PYMNTS Intelligence: Offering Gig Workers Competitive Payment Options

Among the shifts that have emerged in consumer behaviors in response to the pandemic, the growth of the gig economy and the accelerated adoption of digital payment options are coming together as companies seek better compensation solutions to meet gig workers’ needs and expectations.

By August 2021, the Pew Research Center found that 16% of surveyed individuals in the U.S. had earned money through an online gig. Such employment opportunities often serve as a second source of income, with 68% of respondents who had taken app-based gig work in the past year doing so to supplement their incomes, compared to 31% who relied on app-based gig work as their primary income source.

In the face of high inflation and rising costs for basic needs such as fuel and food, supplemental income is likely to continue to be a popular reason for consumers to seek gig work. At the same time, that motivation makes it all the more important for those workers to have easier and faster access to their pay, enabling a quick turnaround when individuals are picking up extra work to meet immediate financial shortfalls. Gig and contract workers who are supplementing a primary income and encounter problems with getting paid are also likely to look elsewhere for that supplemental income, and payroll problems can drive turnover.

This month, PYMNTS Intelligence examines the difficulties and challenges facing businesses in meeting the payout needs and expectations of gig workers. It also explores the opportunities such employers have to define themselves as worker-friendly to recruit the best talent.

Payment Choice Is Driving Gig Worker Employment Decisions

Independent workers experience a greater degree of unpredictability than traditional employees due to the nature of gig economy jobs, making predictability in areas such as payment frequency all the more important. Especially among in-demand contractors and consultants, the ability to be selective about the jobs they accept makes them unlikely to maintain relationships with employers that do not align with their needs for predictable and on-demand pay. In fact, unpredictable payments are one of the leading reasons independent workers switch employers.

Employers that take on independent workers may not always be prepared for the complexity of ensuring no delays or unexpected problems related to timely payment. Gig workers may not even be in the same country, let alone the same city as an employer. When geographic separation and even cross-border transactions are added to the payroll equation, legacy payment rails can introduce delays of days or even weeks. Even ACH payments can lack timeliness when dealing with the intricacies of paying gig workers. Transaction fees and currency conversion can also whittle down pay for gig workers abroad.

Workers of all types in the U.S. are increasingly interested in on-demand payments or other digital payroll approaches that make wages more readily available, and gig workers are no exception. In one survey, 70% of freelancers said they would prefer to be paid weekly or biweekly, compared to being paid monthly or when a job is complete. Companies that offer more flexible payments will have a clear recruitment advantage when seeking independent workers in high-demand fields.

Employers can also improve their payroll workflows by adopting a more frequent or adaptable payroll program for gig workers. Many companies pay freelancers in a way that places them outside the employer’s standard payroll workflow, adding inefficiencies to the process. As gig work becomes a more common employment solution, maintaining two payment systems can become increasingly unwieldy.

Finding a Common Solution in Digital Payments

The digital transformation accelerated by the pandemic has set the stage for a shift in how companies handle independent worker payroll. Gig workers now expect real-time payment options due to the increasing availability of accurate, transparent and expedited payment options. Among businesses, approximately 75% now consider faster payments as a critical service to offer, and roughly 90% believe they will be able to offer faster or instant digital payments within three years. Among companies that commonly employ gig workers, such as Uber, Lyft and Postmates, third-party offerings such as immediate transfers to bank accounts via a personal debit card can enable on-demand payments to gig workers.

Employers that can offer faster payment options and payment choices to meet gig workers’ payment interests and satisfy their economic needs can set themselves apart from their competitors to gain the loyalty of the most in-demand gig workers.