Gig economy participants make up greater portions of the U.S. and global workforce each year, and are set to represent more than half of all U.S. professionals by 2028. These workers are responsible for many of the instant services today’s consumers have come to expect, such as rideshares, home rentals or even graphic design work. Payouts for these offerings have not reached the same level of speed and convenience that gig employees are expected to provide, however.
Twenty-nine percent of freelancers’ invoices are sent out late, and frustrations persist even after they have been posted. Gig economy payment processes are check-heavy, and the associated delays can have disastrous consequences for both recipients and their partner companies. Late payouts can strain relationships between the two, to the point where workers will abandon frustrating platforms for more convenient competitors.
Approximately half of surveyed gig workers noted that their payment relationships with partner marketplaces could use some improvement, and over 73 percent would leave these marketplaces. Such freelancer churn can financially pressure these companies and cause problems as they complete projects.
Firms that rely on freelancers must upgrade their payments processes to adequately support workers’ financial needs and eliminate frustrations. Migrating to digital payments is an obvious first step, but marketplaces will also need to support a variety of payment methods to differentiate themselves from other companies.
Solving Late Payment Frustrations
A rising number of gig workers freelance as their main source of income, with many drawn to the gig economy for its flexibility and the ability to choose which jobs they take and when. Companies competing for talent have a limited amount of time to persuade workers to take positions, meaning they are on shorter leashes regarding the frustrations gig workers are willing to endure during their employment.
Freelancers spend an average of 20 days each year chasing late payments — a significant amount of time for individuals who should be focusing on finding their next projects. The companies responsible for late payouts are unlikely to see freelancers accept projects, which bleeds crucial time and money from both parties.
Solving the issue requires more from marketplaces than supporting digital transfers. Gig workers have disparate financial needs. Those who view their gig work as supplementary are less likely to be frustrated by delayed payments, for example, while the more than 48 percent of workers who freelance as their main source of income have a different opinion. They are more apt to work with marketplaces that provide flexible payment methods, such as payment advances. Approximately two-thirds of gig workers noted that they would be at least somewhat likely to switch to a platform that offered these payments, according to a recent PYMNTS study.
It is also important for marketplaces to offer more than one payment option, as gig workers may prefer one particular method over another. One report found that 22 percent preferred to be paid via PayPal, and over 48 percent would like transfers via bank or automated clearing house (ACH). Building prosperous, trustworthy relationships with freelancers thus requires marketplaces to personalize their payment strategies for the gig workers with whom they wish to collaborate.
Meeting the Loyalty Challenge
Freelancer payment preferences differ even more when the global market is taken into consideration. Thirty-four percent of international freelancers preferred PayPal, for example — 12 percent more than U.S.-based gig workers. A constant among gig employees around the world is their desire for fast and convenient payments, which means firms must support features regarding funds’ statuses. Over 96 percent of freelancers noted that being paid on time was important to their relationships with their marketplaces, and more than 97 percent expressed that being notified about payment issues was also crucial.
Retaining freelancer loyalty is thus less about ensuring that digital payment tools are available, and more about ensuring that freelancers have insights and transparency into their payments’ statuses. Platforms that stick to check payments or otherwise fail to engineer that transparency will not build the lasting relationships they need as the workforce changes.