Less than 20 years ago, freelancers were still a workforce oddity. They came and went kind of invisibly, taking on overflow work from full-time staffers, floating between different companies and assignments. Even taxi driving was a full-time profession, back when freelancers were rare.
Skip ahead to the present-day gig economy, chiefly a byproduct of the Great Recession, when firms shed workers in the millions and whole industries contracted or vanished. Market forces (and, some would say, unabashed corporate greed) repurposed legions of former full-timers into a virtual army of self-employed free agents. Skip ahead again to 2028, when, by the best estimates, gig workers will make up more than half of the entire U.S. workforce.
To say that financial institutions (FIs) were unprepared for the banking onslaught of gig workers would be an understatement – and the same could be said of the entire U.S. economy. Although they have no bargaining power whatsoever with employers, gig workers are nevertheless transforming business writ large, as FIs and others scramble to engage a mass of hired guns.
The Big Gig
The fact that federal agencies – namely the Bureau of Labor Statistics (BLS) – still refer to gig workers as “contingent workers” involved in “non-primary work” underscores how far behind this megatrend government accounting has fallen. This inaugural edition of the PYMNTS Gig Economy Tracker® looks not only at the humanity behind the stats, but also examines how FIs and others are catering to a huge, ascendant workforce whose impact is only now becoming clear.
Stories of gig workers hounding clients for past-due invoices (and getting burned) are baked into gig work lore. That’s changing now, as more companies realize the importance of providing quality experiences for gig workers. Companies that outsource large amounts of work in a freelance model are learning that legacy accounting software isn’t set up for that.
This is where accounts payable (AP) automation is making a major difference, streamlining the onboarding of gig personnel, automating tax compliance for their W-9s, paying global freelancers in local currencies, reconciling payments and integrating with ERP systems.
For their part, more and more freelance businesses born of the gig necessity are turning into legit SMBs that need software and banking relationships. On that score, these newly minted SMBs need fast, scalable solutions that help to manage risk and are easy to use.
For example, software firm Tipalti is one of the most active and engaged players in the gig space, offering a highly scalable and configurable solution purpose-built to enable gig economy payments.
In It for the Money
It’s anybody’s guess how gig economy market dynamics will shake out at this point. As detailed in the report, California’s Assembly Bill 5 may be an unwelcome disruption for gig workers, even as it attempts to bring fairness and corporate accountability to their lives. New York State’s Dependent Worker Act is similar. The gig economy is full of these contradictions.
Payments are still the beating heart of the gig economy, because gig workers are in it for the money. A flurry of surveys prove that faster payments and instant money is what they want. Who will give it to them (and how) will decide how fortunes are made – or lost – in this decade.