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How the Gig Economy and Freelancers are Reshaping HR Departments

September 20 2016 - The gig economy is reshaping today's workforce. Over 50 million Americans worked as freelancers in 2015, according to a study by the Freelancers Union and Upwork. This includes temporary workers, independent contractors, moonlighters, freelance business owners and those with mixed streams of income.

For freelancers, one of the appeals of the gig economy is higher compensation, with hourly wages 17 percent higher than full-time employees. For employers, the appeal of paying 30 percent less in payroll costs makes freelancers attractive. But for human resources departments, transitioning to the gig economy requires making significant adjustments. Here are some ways the gig economy is reshaping the traditional human resources department and what effects this may have on HR professionals.

The Growth of the Gig Economy

Between 2006 and 2014, the percentage of Americans working as freelancers grew from 31 percent to 34 percent due to several factors, reports The Wall Street Journal. The Great Recession forced many former full-time employees to look for other income options. In the process, some workers found that the increased per-hour wages, flexibility and autonomy of freelancing appealed to them more than a traditional job. Meanwhile, the rise of e-commerce and mobile technology created new income possibilities for workers open to working from home or on the go.

Online and mobile job opportunities afforded by services such as Upwork, Uber and TaskRabbit facilitated freelancing for a growing percentage of the workforce. Online and cloud-based collaboration tools made it easier for employers to manage remote freelance workforces. Meanwhile employees discovered the cost and efficiency benefits of hiring freelancers, with added incentive in the wake of increased payroll due to health care reforms. All these factors have combined to promote the growth of the gig economy.

The Challenge for Human Resources

The shift to a freelance workforce creates a number of challenges for human resources departments. First, there is the task of recruiting and screening the right freelance candidates. This challenge is often compounded by the fact that many freelancers work remotely and are not available for traditional on-site interviews and that the internet generates a far larger pool of candidates than traditional methods.

Second, hiring freelancers presents potential legal and regulatory challenges. The Labor Department estimates that 30 percent of employers are misclassifying employees as independent contractors. With the IRS increasingly going after small businesses, this can become an expensive mistake for employers. Additionally, hiring more freelancers can create unease among full-time employees if not handled well.

Finally, there are technological challenges that come with effectively administering human resources for freelance workers who are often working remotely.

How HR is Adjusting

To accommodate the gig economy, one step HR professionals are taking is developing new technology that rises to the occasion. While technology for handling internal HR is mature, that for managing freelancers is relatively new, so staffing firms are urgently investing in new technology geared toward a more mobile economy and workforce. Particularly in contingent, light industrial, IT and clerical staffing, firms are developing recruiting and onboarding solutions that enable more efficient processing of applications and administering of remote qualifying tests. Online accounting solutions that integrate with HR software also are enabling HR professionals to more efficiently administer functions, such as payroll and benefits, from the cloud.

Companies also are responding with a shift in HR culture and recruitment methods to meet the freelance job market in the mobile job-hunting space. For example, Amway uses online recruiting videos and blogs that appeal to workers who are seeking an employment environment that is conducive to personal achievement and pursuing professional goals. By using social media to distribute this type of recruitment material, Amway positions itself to attract the type of freelancers who would fit well within its corporate culture.

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