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What is the gig economy?

Traditional ways of working may soon be a thing of the past. But what is the gig economy, beyond a buzzword you may have heard on the news or around the water cooler? Let’s find out, starting with our gig economy definition.

Gig economy definition

The gig economy is – in a nutshell – a market of workers that aren’t permanent employees. These workers take on jobs on a gig by gig basis. That is, they’re freelancers that work on-demand, from anywhere, not permanent employees. The internet has been imperative to the rise of gig workers who work remotely, connecting people across the globe, regardless of time zone or location. But you don’t need to work globally to benefit from a career in the gig economy. You can work in-person with local clients too.

Who makes up the gig economy?

The idea of a free spirit who jumps from job to job may conjure images of musicians and creatives, but the gig economy is being utilized by a wide range of professionals, including:

  • Freelancers who work for many businesses on short-term projects

  • Consultants who offer professional advice and guidance

  • Seasonal workers who take up jobs on an as-needed basis

  • Contractors who are like regular employees but work on an independent basis

Lots of roles/jobs can fall within the gig economy, including:

  • Drivers for ridesharing apps

  • Food delivery drivers

  • Virtual assistants and PAs

  • Software developers

This means businesses, especially small businesses who can’t afford full-time staff, can still call on expert workers when they need them. For example, your business’s website only needs to be designed, populated, and launched once, so you can budget for this event without worrying about the long-term costs of employing a developer, designer, and writer.

The gig economy also gives workers the opportunity to work for a range of businesses and avoid traditional ways of working. Management accountants, for example, can serve as consultants for clients across a range of industries, rather than just one company.

Pros and cons of the gig economy

As popular as the gig economy is, it’s not for everyone. Some people thrive with the freedom that accompanies freelance work, while others prefer the security of traditional work contracts.

Advantages of the gig economy:

  • Plentiful opportunities

  • Ability to enter new career paths

  • Flexibility

  • Short-term work allows for variety

  • Businesses can employ workers on a as-needed basis

  • Businesses can benefit from in skilled workers without long-term commitments

Many gig economy workers can also benefit from being “digital nomads,” meaning they can work from anywhere, so long as they have an internet connection. In turn, this enables gig economy workers to base themselves in locations with much cheaper living costs than the area where clients are located.

Disadvantages of the gig economy:

  • No benefits: as a non-permanent employee, you don’t get benefits like retirement plans or health insurance

  • Taxes can be more complicated

  • Lack of ‘belonging’: the workplace is always changing, and workers rarely have the opportunity to form long-term relationships with co-workers

  • No long-term security: freelancers always need to have the next job lined up

The California gig economy law (Proposition 22) demonstrated that gig workers who serve as delivery drivers aren’t treated equal to employees and aren’t permitted the same benefits like unemployment or health insurance. There are fears that the California gig economy law will encourage other states to also deny gig economy workers these sorts of benefits. This is something workers should consider before taking the plunge into gig work. However, this also provides a fertile ground for businesses to differentiate themselves when it comes to attracting talent, i.e., improving salary or offering benefits to gig workers.

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GoCardless (company registration number 07495895) is authorised by the Financial Conduct Authority under the Payment Services Regulations 2017, registration number 597190, for the provision of payment services. GoCardless SAS (23-25 Avenue Mac-Mahon, Paris, 75017, France), an affiliate of GoCardless Ltd (company registration number 834 422 180, R.C.S. PARIS), is authorised by the ACPR (French Prudential Supervision and Resolution Authority), Bank Code (CIB) 17118, for the provision of payment services.