Today’s workforce looks very different than it did only ten years ago, and the “gig economy” promises to force even more changes. Freelance and contingent work is on the rise, slowly encroaching upon the traditional, long-term nine-to-five job. A whole breed of highly valued technology companies aren’t building social networks or search engines, but rather reinventing entire industries by letting anybody offer up their labor, knowledge, or even their homes, in exchange for income.
According to a 2014 survey, 53 million people in the United States are part of this contingent workforce. The number is staggering, but complicated, encompassing everyone from independent contractors to moonlighters. But whether they’re primarily freelancing, working temp jobs, or cultivating a set of side gigs, a staggering 34% of the U.S. workforce shares the same defining characteristic. These individuals are working, but they might not be doing it full-time or in the long-term for someone else.
A number of technological and cultural paradigm shifts are fueling the rise of this so-called “on-demand” economy. Of paramount significance is the rapid development of mobile technologies, social media, the internet, and always-on connectivity.
Generational factors are critical as well. Millennials now make up a majority of the workforce, and as more traditionally-minded workers (not to mention employers) retire and the ranks of millennial employees continue to swell, contract-based and part-time work will only become more common. For this generation, the freelance economy isn’t some new phenomenon. It’s the way they have worked since first entering the job market.
Regardless of the mechanisms underlying the “on-demand” economy, this shift—sometimes described as “the Industrial Revolution of our time”—is only expected to continue. Thirty-two percent of independent workers said they saw demand for their services increase in the previous year. Likewise, a 2015 study suggests 13% of adult Americans who are not independent workers are considering a shift to an independent path in the next 2-3 years.
So how will the proliferation of the contingent workforce impact laborers and the organizations that employ them? For workers, this movement presents huge benefits, as well as challenges. While the wages of contract workers vary widely (service industry labor doesn’t yield paychecks quite as big as healthcare gigs do), freelancers report making decent money. Most notably however, independent work is more flexible than a traditional job, allowing workers to find jobs that build and utilize their skills while maintaining control over work-life balance.
But with flexibility comes uncertainty. The most obvious drawback of being an on-demand worker is the lack of financial stability. Paychecks may be sizable, but they’re seldom paid in regular intervals. And even the best-paying clients don’t offer the benefits of traditional employment, such as health insurance, paid sick leave, and vacation.
For employers, the on-demand economy is equally challenging. In an era where acquiring talent is critical and supply is limited, bringing on independent workers is an appealing and cost-effective way to remedy a growing skills gap and continue delivering needed business growth. Unsurprisingly, executive decision makers in the HR space report increasing interest in bringing independent, freelance, or temporary workers into their organizations.
But turning to an independent workforce comes with its own obstacles. Organizations must still recruit, engage, manage, and compensate these workers like any other employee. As such, companies will need to prepare themselves to court and sustain this new, distributed army of talent. Doing so means adopting integrated systems that can seamlessly track talent, across multiple business functions and geographies, while ensuring compliance with labor laws. These changes will need to happen soon. The on-demand economy is here for the foreseeable future, and adopting these systems is a matter of “when,” not “if” for companies that want to thrive.
Learn how Workday can help companies align and assess their talent—contingent or otherwise—to stay competitive no matter how their workforce transforms.
This article was produced on behalf of Workday by the Quartz marketing team and not by the Quartz editorial staff.