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The Gig Economy & the Challenge for HR

The gig economy has been a recent trending topic. While the concept of gig workers is nothing new, the attention being paid to it is, especially since this is an area whose growth has been facilitated by the digital marketplace. Here, I take a quick look at the challenges gig workers present for HR.

Gig workers present a challenge on several fronts, especially when it comes to managing the workforce, since contingent workers are often managed separately from permanent employees. In fact, ADP research finds that only ~40% of organizations report that HR owns all talent (i.e. permanent and contingent workers). And the use of contingent workers by organizations will only increase in the future, especially within certain occupations such as IT, media, and communications.

To support this growing trend, some MSP vendors are offering blended services with RPO, essentially moving towards a total talent management model. For example, Alexander Mann Solutions provides this blended model to an energy client, supporting 500 contingent workers and 3k permanent employees per annum.

But there are other concerns with the gig economy, specifically around the financial wellness of contingent workers. Over the last five years, benefits administration vendors have been launching initiatives focused on providing educational and decision-support tools to empower participants to make good financial decisions. More recent developments focus on holistic financial wellness offerings that extend beyond planning for retirement, and incorporate assistance around student loan debt management, budgeting for college, and saving for emergencies. Unfortunately, however, contingent workers do not typically receive employer-paid benefits.

Current estimates of the size of the gig economy vary greatly ranging from ~10% to ~35% of the U.S. workforce. And it is important to note that many gig workers also have traditional full-time jobs (i.e. hybrid gig workers), which will provide them access to employer benefits, including retirement plans and health insurance, as well as annual and sick leave. But does this represent enough gig workers to the point that HR shouldn’t be concerned? Findings from a recent study by Prudential suggest not.

The Prudential study, Gig Workers in America: Profiles, Mindsets and Financial Wellnessfound that 16% of pure gig-only workers and 25% of hybrid gig workers have assets in an employer-sponsored retirement plan compared to 52% of permanent workers. And when it comes to some voluntary benefits such as disability insurance, the stats are even worse for contingent workers.

It’s clear that employers will continue to leverage gig workers. Therefore, HR suppliers need to first recognize the issues that this class of workers creates across the HR lifecycle, from hiring to managing talent, to assistance with financial security, and then create solutions that address the blind spots and gaps in order to optimize HR.

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