Digging Deeper | What is a gig economy and how to navigate it?
Posted 18-Jun -2019
The Gig Economy. You’ve likely heard or read this phrase in the last couple of years. It’s the rise of the freelancers. Okay, that makes it sound like a large scale riot by mercenaries in a Mad Max type scenario. But I’m referring to actual freelancers – in a global economy that we hear is imploding one day and expanding exactly as expected the next, freelancers are a growing presence. Freelancing is a popular choice these days. What?!, you think with some surprise, and trepidation…do people really give up bonuses, job perks, medical insurance, PF and the annual offsite to a has-been theme park or resort, in favor of sitting in cafes or co-working spaces, untethered and without worrying about having an office to go to?
Yes, they are. And that tribe is growing. Besides, cafes have great music and free wifi these days.
Alright, jokes aside, the growing tide of freelancers is no, er, joke. According to PayPal, top freelancers earn an average of 20 lakh rupees annually. According to a report by McKinsey Global Institute,20 to 30% of the working age population in developed countries is engaged in independent work. Tech giant Microsoft has two-thirds as many contractors as employees. Deloitte named “managing beyond the enterprise” one of the biggest human capital trends in 2018. And American millennials are leading the charge in this regard: around 74% are interested in freelancing, according to USA Today, and 40% plan to abandon their job to freelance in the next five years.
So let’s take a look at this thing called the gig economy, and a few pointers on how freelancers can take advantage of such a scenario.
What’s a gig economy?
Let’s look at a small case study to give us an idea of what’s at the top of the freelancer pyramid in India. In January 2018, BusinessLine reported that 41% of Indian freelancers witnessed growth in the previous 12 months. Narsi Subramanian, Director, Growth, PayPal India, told the paper that most of the 500 Indian freelancers surveyed expect to be doing a lot more ‘freelancing’ work in the future. Nearly 23% of them had annual earnings of 60 lakh rupees. They estimated that most Indian freelancers had been working independently for approximately four years. That’s the cream of the crop, of course. But not a bad life, eh?
Some estimates claim India had between 15 and 20 million ‘freelancers’ in 2018 — individuals who use computers or the internet to offer services in both domestic and export markets. There is also an industry estimate of the Indian ‘freelancers’ market size growing to whopping $20-30 billion by 2025. Web and mobile development, web-designing, internet research and data entry were the key focus areas for Indian freelancers while some were also engaged in accounting, graphic design and consulting. A high-quality Indian freelancer earned about $20 per hour this time last year. The Economic Times noted that writing of resumes, wedding vows & cooking recipes, online Bharatanatyam courses, online tutoring, online patient consulting in allopathic, ayurvedic & homoeopathic medicine as well as data analytics are that could see actual growth in the coming years. That’s right, homoeopathy and writing of wedding vows could get you good money in the future.
The report then makes a bold claim: India is the largest freelancer market in the world and is poised for growth. One-in-four freelancers in the world is from India. Subramaniam has a theory for this: he claimed, “When (their) day job turns monotonous or there’s a need for more family income, people start freelancing … The trend is catching on big time in India…The growing startup ecosystem is also churning out more freelancing projects … Startups contract out a lot of one-time jobs to experts in relevant fields. Some big corporations have also started contracting out their non-core jobs.”
Which brings us to the gig economy. A Financial Express report last month made an interesting observation: “Gig economy—where companies tend to hire independent contractors and freelancers instead of full-time workers—is making stronger inroads into corporate India, with more and more firms adapting it to their needs, and making it an intrinsic part of their HR function. In fact, this is what our report…has revealed. “
John Younger, one of the authors of the book Agile Talent: How to Source and Manage Outside Experts, claimed that upto 91% of companies already utilize some form of outside talent and, at organizations with fewer than 1,000 employees, external labor typically composes a full third of the staff. At workshops Younger has facilitated across the world, human resources leaders have reported that, in five to 10 years, full-time permanent employees will account for only half their workforce. That said, there is a danger of overestimation too. Even in the US-of-A, where the gig economy was seen as a disrupter for the past few years, a report released by the Bureau of Labor Statistics in June 2018 showed only 10% of the American workforce in the gig economy, or as the Bureau of Labor Statistics called it, “alternative work arrangements.” The majority of people in that category were Uber drivers and freelance writers. Nevertheless, business schools from undergraduate programs to executive education programs are working towards figuring out how to produce business leaders in the evolving way of work.
The bottomline is, the gig economy is definitely here to stay.
Why the gig economy took off
Sanjay Lakhotia of Noble House Consulting claimed that, in a survey conducted by his organization, 70% of the firms confirmed they used a gig employee. Lakhotia said the market is set to move to a new requirement—getting it right the first time. Firms have factored in the first flush of gig workers, and don’t have the cushion of making mistakes. Meaning no learning curve. Complete staffing plans are built around the assumption of gig workers filling specific roles. Conversely, the earlier cushion of saving on hiring costs with a gig worker vis-a-vis a regular employee no longer holds. Firms have a reduced margin of error for hiring mistakes, so gig workers will need to raise their game as well.
Here’s how it plays out – projects are becoming shorter these days as firms learn to calibrate expectations versus delivery ability. Also, remuneration is rising faster, as the cost of non-compliance for want of right employee, or hiring delays, helps firms develop a better appreciation of the value of the gig worker. That freelancer, for his/her part, might find more value in working non-stop for, say, a two-week period followed by a week-long break, than following the corporate schedule of a five-day week for a month. Further, there was a perception that the gig economy was more about the younger strata of professionals who sought flexibility and learning. That was probably true – when the gig economy started taking off. Over time, experienced professionals are moving in, attracted by the opportunity to ply their trade at multiple places with a strong key skill, besides speed and flexibility.
With a smaller firm, experience counts for a lot more as the senior management tends to appreciate the extra experience on board, and its influence beyond the basic project. Lakhotia claims this opening for experienced talent is only going to grow and take a larger share of the market, going by the feedback his firm received from clients as well as the quality of people signing up.
The Society for Human Resources Management (SHRM), reported that it usually takes 36 days, on average, to fill a single position. Compare that to an experienced freelancer, who can be onboarded in a matter of days, sidestepping much of ‘bureaucracy’ that slows down traditional hiring.
So what’s a freelancer to do?
An ‘expert column’ in Forbes made a claim that piqued my interest – “…as a group, freelancers…tend to work longer hours at less pay than their employed counterparts. At the same time, they tend to state that they work on more interesting projects and enjoy the flexibility that gig work provides to them, including being able to work from home, spending more quality time with their family, having time to take online courses like an imc masters, being able to volunteer for charity, etc. Overall, this could reflect a shift in priorities among workers.”
Joseph Fuller, a professor of management practice at Harvard Business School claimed ths shift towards a gig economy is because of a widespread change in attitudes. He explained, “What we found…was quite surprising…this population who we would anticipate would feel most exposed (to the rapid charge of tech) is actually rather excited and bullish by the prospects that change in the workplace can have…Another example was with things like gig economy, job platforms. ‘Maybe I can qualify for a second type of job. Or maybe I can find an alternative source of income.’”
It is crucial that a freelancer think like an independent contractor. Because that’s what freelancers are. If nothing else, consider this: freelancers in India have to file GST. Even something as innocuous as a blog with advertisements of businesses from outside the state you live in attracts GST. Regardless of turnover, if you provide freelance services across state boundaries in India, GST will find you and tax you. So, if the govt is taking your money that seriously, perhaps you should too.
With that newfound self-awareness, let’s look at what the experts recommend.
First off, the pitfalls. Take, for instance, Uber/Ola and other cab drivers working with ride-hailing companies. Alex Rosenblat , who wrote a book titled Uberland: How Algorithms Are Rewriting the Rules of Work, said, “There is no bargaining power. The drivers can’t build their own client list. They don’t set the rates; Uber sets the rates. They don’t have the information they need to determine if a job is profitable. And if they try and reject a job that is not profitable, they might get a notice warning them that they’re going to be disciplined…Many people may be prepared to run errands in the gig economy, but they’re not necessarily prepared to run their own business.”
Then there is the downside of a freelancing gig – dread. As one column in Harvard Business Review put it, “…the price of such freedom is a precariousness that seems not to subside over time. Even the most successful, well-established people we interviewed still worry about money and reputation and sometimes feel that their identity is at stake. You can’t keep calling yourself a consultant, for example, if clients stop asking for your services.”
Which is why a freelancer needs to think of himself/herself not as employees but as an individual business. But being your own boss requires a wide range of skills. Like tech literacy, customer-service skills and tax savviness. And let’s face it – when a person says, “I want to be my own boss,” what he/she is really saying is, “I don’t want anyone to tell me what to do.” But bosses play crucial roles. Jeremy Sulzmann, the business segment leader for QuickBooks Self-Employed at Intuit, recommends that freelancers put themselves through a standard annual review. His suggestion: “Assess yourself…Go over monthly objectives and examine how you did.” Another piece of wisdom he shared is on setting regular performance goals, such as a weekly revenue tally to see if you are hitting the necessary billable hours or marking out time to earn a qualification. Sulzmann said, “Having (some) structure and clarity about what you want to do, and then mapping your time back to that, is one thing that you get in a full-time role that you don’t have as a self-employed worker. You have to create it (for yourself).”
An expert column in Harvard Business Review explains that there are 4 points to bear in mind for freelancers looking to hit paydirt in a gig economy. First is the workspace. Freelancer, own boss, free-spirited – whatever descriptor you prefer, the truth is that all the individuals surveyed by HBR inevitably found themselves to be most productive in certain places kor corners only. One software engineer, whose home office has all these features, described his workspace to HBR as a “fighter pilot cockpit,” where everything he needs is within arm’s reach. “Sometimes it’s claustrophobic,” he explained, but “when I’m there, the open space is in my mind.” Second on the list is Routine. Effective routines are commonplace in successful organizations.This applies to freelancers as well. Some routines improve workflow: keeping a schedule; following a to-do list; beginning the day with the most challenging work or with a client call; leaving a sentence incomplete in an unfinished manuscript to make an easy start the next day etc. Other routines, maybe involving sleep, meditation, nutrition, or exercise, incorporate personal care into people’s working lives. HBR says both kinds often have a ritual element that enhances people’s sense of order and control in uncertain circumstances. Third on their list is Purpose. While it certainly can be a nebulous thing to explain, a sense of purpose can also be the entire reason a freelancer succeeds. An executive coach explained to professors Susan Ashford and Gianpiero Petriglieri, who researched the subject for HBR, “A big distinction between successful independents and the ones who aren’t or go back [to corporate jobs] is getting to that place of knowing what you’re meant to do. That gives me resilience for the ups and downs. It gives me the strength to decline work that isn’t in alignment. It gives me a quality of authenticity and confidence that clients are drawn to. It’s helpful to building or maintaining the business and serving the people I am here to serve.” The two professors claim that a sense of purpose, about your work, both binds and frees people by orienting and elevating their work.
The final, and most important point -people. As one freelancer told the professors, “If I were just left on my own, I could sit here in the office and go down a rat hole. You’re left to your own inner voice, and it spirals down into ruminating.” Another said, “My ability to process, develop, and grow as a human being and understand who I am in the work I’m doing comes from the conversations that I have with these folks…These people are how I know what I’m supposed to be doing.” Hard to disagree with the HBR article – we can’t do much freelancing if we don’t have an effective routine or are reticent with networking.
So what do the experts recommend for people looking to strike out on their own?
Ashford and Petriglieri surmised, “…people in the gig economy must pursue a different kind of success — one that comes from finding a balance between predictability and possibility, between viability (the promise of continued work) and vitality (feeling present, authentic, and alive in one’s work). Those we interviewed do so by building holding environments around place, routines, purpose, and people, which help them sustain productivity, endure their anxieties, and even turn those feelings into sources of creativity and growth. “There’s a sense of confidence that comes from a career as a self-employed person,” one consultant told us. “You can feel that no matter how bad it gets, I can overcome this. I can change it. I can operate more from a place of choice as opposed to a place of need.”