our podcast Checkpoint Presents: Payroll on Point, we’ll talk about how to make that shift to accommodate more gig workers.

A good place to start might be with an assessment of what type of workforce model your business has currently. If you have the older, more traditional model with higher fixed costs and a smaller spending budget for freelancers, you may have to shift some things around. Some employers have a hybrid model that is a bit more flexible, but it’s not scaled, and it’s not managed.

Then there is the third type: the agile workforce model. This third agile model is predicted to be where some think the market has headed as far as being able to manage gig workers. Some more advanced organizations have already adopted this model, and this could be the trend to a change in workforce models.

How exactly is the agile model different?

The agile model differs from more traditional top-down approaches. It was actually IBM who coined the phrase agile workforce to describe a company being able to quickly adapt to the changing needs of the customer, the employees and the marketplace. In June 2019, at an American Payroll Association seminar, the subject was about the gig economy. One of the speakers explained that the agile workforce idea involved pooling different labor options where you have employees, vendors, freelancers, alumni, contractors, and many more, assigned to different worker roles for which the employer decides employees are best suited.

Apple and Google have adapted the agile approach. They are examples of companies that keep the customer first and believe in a small team managing the company’s network. That is also the model that Thomson Reuters has taken on.

The book The Age of Agile by Steven Denning describes how some companies use frequent iterations to update their products for customers. One of the more extreme examples is the e-commerce website Etsy, which focuses on vintage products or hand-made crafts. According to Denning, Etsy runs daily iterations of updates or improvements to its site that may include more than a dozen items. Now in order to do this, a more agile workforce is needed.

What perks or benefits do gig workers expect?

To stay competitive, some temp agencies and other short-term employers offer paid time off, health insurance and other typical benefits. The gig worker is looking for some of these perks too.

Washington is an example of a state that considered gig workers in the construction of its paid Family and Medical Leave Act (FMLA) program. The FMLA allows gig workers to participate if they pay into the program. While legislators are scrambling to address gig-worker needs, some bills have been introduced in state legislatures in the past few years. For example, a bill in Washington state attempted to create portable prorated universal benefits for gig workers for marketplace platforms employing more than 50 gig workers. In New York, a bill was introduced that would empower gig workers to form unions and some businesses are responding by offering some benefits to gig workers, but they must be careful not to cross over the line where they might be considered an employer.

If a company adapts the agile workforce model, departments like payroll and human resources would be affected. There’s actually a system out there to help payroll and HR departments, and it’s called the freelance management system or FMS. This is a cloud-based solution and it’s similar to the HR Information Management System or the HRIS. The system is designed more specifically to handle the agile workforce model for things like organizing talent and labor clouds, engaging freelancers through text, email, or an app to market approach and paying the workers with workflow automation tools and analytics.

Tools that help you manage gig workers

The APA seminar stressed that employers competing for gig-related labor need to have a proper pay process in place and fast payroll solutions for these types of workers. Another benefit of using an FMS system for payroll is that it can address C-suite concerns. Some are skeptical of gig work due to the perception that they would lack visibility into the vendor process, selection of workers, vendor performance data, and a payment process that’s transparent. An FMS solves that and can also be used to track freelancers’ tax forms and monitor employment risks. Companies utilizing anywhere from 100 to 10,000 or more freelancers would probably want to use some kind of FMS.

Another payroll-related consideration for businesses that use gig workers would be new hire reporting requirements. Some states require businesses to report the use of independent contractors under certain circumstances for child support purposes. Businesses should check the states in which they operate to determine what new hire reporting requirements apply. It doesn’t seem that the gig economy is going anywhere. With technological advances and innovations, it’s just going to keep marching on. This is not to say that a business has to change to an agile workforce and use more gig workers, but it is something for them to consider.

Moving to a gig-oriented workforce

In some cases, it may not be the right move for every company to hire gig workers, but this is a trend that employers should have a conversation about to determine if it’s a good fit for their business. For businesses, it’s important to get proactive and strategically think about your labor force. Examine what types of work a company does that may benefit from more task-based labor, then see if it makes sense to move in that direction. This is a conversation that can be started by anybody in the company. Maybe it’s a great new direction to take your company, or maybe your current model works just fine. Since there are factors that will be forcing more gig-based work in the future, and the expected labor market shortfall will be approaching, it’s better to have a chat about it now.

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Listen to this episode of the Payroll on Point podcast here or on iTunes or Google.

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