The Ins & Outs of the Gig Economy

By Diane Tait

Image courtesy flickr

If you own a business like me, then you know there’s a fine line between revenue and profit.  Many a small business has been known to sell itself into the ground by under-pricing its work.  Others have hit the rocks of insolvency because they over-promised and under-delivered.  But perhaps the biggest cash crunch of all occurs when the economy takes a tumble and suddenly the burden of payroll turns your employees into a school of piranhas whose appetite sucks the life out of your firm.  While I can’t help you with the first two business busters, I can show you a way out of Chapter 11 by introducing you to a manpower resource that won’t eat you out of house and home because you only pay to play on a contract basis.  What I’m talking about is what’s known as the Gig Economy.

Is your business top heavy with employees? – Back when I first started my business 20-years ago, as soon as I hung out my shingle, I started wearing a lot of different hats to keep the business solvent.  After working 6-months or so, the business got to the point where I realized I could no longer deal with all the tasks involved in building a business on my own.  That meant one of two things: Hiring an employee or a temp.  Nine times out of ten business owners back then would usually opt for either a full or part-time employee. While temps were cheaper, the agency that ran them charged a hefty management fee and you couldn’t always guarantee you’d be able to work with the same temp, since their assignments were up to discretion of the agency.

Image courtesy flickr

Ten years ago, the Age of Outsourcing was born.  This enabled everyone from Fortune 500 companies to mom and pop firms to outsource everything from copy-writing and computer programming, to bookkeeping and marketing.  While the rates and tax burden of working with outsourcing companies was much cheaper than hiring employees, many times the cheapest outsourcing firms were located in places like India, China and the Philippines.  This resulted in cultural and communications difficulties that many businesses didn’t have time to deal with. As a result, outsourcing was a hit or miss proposition at best.

Five years ago, the Gig Economy was born.  This model differed from outsourcing and temps since you no longer had to hire an agency or an offshore company in order to assign freelance assignments any longer.  You could  hire local talent on a contract basis by simply scouting online posting boards like upwork.com (formerly oDesk.), MediaBistra, SoloGig, SmashingJobs and BloggingPro, just to name a few.  Even Facebook and LinkedIn now offer job boards where freelancers can troll for gigs.

Stop the Presses

Before you click over to any online job board to look for help, you need to understand how to weed out the chaff from the wheat when it comes to selecting a competent freelancer.  Just as you’d take the time to vet a potential employee, when it comes to giving out gigs, you need to check out the credentials of any contract worker.

      1.      How long have they been in the business? – Just because a freelance writer, graphic artist or programmer knows how to write a great gig posting, that doesn’t mean that they are a competent worker.  Since anybody can post on job boards, before you decide to entrust a freelancer with an assignment, it’s a good idea to check out their background, including job history, samples of their work, and references to other satisfied customers.  It’s also a good idea to have a conversation with a freelancer either on the phone or via videoconferencing since communication is one of the keys to great gigs.  The more confident you are of their ability to carry out an assignment, the better the results.

      2.      Is the freelancer’s skill set a good fit for your particular needs? - Just because a blogger can deliver a 500-1,000-word article on any given topic, that doesn’t mean he or she can provide weekly blogs that clients and prospective clients will enjoy reading.  Before you sign a 6-month contract, make sure you not only see some samples of a freelancer’s work, but get them to agree to write at least a couple of blogs on spec before you sign a long-term contract.  This way, not only will you be able to see if their skills translates to your business, you’ll also have an opportunity to see how well they can handle a deadline.

Image courtesy flickr

      3.      Show me the money! – Just as you need to make sure you have the right individual for the job, you also need to decide if what they charge makes sense.  Since gigs can be on an hourly or a per-assignment basis, before you give out a gig, you want to make sure you know what you’re getting for your money.  You also need to know how payment is going to be processed and what the tax ramifications are to your business.  While a direct hire becomes a 1099 worker requiring you have the freelancer fill out a W-9, you still need to decide how to pay them. Sure, you can mail a check every couple of weeks or when an assignment is complete, but you should also consider using a payment portal like PayPal to process payments.  Even if you have to pay a bit more to facilitate the transaction, using PayPal gives you recourse should an assignment go south, or a freelancer fall off the face of the planet.  If you’re hiring through a job board that collects a commission when gigs are assigned, this makes it even simpler, since you pay the agency that runs the job board and they pay the freelancer.  Either way, you should talk to your accountant to make sure you properly document any freelancers you wish to work with.  Otherwise it could cost you big come tax time.

      4.      How do you get the rights right? – When working with freelance writers, graphic artists and computer programmers, you need to understand the rights you’re purchasing.  Who holds the copyright on a blog or a website, you or the freelancer?  Are you free to reuse the copyrighted material as you see fit or do you have to pay a royalty if you want to re-purpose any written work?  The legalese used in assigning rights can be confusing.  Also, if a blog uses a pull quote from another source, you’re required by law to provide attribution and a backlink to any copyrighted material. Failure to do so could result in legal action by the copyright holder.

Diane Tait owns and operates A&B Insurance.  To find out more about how you can save money on insurance, go to her site or fill out the form at right.