Around 2009, during the turmoil of the Great Recession, the gig economy as we know it found solid footing and transformed the market. Talk of gigs and developing technology platforms to embrace them overtook many of the conversations workforce solutions leaders were having. Some years later, a global pandemic hit. Once again, the gig economy stepped into the forefront as people found themselves confined to their homes or temporarily jobless as physical offices closed. Today, inflation has continued to propel gig work, with 70.4 million people freelancing to earn the income they need as payrolls stagnate while demands for productivity increase. With experts predicting a recession this year, it would seem, based on cycles, that the gig economy could reach new heights. But analysts say a combination of factors will make this recession different. Gig talent will remain imperative, but retaining them may depend on exceptional onboarding experiences. And that’s an opportunity for MSPs.
The Growing Gaggle of Gigs
According to a report from Mastercard, 2023 will see the gig economy thriving, with an expected increase of 17% to about $455 billion). Data from Statista suggests that 50% of the U.S. workforce will be freelancing by 2027. And of the 70 million people freelancing currently, that number could grow to reach 79.6 million by 2025 and 90.1 million by 2028. Here are some other tidbits to consider.
- The global gig economy is expected to grow to $833 billion by 2025.
- In the United States, the gig economy is estimated to account for 16% of the workforce, and it’s expected to grow to 27% by 2025.
- In terms of actual headcount, the number of Americans who freelance or work gigs has steadily risen by 66% since 2015.
- The most common industries that use gig workers are technology, healthcare, and transportation.
- The benefits of using gig workers for businesses include cost savings, access to specialized talent, and flexibility.
- The challenges of using gig workers for businesses include managing compliance, ensuring quality, and providing benefits.
A New Recession Could Present New Dynamics for the Gig Economy
The outlook for the gig economy seems strong. And periods of intense economic fluctuations have, historically, portended substantial gains in gig work. So, with the existential dread and dire prognostications of recession from prophetic investors and economists, one may expect the gig economy to weather the storm — or even benefit from it. However, as the Canadian Press reported, “Economists say the expected economic slowdown in 2023 may not result in higher levels of gig work, unlike past recessions when levels of contract work and self-employment spiked.”
A tightening labor market — combined with stubborn inflation, an exodus of Boomers from the workforce, and practices such as “labor hoarding” — could make a possible recession this year different from those that preceded it.
“This is a confluence of factors we’ve never seen before,” said economist Armine Yalnizyan.
All of that aside, economic uncertainty and widespread tech industry layoffs have accelerated a shift to gig work as more companies bring on contractors instead of full-time workers, according to recent surveys and staffing industry research.
“At many of the companies, contractors were among the first let go since they didn’t receive severance payments and their layoffs generated less negative publicity,” Paul Davidson wrote in USA Today. “Now, however, the firms are regrouping and bringing on contractors and consultants to handle projects previously done by full-time employees, staffing executives say.”
“About 4 in 10 companies that recently laid off workers are hiring contractors to replace them according to a January survey of about 1,000 U.S. business leaders by ResumeBuilder,” Davidson added. “Most of the executives say the strategy, at least in part, is intended to save money.”
Stephen Juneau, a senior U.S. economist with Bank of America, also pointed out that companies have adopted a “retention mentality” in preparation for potential downturns in the market. “To us, that’s a signal that businesses are cutting back first on hours worked even though they’re still trying to fill open positions,” he said.
So while a possible recession this year may not spark another boom in self-employment, freelancing, and independent contracting, companies looking to fill positions may first turn toward gig work rather than full-time hiring. The complication in this scenario is that many companies lack the technology, engagement strategies, and optimal onboarding experiences that are needed to attract and retain skilled freelancers. This is where MSPs can step in and tackle the heavy lifting.
Gig Work Is Still New Ground for Many Hiring Managers
Zee Johnson, writing for HRO Today, cited a study from Sterling that detailed the complexities involved with recruiting contingent talent.
“A recent survey by Sterling found that this freedom hasn’t come without issue,” Johnson explained. “Thirty-three percent of hiring and onboarding professionals said that hiring contingent workers is more complicated than hiring traditional workers and 32% said they’re now competing with other/new types of work.”
Sterling’s report discussed the “key process adjustments and investments” organizations are considering in order to capitalize on the benefits of contingent and gig workers.
- 48% are using technology to enhance or simplify the candidate experience;
- 41% are integrating background screening and identity verification into their hiring workflows to create a more seamless experience; and
- 40% are using technology to further automate their process.
But onboarding remains a big challenge, as Johnson noted from conversations with Joy Henry, head of technology and business services at Sterling.
“Since the survey found that 85% of gig work candidates either considered dropping out or did drop out of their most recent hiring experience, she advises making the process uncomplicated or risk losing qualified talent. ‘An easy-to-use and responsive hiring process is important to prevent candidate drop-off. Candidates considering quitting the onboarding process typically think it is too difficult,’ she says. ‘As a result, the background check process must be a seamless element of the hiring process to help avoid losing quality workers in the race for talent.’”
Why MSPs Should Be Your Go-To Sources for Gig Talent
In today's shifting business landscape, the demand for flexible talent has surged exponentially. A potential recession will only contribute to that need. Managed Service Providers (MSPs) have emerged as the ideal partners for companies seeking to tap into the vast pool of gig workers.
Understanding the Gig Economy
The gig economy thrives on the flexibility and adaptability of gig workers. These individuals are often highly skilled, independent contractors who can be engaged on a project basis. MSPs specialize in comprehending the nuances of the gig economy, staying updated on evolving workforce trends, and understanding the unique needs and aspirations of gig workers.
Streamlined Recruitment Processes
MSPs bring extensive expertise in managing end-to-end recruitment processes. They leverage a variety of strategies to attract, screen, and onboard gig workers efficiently.
- Talent Pool Development: MSPs invest in creating and nurturing a diverse talent pool comprising gig workers with diverse skill sets. This pool is continuously updated, ensuring a quick and effective response to clients' staffing requirements.
- Sourcing and Screening: MSPs employ advanced technologies, such as AI-powered applicant tracking systems and resume parsing tools, to streamline the sourcing and screening process. These tools help identify gig workers with the right skills, experience, and cultural fit for specific client projects.
- Comprehensive Vetting: MSPs conduct thorough background checks, reference verifications, and skill assessments to ensure the quality and reliability of gig workers. This diligent vetting process minimizes the risks associated with onboarding unknown contractors.
- Efficient Communication Channels: MSPs leverage modern communication platforms to maintain clear and transparent lines of communication with gig workers. This helps to address queries promptly, relay project details effectively, and build strong working relationships.
MSPs harness technology to enhance efficiency and deliver seamless experiences to clients and gig workers alike. And since 2009, more MSP/VMS providers have incorporated specific elements of the gig economy into their tools.
- Vendor Management Systems (VMS): VMS platforms enable MSPs to automate and streamline the entire contingent workforce management process. These systems provide centralized visibility, enable real-time reporting, facilitate efficient invoicing, and ensure compliance with regulations.
- Online Talent Marketplaces: MSPs leverage online talent marketplaces to expand their reach and access a broader pool of gig workers. These platforms offer a user-friendly interface, enabling gig workers to showcase their skills and experience, and clients to review and engage them directly.
- Mobile Apps: MSPs develop dedicated mobile applications that empower gig workers to manage their engagements, track their time and expenses, and communicate with workers, staffing partners, and clients. These apps enhance convenience and ensure smooth collaboration between all stakeholders.
Seamless Onboarding Practices
MSPs prioritize effective onboarding processes to ensure gig workers can hit the ground running.
- Pre-Engagement Orientation: MSPs provide gig workers with comprehensive pre-engagement orientation, including project-specific training, cultural immersion, and access to necessary tools and resources. This sets the stage for successful integration into client teams.
- Continuous Learning Opportunities: MSPs offer gig workers access to learning and development resources, such as online training platforms and webinars, to enhance their skills and stay updated with the latest industry trends. This not only benefits the gig workers but also adds value to the clients' projects.
MSPs employ carefully researched and practical retention strategies to attract, retain, and build long-term relationships with gig talent. MSPs understand that gig workers value flexibility, autonomy, and a positive work experience.
- Effective Communication: MSPs maintain open lines of communication with gig workers, fostering strong relationships and ensuring clarity on project expectations, timelines, and deliverables.
- Fair Compensation: MSPs work closely with clients to ensure gig workers are fairly compensated for their skills and expertise, taking into account market rates and industry benchmarks.
- Career Development Opportunities: MSPs invest in the professional development of gig workers by providing access to training programs, certifications, and relevant resources, enhancing their skill sets and employability.
- Performance Recognition: MSPs implement recognition programs to acknowledge and reward outstanding performance, motivating gig workers to excel in their roles.
- Feedback Mechanisms: MSPs actively seek feedback from gig workers to address concerns, improve processes, and create a positive work environment.
The Benefits of an MSP in the Gig Economy
As the overall economy deals with ongoing inflation and the threat of recession, the workforce will be a primary concern for every business. Contingent talent, freelancers, and other gig workers will remain essential resources in tough financial times. But going it alone isn’t always as easy as it would appear. MSPs save clients time, money, and hassle, with access to a wider pool of talent and the expertise to navigate compliance and regulations.
- Time and cost savings: MSPs can help you save time and money by taking care of all the administrative tasks involved in recruiting and managing gig workers. This includes sourcing candidates, screening resumes, conducting interviews, and onboarding new hires.
- Access to a wider pool of talent: MSPs have access to a wider pool of gig workers than most businesses do on their own. This is because they partner with a variety of staffing agencies and platforms. This means you can find the right talent for your needs, even if it's a niche skill set.
- Expertise: MSPs have the expertise and experience to help you navigate the gig economy. They can help you understand the different types of gig workers, the best ways to attract and retain them, and the legal compliance requirements.
- Risk mitigation: MSPs can help you mitigate the risks associated with using gig workers, such as compliance issues and liability.
- Peace of mind: MSPs can take care of all the details, so you can focus on your core business. This means you can be confident that your gig workforce is being managed effectively and that you're compliant with all the relevant laws.