Gig Economy Pros And Cons: Everything You Need To Know In 2024

The pros and cons of the gig economy are a significant talking point in boardrooms nationwide, as its effects are now being felt in every industry. 

The internet, websites, and apps allow companies to hire staff more efficiently for specific projects and short-term jobs, disrupting traditional work. 

Gig workers and the companies they work for are experiencing the benefits and drawbacks of this new paradigm, and it's not all smooth sailing. 

What Is the Gig Economy? 

Understanding the gig economy requires that you assess its impact on both workers and businesses and its effect on the current labor market. 

The gig economy is characterized by the prevalence of temporary and part-time positions filled by independent contractors and freelancers. 

It reduces the need for full-time permanent employees and allows workers to enjoy flexibility and independence—but at a cost. 

Gig Economy Pros and Cons for Companies and Workers 

History teaches us that as technology advances, innovation disrupts the job market, and old methods give way to new opportunities. 

When horses and buggies were replaced by automobiles—leaving farriers and coach makers out of work—new jobs arose in the assembly of engines and chassis. 

Mobile devices and the internet have given rise to companies like Uber and Airbnb, affecting how workers connect with businesses, resulting in short-term engagements. 

Here are a few of the pros and cons for companies and workers. 

Gig Economy Pros for Workers 

The World Bank reported that in 2023, the gig economy accounted for as much as 12 percent of the labor market globally. 

This appears to be a growing gig economy trend; gig workers are increasingly engaging with the gig economy. 

Crafting Your Own Work Schedule 

Gig economy workers can choose when and where they work, often discovering some of the best gig economy jobs align perfectly with their skills. 

They can explore a diverse range of roles and preferences, often setting their own hours in jobs with no direct client contact. 

This allows them to fit work into their schedules, whether at home or from a remote location like a coffee shop or even another country. 

Fostering Greater Independence 

Many gig economy workers enjoy heightened independence; freelancers often receive tasks to complete without constant supervision. 

They also get to structure their timetables around their lives and locations, which is especially helpful if one has family or other commitments. 

This helps boost gig workers' confidence and creativity while allowing them to develop their skills and increase their experience. 

Unlocking a Variety of Job Opportunities 

Since 2020, traditional job markets have been in turmoil worldwide as companies struggle to adapt to major changes in the world economy. 

Gig economy workers embrace an alternative means of employment, moving from the traditional model to one dominated by a wide variety of projects and gigs. 

Geographic location is less of an impediment to finding gig economy jobs, especially when jobs in Western nations pay significantly more than in third-world countries. 

The work is interesting because various assignments offer different challenges, allowing for greater creativity in completing tasks. 

Taking Charge of Your Earnings 

Gig workers may charge hourly rates for their time, offering opportunities to earn more money by working extra hours, attending meetings, or taking phone calls. 

Payments may also be based on reaching certain milestones or as a set fee for completing defined tasks or achieving specific outcomes. 

Direct control over their own work hours and earnings also allows gig workers to work for multiple employers simultaneously. 

Earning and Learning in the Digital Age 

In the gig economy, workers can take advantage of flexible working hours to pursue additional education, such as online degrees or certificates, while working. 

With enhanced skills and qualifications, the gig economy offers workers higher-paying freelance opportunities or secure full-time employment, further increasing their value to clients. 

Gig Economy Cons for Workers 

Unfortunately, there are some significant downsides to working in the gig economy, especially when it comes to the usual workplace benefits. 

One hurdle gig workers face is coming to terms with the fact that they are effectively running their own small businesses and aren't employees. 

Despite the following disadvantages of working as a freelancer or independent contractor, gig workers worldwide successfully navigate the gig economy's pitfalls. 

Working Longer Hours 

When workers initially join the gig economy, especially when signing on to one of many online platforms, they may struggle to find jobs. 

This often results from having no reviews or lacking a sufficiently strong CV to convince companies to hire them. 

To remedy this, gig workers often quote or accept much lower rates than usual to build a reputation and receive positive reviews. 

If properly managed, this situation should not last long, as each successful project allows workers to raise their rates. 

It means gig workers will initially work longer hours than they would in a traditional full-time job, but it shouldn't become the norm. 

Lacking the Usual Employment Benefits 

One of the challenges gig workers face is the absence of the best gig economy insurance and other comprehensive benefits. 

Although this is now changing, most gig economy jobs do not include benefits such as health insurance, retirement benefits, or paid time off. 

Each gig worker must make provisions for their health and savings plans to look after themselves in old age. 

When applying for gigs, workers must understand their hourly or daily rate—including the cost of benefits—and quote accordingly. 

A recent survey by the Economic Policy Institute shows many gig workers earn below the minimum wage, highlighting the importance of knowing your figures. 

Paying Quarterly Taxes and Personal Expenses 

Gig workers are typically classified as self-employed, responsible for paying their own taxes, sometimes requiring quarterly payments. 

They also need to cover personal expenses related to their work, such as laptops, cell phones, internet connections, and a place to work. 

Managing taxes and personal expenses can be complex and time-consuming, so employing an accountant or using accounting software becomes essential. 

Coming to grips with the financial complexities of gig work requires diligence and an understanding of basic accounting principles when working in the gig economy. 

Particular attention should be paid to health insurance, as gig economy workers seldom have company health plans to fall back on if they become ill. 

Suffering From Isolation and Lack of Personal Contact 

Gig economy workers often work at home or remotely, leading to feelings of isolation and a lack of connection with coworkers. 

They miss out on the typical social aspects of a traditional office setting, like office parties and regular chats around the water cooler. 

Your state of mental health should never be underestimated, as working remotely can be challenging for workers who are used to regular social contact. 

Many gig workers visit coffee shops or co-working spaces to stay in contact with other flexible workers, which can help stave off depression. 

Experiencing More Stress 

Gig workers must have a steady pipeline of jobs or face the stress of constantly searching for their next gig. 

They often deal with changes in current projects, altered deadlines, or the stress of not earning enough to cover bills. 

Constant uncertainty and a lack of job security can lead to anxiety and stress, which can contribute to serious health issues if mishandled. 

Communication can also be challenging, as gig workers do not always have easy access to colleagues for problem-solving or collaboration. 

Reviewing your role as an independent contractor and scheduling time to market your services can help keep earnings regular and considerably reduce stress. 

While gig economy jobs offer flexibility, they often lack the safety net of the best gig economy insurance, leaving workers to fend for themselves. 

Gig Economy Pros for Companies 

Hiring gig workers has allowed many companies and startups to reduce their cost of employment, helping them weather challenging markets. 

Unlike full-time employees, gig economy workers offer many benefits during economic uncertainty and downturns. 

Significant Cost Savings 

Gig workers are often far less expensive than full-time employees because you may not need to provide the full range of employee benefits, reducing overhead. 

They also don't require office equipment, desks, computers, and stationery, nor do they need an extensive payroll department. 

By strategically hiring gig workers to assist with critical tasks and processes, companies can minimize costs without increasing the number of full-time employees. 

Short-Term Employees for Short-Term Projects 

For companies with short-term projects or specific tasks, hiring gig workers gets jobs done without long-term commitments associated with full-time employees. 

Gig economy work is flexible by nature, allowing companies to benefit from a diverse global workforce. 

Savings on Education Costs 

Gig workers often invest in their own education and acquire necessary certifications and skills customarily paid for by employers. 

This means you can often find experienced workers with the qualifications you need without bearing the cost of their education. 

On-the-job training of gig employees is reduced, as specific skills required to complete tasks can be identified and screened before the gig worker is appointed. 

Around-the-Clock Service 

Hiring gig workers from different time zones provides around-the-clock service, which can benefit customers or tasks requiring 24/7 support. 

Utilizing gig economy workers provides businesses with a diverse pool of flexible workers who can often work during non-traditional hours. 

Rapid Scalability Using a Diverse Pool of Experienced Workers 

Freelance workers and contractors allow businesses—especially smaller or startup companies—to scale their operations rapidly. 

They can often hire skilled workers with their own equipment through word of mouth or online platforms. 

With the help of apps and websites, agile scaling helps businesses meet short-term goals and market demands while keeping employment costs low. 

Diversity in work hours and skill levels allows businesses to access a wide range of talent and expertise, facilitating creativity and innovation. 

Gig Economy Cons for Companies 

The challenges facing companies in the gig economy aren't insurmountable, but they must be managed to prevent affecting the outcome of sensitive projects. 

Using standard operating procedures when hiring and onboarding gig workers will help mitigate any problems that might arise. 

Beware Legal Challenges 

Companies face the challenge of navigating through complicated and evolving gig worker law to ensure compliance and avoid potential legal liabilities. 

The misclassification of gig workers as self-employed when they should be considered full-time has led to legal issues and potential liabilities. 

Pay disputes like the one between Amazon and its drivers highlight the fact that companies cannot just make up the rules as they go along. 

Handling the legal aspects correctly is essential for avoiding legal complications, especially when dealing with multi-jurisdictional issues and human resources. 

High Turnover of Freelance Workers 

In the gig economy, freelance jobs are constantly advertised, and workers often move on to new opportunities quickly, potentially leaving projects unfinished. 

High turnover can disrupt workflow and necessitate frequent replacements but can be mitigated by paying market-related rates for good gig workers. 

Less Reliable Workers 

The adage that 80% of the work is done by 20% of the staff is worth considering when hiring gig workers. 

Understandably, the gig economy attracts good and bad workers, and part-time workers may not be as committed or reliable as full-time employees. 

Businesses may encounter issues with freelancers less willing to work hard or meet deadlines, potentially leading to project delays or disruptions. 

Lack of Employee Commitment 

Freelance workers are not entitled to traditional job benefits, such as the best gig economy insurance, retirement plans, paid time off, or worker's compensation. 

This lack of benefits may make it less appealing for workers to commit to long-term gig economy work, especially if pay rates are low. 

Limited Control Over Freelancers 

Unlike full-time employees who occupy office space, businesses have less control over gig economy workers who often work off-site. 

This can result in communication problems, difficulty collaborating, and a lack of proper oversight of project progress unless standard operating procedures are in place. 

Summary 

Now that you better understand the gig economy's pros and cons for both workers and businesses, it's time to address each issue. 

You can better manage gig workers' expectations by defining the gig economy as freelance or contract work, in which individuals complete short-term projects. 

The pros of the gig economy for businesses include lower costs, scalability, and access to a diverse pool of flexible workers. 

The cons, however, involve navigating complex contractor status regulations and concerns about worker reliability, which must be managed to benefit all concerned. 

The positives and negatives for workers and companies in the gig economy require careful consideration to secure the best deal for everyone involved.