Is There a Future for Your Small Business in the Gig Economy?

It is certainly no secret that the gig economy has been growing at a fast pace for a decade now due to the availability of bandwidth and the Internet. While this trend has caught the attention of entrepreneurial-minded people, many have hesitated to leave the comfort of a full-time job to become self-employed and a remote worker.

The Trend Accelerates

If you are one of those hesitant to take the leap to independent contractor status, events beginning in 2020 have accelerated the growth of the gig economy dramatically. The COVID-19 pandemic, with the lockdown of many businesses, caused them to send employees home to work in droves.

The work-from-home spurt was not by choice, but businesses had to do something to stay in operation when they could not retrofit their workplaces for mandated social distancing and other requirements to address the pandemic.

The Surprising Results

Businesses sending workers home hoped that it would be temporary, as they feared lost productivity and control over employee workdays. Many also feared that they would be hampered by remote workers’ lack of face-to-face communication that was normal in the pre-COVID workplace.

On the contrary, most of the responses from businesses have been positive in nature. They found not only that productivity did not drop for many employees, but that it increased. Their fear of not having line-of-sight control of employee work was unfounded.

The businesses also found that most of the employees surveyed said that they liked working from home. They stated that they could avoid distractions and produce the same volume of work while enhancing their home interactions as well.

Changing the Focus from Employees to Freelancers

Once the positive results were understood, many businesses also began to analyze their workforce and facilities for ways to cut costs to go along with this boosted productivity. They began to replace employees through attrition with freelancers or sub-contracted gig economy workers.

The savings from moving to a sub-contracted workforce could be significant for many business types. They could reduce their facility footprint, often moving to smaller spaces with lower rents. Other costs related to onsite workforces, such as utilities and services, could be reduced as well.

Employment taxes and employee benefits costs could be reduced greatly. Jobs that often had ebbs in demand but continued wages and benefits costs could be done by gig workers at a much lower cost without associated employee expenses.

What This Means to the Entrepreneurially-Inclined

If you are one of the budding entrepreneurs who have hesitated to separate from the hired workforce, now is the time to give it serious consideration. Many can do so part-time, keeping that salary while they start their new business.

The path to success begins with an understanding of the events described here and how you will fit into the plans of the businesses you want to hire your services. You must be self-employed in the IRS true sense. You cannot require management of your time or output, or for the most part, any training or supervision. The business must be able to show the IRS that they meet a strict test of how they manage their gig workers to pay them as independent contractors.

You must have the facilities and equipment to deliver your work. This is often just a home desk and computer, but you should have excellent Internet service for online conferencing as well. The clearest way to put it is that the word “independent” in independent contractor is critical.

If you have the skills and the tools, there has never been a better time to become your own boss. Between your own contacts and the many online freelancer websites, you can find work, though you may have to lower your compensation expectations while you build a body of work and reviews or ratings that will attract offers.

If you are getting excited about the prospects of owning a business and taking more control over your work and home life, there has never been a better time to do so.

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