Finding a Job

What Is the Gig Economy? (Plus 4 Benefits)

July 20, 2021

Whether you're looking for an extra stream of income to supplement your full-time job or you're pursuing a new line of work, the gig economy provides great employment opportunities. It offers flexibility and allows people to set their own hours and pay rates. It can also be an excellent way to get hired for work quickly and gain experience in a new field. In this article, we discuss what a gig economy is, how it works, its primary benefits, and the best practices to follow for gig workers.

What is a gig economy?

The gig economy is an environment with a large number of short-term and low-wage jobs where freelance workers and independent contractors compete for the opportunity to work gigs that a variety of clients offer. It's a deviation from the traditional economy where individuals earn a single wage from one job over an extended period of time. For example, people who work for ride-sharing apps earn money for individual rides that they provide, accumulating more money with each ride they give. The rise of web-based applications that promote gig work has greatly influenced this market.

Related: Full-Time Hours: Definition and Benefits

How the gig economy works

The following factors contribute to a gig economy:

Individual gigs are a small portion of total income

Gig workers complete tasks for payment from individual clients regardless of their expertise. Each gig makes up a small part of the individual's total income, and a variety of sources commonly generate income. For example, a freelance code writer may complete the code of a website for one client, receive payment, and then seek out work on another project for a different client.

Contractors find work via technology

Finding contract work or gigs online has risen in popularity in recent years. Social media sites have emerged as a good source of promotion and income for some gig workers. Freelancers can also find work on freelance websites, which act as service databases to connect clients and gig workers, as well as provide a centralized place to manage earnings and schedules.

Some digital applications have created entire industries of service gig work that rely on the apps. These differ from typical freelancers who can find work independently. Examples of this type of app-based gig work are food delivery services and ride-sharing.

Related: Guide: How To Get a Job Quickly

Gig workers operate as independent contractors

Individuals in a gig economy work as independent contractors, rather than as full-time employees of any one company or employer. As independent contractors, they set their own rates for the services that they provide.

Gig workers who find work through popular digital applications can follow suggested rates of the application to encourage client engagement. The applications that facilitate the gig economy allow contractors to earn a percentage of the earnings, rather than employ the gig workers themselves.

Related: A Beginner's Guide To Freelance Jobs

Contractors handle their own benefits and taxes

Contractors are self-employed, so they are responsible for the benefits that a traditional employer may have provided. Examples of these benefits include:

  • Supplemental health insurance
  • Employee education and training
  • Additional vacation days
  • Paid sick days

If you work in the gig economy, you also are expected to pay your own taxes. Being self-employed means that you may take advantage of small business tax benefits, which may include deductions for supplies or travel. As an independent contractor, it is important to keep track of all invoices and receipts from gigs to accurately represent your business spending and earning.

Benefits of a gig economy

The gig economy represents a shift from typical employer and employee relations, which provide benefits such as:

Provides flexibility

Because gig workers primarily work for themselves, they have more flexibility with their work hours and pay rates. They may choose to have a standard nine-to-five workday, or they can customize their hours to their preferences. Many gig workers work a traditional job during regular business hours and add additional gig hours in the evening.

Gig workers can also have more freedom to work remotely. This can be helpful for those who want to work from home, need to stay home to care for family members, or who live in a different location than their clients. This has led to a new category of remote employees known as digital nomads who work remotely while traveling. Working remotely is primarily for creative or digital gig workers, like code writers or website designers. Gig workers in the service industry typically get work based on their location.

Related: How to Decide if Permanently Working From Home is Right For You

Supplements income

The gig economy offers a way to earn supplemental income for those who have another full-time or part-time job or for students who want to make extra money while studying. Many digital apps offer short training materials to prepare new employees to use their services, creating a low standard of entry into new industries. This additional income is helpful to those who earn lower wages and need extra income to cover their cost of living or want additional spending money.

Builds your resume

For creative individuals who want to gain experience and have a more traditional job in the future, the gig economy can also be an effective entry point. For example, graphic designers typically need a work portfolio to gain jobs at traditional agencies. To build a portfolio, they can work in the gig economy, taking smaller jobs to practice their craft and build connections. They can use the work they produce for these contracts as references and samples. The connections they make during contract work may eventually lead to an offer of a full-time job with benefits.

Offers affordable help

For clients, the gig economy offers services at a lower price than is available for most consumers. Working directly with a contractor can eliminate the overhead costs that agencies include in their rates.

Businesses also spend less on labour because they hire contract workers per job, rather than adding them as a salaried staff member. Employers also save money by paying for the work alone, rather than having to provide employee benefits. For example, if a business needs to hire a photographer, they can hire a freelance photographer for one photoshoot, which is less expensive than keeping a photographer on their payroll.

Best practices for using the gig economy

If you are interested in joining the gig economy, here are some best practices to follow for success:

Set a schedule

As your own boss, you are in charge of your schedule. The income that you make directly relates to the hours you spend working and finding new clients. While this aspect of the gig economy can provide flexibility, it is important to set boundaries around your schedule so that you can stay on target for your desired pay. Setting a schedule can help you stay motivated to work and help you reach your productivity goals. It can also help you step away from your work at appropriate times so that you can maintain a healthy work-life balance.

Find your niche

As a gig worker, you market yourself and find your own clients, so think about what you can offer a client that is specific to your skill set. Include any experience you have and how it can differentiate you from other gig workers in the same industry. If you can establish yourself as a well-known professional within a specific niche, you may be more successful in the market and find it easier to gain clients at a higher rate.

Use technology

There are a variety of platforms that can help you find clientele as a gig worker. Besides specific digital applications for certain industries of service gig work, there also are online databases that many businesses use to find freelance workers when they need them. Freelancers also rely more heavily on social media to gain recognition, so you can use different platforms to your advantage. Use technology to promote yourself and connect with people who are looking to hire someone for the work that you're offering.

Exceed expectations

As a gig worker, if you consistently exceed expectations and create a positive reputation for yourself, you have a better chance of securing more work in the future. Every gig you work is a chance to promote your skills as a freelancer, and one way you can do that is through recommendations from past clients. Consider collecting and displaying positive reviews you receive and cultivate high-performance ratings on every digital platform you choose to use.

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