HR Benefits and Challenges of The Gig Economy †Free Samples

Question: Discuss about the HR Benefits and Challenges of The Gig Economy. Answer: Introduction The gig economy is that workforce that is based on single or on demand tasks often done through the digital market place or what is called alternative arrangement (Bureau of Labor Statistics, 2005). There is an emergence of new business models given rise by digital platforms which include classic examples like eBay and Amazon and new ones that include Uber and Airbnb among others (Burtch, Carnahan Greenwood, 2016). Businesses of this kind, also known as the gig-economy are expected to make up a big part of the economy and with implications like disrupting the long standing business (Morse 2015) and the replacement of the existing businesses (Zervas, Proserpio and Byers 2015). The gig economy has provided an opportunity for flexible employment with the workers setting their own working schedules while they still earn a relatively stable pay (Hall Krueger, 2015). The gig economy may also eliminate some jobs while also benefiting individuals who have a weak attachment to the labor mar ket (Zervas, et al., 2015). Notable also is that the gig economy employees are at the mercy of the startups often overworking themselves and lacking in the benefits and the legal protection of the permanent employees (Brown, 2017). There is an opportunity for policy makers to consider the legality and regulate this gig economy (Zervas, et al., 2015). This paper will discuss how the gig economy operates and the HR implication of this emerging economy and the benefits and challenges for organisations. How the Gig Economy Operates The rise of part time employment or independent contractors began to rise in the 1980s in America linked to various factors like worker preferences, the state of economy, labor law changes, a decline in labor unions and high levels of unemployment among other factors. The patterns of employment have dramatically changed from traditional employment giving rise to the gig economy where workers work under alternative work arrangements (Friedman, 2014). The gig workers have been classified as being self employed, independent contractors, freelancers or independent consultants (Katz Krueger, 2016). The gig economy takes the form of crowd work or on demand work which is found through apps. Crowd work involves completing work activities through online platforms (Kessler, 2015). This matches the available job opportunities and skills. These platforms allow many organisations and individuals to connect through the internet and so employers and employees connect globally. Work on demand apps allow the demand of the work and its supply is channeled through mobile apps where the firms that manage the apps may also intervene to set minimum expected standards of service and even selection of the employees. This may involve some of the traditional jobs like transport, cleaning or even some clerical work (Rogers, 2015). Most of the gig labor is found in labor intensive traditional work like construction and agriculture while some are in highly educated IT field. On average, most gig workers are seen to be paid less than their equally educated young people in traditional employments. Companies make use of gig workers to lower labor costs especially as it relates to benefits (Friedman, 2014). Either way, they provide a good opportunity for job opportunities and flexibility both for the organisation and for the workers. It is difficult to state the number of people working in the gig economy since most companies do not disclose the number. Another reason is that the gig workers may work for a number of organisations during the same period, whether weekly or monthly or even daily (Stefano, 2016). The numbers are however estimated to be on the rise and this economy cannot be ignored as it has effects on the general economy of the world. Benefits of Gig Economy Gig employments give the employers flexibility in wages and labor costs are responsive to unemployment. Because gig workers do not have long term contracts, it minimizes separation costs and makes it easy for organisations to quickly adjust employment according to demand. It also makes it easy for organisations to raise productivity by moving production to the most efficient sites (Friedman, 2014). In the gig economy, workers are hired just when needed and compensated on providing the service. They only receive payment when they work for a customer thus reducing costs on payment for labor when it is not needed. It gives rise to human as a service concept although this has been seen as a commodification of workers (Irani Silberman, 2013). Because these workers operate from anywhere thus operating from the other side of the screen, it means the organisation does not have to incur the cost of renting out space and other facilities required by employees who work within an organisation premises. It also allows organisations to operate with a very lean staff. For example, Uber who despite operating globally, has a staff number of around 15,000 employees which is low compared to other global companies the balance of workforce being gigsters (Stefano, 2016). Organisations can also receive instant feedback of the workers performance which is enabled by technology thus enabling flexibility and control (Sachs, 2015). This also reduces the need for an organisation to invest in internal performance review mechanisms. It also allows the company to outsource most of the customer care work to individual gig workers. It allows organisations to classify the gig workers as independent contractors (Risak Warter, 2015). By doing this, the company is able to shed off some of the liabilities like insurance obligations and other duties regarding employment law and labor protection rights. These include minimum wage laws, anti-discrimination regulation, social security and others (Rogers, 2015). The organisation therefore benefits when it does not carry the burden of these regulations and contributions. Challenges of the Gig Economy The growth of the gig economy has led to challenges that require HR to be agile and respond with new programs and policies, the culture and processes that fit in with the emerging needs of part time contracts or on call workers, gigsters, independent contractors and freelancers. There are talent platforms like Mechanical Turk and Tongal among others that allow people more flexibility in how they work , on whether to work from home or office or being their own bosses. The HR offices have to decide whether to make use of such platforms to manage their talent portfolio or their responsibility will be handled by the organisations hiring departments or procurement departments. The gig jobs may reduce productivity growth. It may lead to less attachment of employees towards their employer leading to slow development by workers and less innovation. Employers may use fear of job loss to raise productivity but fear leads to less creativity and innovation. Flexibility may not be good for those organisations that require adaptation and innovation (Gramm Schnell, 2001). If organisations hire short term in the long term they will lose on the benefit of work force training and acculturation. Long term contracts are beneficial to a company as it protects their employees they have invested in training and developing and encourages workers to connect with the employer and become more productive (Friedman, 2014). This is lost in the gig economy as workers have no attachment to the company. The employer loses the benefits of workplace goods. When employees are scattered all over, probably working from home or any other place, the benefit when workers share experiences and learn from each other is lost. The experience of working near each other has benefits to the company which may result from the team work that is cultivated which may enhance performance and innovation. The gig employment threatens the income security and as social insurance is provided through traditional jobs. Workers insurance including disability insurance, health insurance and unemployment insurance among other are all provided as added benefits in employment. Gig workers are mostly not protected by legislation. Many of them are also responsible for their own work places and are thus not protected by OSHA or any other safety and health regulation. They may not receive any form of social insurance like sick pay or holiday pay (Friedman, 2014). Another challenge regards on whether companies should regard employees as assets or as costs that need containment. If companies regard employees as assets, how do they develop and promote them? The company strategies will have far reaching effects regarding employee retention. The companies have to decide how they will bear the costs of retaining and upgrading employees (Kenney Zysman, 2016). Market rules that relate to competition, labor market and even the intellectual property rights are becoming very difficult to be defined and legislate. The economic disruptions create winners and losers. There are political fights over the market rules which define the workplace and the society in the platform or gig economy. These are aimed at protecting the communities, the customers and the employees as markets continue to be disrupted (Kenney Zysman, 2016). Most of the HR departments were created for the permanent employees and not the gig workers. They therefore need to be transformed and be prepared for the emerging challenges of the gig economy. The transformation needs to be led by the Chief HROs in the face of these unprecedented challenges brought about by the gig economy. These changes may not be easy but they are necessary if an organisation is to compete successfully and be ready in the human resources as this affects the entire organisation (Horney, 2016). HR Implications HR needs to respond to the current issues in order to manage the transformation of their organisations and continue to be competitive. The human resources are a very important component of any business that needs proper management in the face of current challenges. Some of the areas that need to be reformed include labor laws, leadership and management of gigsters and managing a global workforce. HR agility while responding to these and other issue will determine future organisation success (Horney, 2016). Most of the labor laws were written to govern employers and employees in the age of permanent employment. The gig economy and platforms have challenged the definition of employer and employee. These laws were meant to govern workers treatment by employers. They were to govern the duties of workers and the employers and assumed a relationship where the employer had more powers and control over the workers. The growth of the gig economy now demands new ways to govern and regulate the new labor models (Horney, 2016). Leaders need to be empowered with skills on how to manage a broader talent portfolio. HR should be able to identify the talent and skills that are required in an organisation and determine how to source for those skills, whether from full time employees or from the contingent workers model. It presents more challenges when leading a team comprising of full time workers, contractors and consultants than leading a team consisting of people who work for the same organisation. Leadership development programmes and executive coaching sessions are needed in order to empower managers with effective skills to handle the challenges of leadership in a gig economy. HR must be in the fore front to empower leaders in the organisation with these skills (Horney, 2016). The global workforce has been made easier by greater mobility and cloud computing. This has resulted in a workforce that is more external, flexible and project based (Younger and Smallwood, 2016). This has changed in the way employers relate with employees and changes in the organisation cultures. Effective HR departments need to adapt to the changing work environments that are increasingly global and have strategies to effectively handle the global workforce (Horney, 2016). The gig economy also demands a shift from management of talents which was traditionally made up of full time employees to management of talent portfolios which consist of both external and internal talents. HR processes, policies and philosophies should be able to support entire talent portfolio of external and internal talent and their relationships. If an organisation does not treat the contingent workers as equal to the internal workers, it is likely to have problems. HR needs to empower managers with skills to enable them manage the entire talent portfolio well (Horney, 2016). HR also needs to work with both the hiring manager and procurement managers in order to work collaboratively while acquiring talent in the gig economy. The procurement department that negotiates contracts for contingent workers may be biased towards controlling cost and limit on the value of the talent portfolio that these workers contribute to the organisation. The hiring managers need to manage the gig workers as part of the organisation talent. This will ensure all talent is included in the organisation policies and processes and culture (Horney, 2016). Recommendations for Uber to Make Best Use of Gig Economy The gig economy presents some benefits and challenges as have been discussed especially to the workers. Companies can embrace some strategies and practices that make it better for the workers for them to remain motivated and remain committed to the organisation. Being among the top three employers in the world with majority of the workers in the gig model (Helft, 2016), Uber can use some strategies to help employees cope with some of the challenges they have been experiencing. First is a co-ownership model where employees are allowed to buy in to the shares of the company and thus share in the profits at the end of the year. This will not only keep the workers engaged but will make they them work harder as they know they own part of the company and will benefit at the end of the year. They will thus work hard in order to share in the end of year bonuses. They can partner with financiers who can give loans to the workers so that they can own more and better vehicles. This will reduce the exploitation of drivers by partners and thus empower drivers earn more from their work. They can also help they form some cooperatives where they can save money amongst themselves and empower themselves in buying or upgrading their vehicles. The company can also partner with others who offer insurance to offer basic and cheap insurance for the workers so that in the event of illness they will be able to afford medical care. This can also include retirement covers and other social covers that will greatly benefit from. Due to the huge numbers of workers, they would benefit from benefit of economies of scale if this was to be offered to most of the workers thus making it affordable. Conclusion The gig economy has changed the employment landscape bringing with it opportunities and challenges. It provides an opportunity to connect workers and employers through the internet. While it gives rise to flexibility and lowers costs for organisations, it requires that organisations also be ready to deal with new labor regulations and redefine their processes and procedures to accommodate these gigsters who may be working from anywhere in the globe. The organisations must also equip their leaders with management skills that enable them lead these workers and treat them as equal and important like the internal employees. The debate on whether the gig economy has created or destroyed jobs will continue and may not have a clear answer. 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