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The gig economy – why knowing what it is and how it works is important

By February 12, 2018March 15th, 2019Advice, Business, News, Small Business

gig economyHere at Cornerstone, we offer free mentoring to those already working for themselves, or considering starting a business – becoming self-employed can be a challenge. Businesses must stay in touch with the latest developments in the business world to ensure they are not one of the majority of new businesses that fail within the first three years of trading. One such development is the gig economy which, to the uninitiated, sounds more like the value of live music than an increasingly popular way for big companies to take advantage of the services of the small, or sole, trader.

So what is the ‘gig’ economy and why is important that we are all aware of what being part of it – as a service provider or user – actually means?

How many times have you needed something for your business, or home, urgently and gone online to take advantage of speedy delivery times? When the driver comes to your door with your goods, do you stop to think how many other parcels he is delivering that day, or wonder why he is always in such a hurry?

One definition of the gig economy is ‘a labour market characterised by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs’. All to the good you may say – more work for the freelancer, constantly struggling to find enough work to make a decent living over the year. However, the practice is increasingly used to reduce the need for permanent workers almost entirely, requiring those who would previously have enjoyed employment benefits such as holiday pay and regular working hours to become independent contractors, paid for the ‘gigs’ they do – such as deliveries, food orders or courier work. The BBC state an estimate of 5 million people in the UK are working in this way.

Those who consider the gig economy a good thing, say it offers greater flexibility for workers, who can manage their workload around other priorities, whilst at the same time benefiting employers, who need only contract out the work and pay when work is available, reducing staff costs in lean times.

However, recent reports of the death of a delivery driver who died because the pressures placed on him by DPD the delivery firm pressurised him to miss vital health appointments for fear of draconian fines highlighted the negative aspects of this market – no protection against unfair dismissal, no right to redundancy payments,  the national minimum wage, paid holiday or sickness pay.

Working for yourself is never the easy option. It is always hard work, offers little in the way of security and it inevitably takes time to become successful. But it is often the very best way to do something you love or take pride in. You have an idea, you sell it and do your best to make a financial success of it. But this is very different from being used by big companies to cut costs. Be very wary when taking on such contracts. You may find it is not as flexible as you thought – you have to work for some time before you get paid, must build up ‘credit’ with the company you are working for and find the hours you want to work don’t match those the contract requires of you. It is piece work, with all its pressures.

The government has not so far promised to regulate this new brand of self-employment with strings, despite some high profile court cases, in which gig economy workers were deemed to be employees, however a big company – such as Uber – chose to define them. So in the meantime, be wary. Take your time before stepping into the world of the high-pressure gig. Be educated, not exploited.

And recognise that the price of your speedy delivery might be the health of a fellow self-employed worker.

To find out more about the gig economy see What is the gig economy?