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Gig Economy: Evolving Employer-Employee Dynamics

Gig Economy coming of age

In 2016, Deloitte posed an interesting question- whether the gig economy was a ‘distraction or disruption’. The following year, The New Yorker wondered if the gig economy was working (Kapoor, 2020). Given the turn of events since then, we know what the answers are.

In the current context, Gig Economy is a term that describes the labour market where freelancers and contractors (instead of permanent workers) work on a project-wise basis and get compensated upon completion of tasks. It’s derived from the slang ‘gig’ meaning short term engagements between organisations and the hired. (Manishii Pathak, 2019)

Several factors are at play for the recent uptrend in the gig economy:

The permanent-labour market is fraught with competition, and increasingly so due to digitisation, increasing penetration of mobile and internet and the notion of ‘cheap Indian labour’. The minimum wages for Indian freelancers average up to Rs. 10,500 per month vis-à-vis Rs. 16,600 per month in China. The changing lifestyle of millennials- more focus on work-life balance, portable work, side-finance, flexibility to pursue their niche etc. has boosted the freelance culture. Digital India Program (DIP), a Government of India initiative also promotes freelancers. Moreover, the gig economy is an easy way out for companies looking to reduce labour cost (Harshasheelam, 2020).

At the onset, freelance culture was adopted largely by start-ups but over the last couple of years, large corporates and professional service firms are spearheading the demand up from 52% in 2016-17 to 72% in 2018-19 (Bhattacharya, 2019).

More recently, with the outbreak of Covid-19 pandemic, the role of the gig economy seems to be taking firmer shape. The lockdown because of Covid-19 has meant that more than 120 million people have lost their jobs in the month of April, and India’s unemployment rate has risen to 27.11% according to a report by the Centre for Monitoring the Indian Economy (CMIE). Sabina Dewan, president of thinktank JustJobs Network predicts that the e-commerce and gig economy will actually capture the limited demand post-Covid-19. This can be seen in the form of growing reliance on delivery services for almost all items of daily use.

Moreover, the Social Security Code Bill proposed by the labour ministry making gig workers eligible for insurance benefits under state-run Employees’ State Insurance Corporation (ESIC) seems to indicate the permanence of gig economy (Will There Be A Boom in Gig Economy Post COVID-19? 2020).

Given the weight gig economy is gathering, it becomes interesting to lift the veil and discover what employees and employers expect from each other as well from the work in this emerging setting. Interestingly, such a study also holds the potential of uncovering the new set of expectations that come along with the new normal i.e. WFH (work from home) as both the scenarios involve physical distancing of employers and employees.

Back in January 2020, I along with a friend at IIM Ahmedabad conducted primary research in the form of in-depth interviews with ~30 freelancers (developers, photographers, make-up artists, painters etc.) and employers (start-ups and small-scale organisations) to understand each party’s expectations from the other as well from the work itself. This is what we found:

Expectations of Freelancers

1. Motivation to Freelance: Of the total freelancers interviewed, 62% highlighted compensation as the primary motivation for freelancing, 58% mentioned both exposure (challenging or enriching projects) and project choice, 46% mentioned flexibility (choice of time, place, location and convenience of the work) and 35% mentioned growth (long-term aspirations). Interestingly, short-term motivations such as compensation, exposure and project choice as opposed to long-term motivations such as flexibility and growth seem to be more popular among freelancers.

2. Financially Rewarding: 80% freelancers associate freelancing with higher compensation compared to a full-time similar role irrespective of the fluctuations in the availability of freelance projects with no consistent income source. This was because they can work on multiple projects at once. 60% of the remaining 20% freelancers who didn’t find freelancing as more well-paying than a regular job were not full-time freelancers.

3. Basis of Compensation: Basis of compensation is codified into ‘work intensity’ and ‘no. of manhours’ required. Work Intensity encompasses the complexity of the job, skillsets required or roles where time commitment couldn’t be initially determined. No. of hours as the basis of compensation largely covered freelance work such as that of developers or photographers and videographers. It was found that 73% freelancers were paid basis work intensity and the remaining 27% basis no. of hours worked.

4. Expectations from Employers that remain unmet: Freelancers pointed towards lower degrees of professionalism showcased by clients towards them as compared to the full-time employees. This resulted in various impediments across the timeline of the project- lack of clarity about deliverables, confusion around POCs and project overruns. Freelancers found that companies were unaccepting of their way of operation. Lastly, the absence of a standard or a baseline for compensation determination and the fluidity with which project quotations were created were found to be major stressors to the freelancers. Some minor themes identified during freelancer interviews are i) lack of clear communication channels, ii) inflexible contract terms, iii) disruption in work-life balance, especially where the client is based in a different time zone and iv) lack of opportunities for fresh entrants into the gig economy.

Expectations of Employers

Cost savings as highlighted by 67% of employers was found to be the major motivation for hiring a freelancer over outsourcing to an agency or consultant. Other reasons include access to expertise for special one-time projects, the inadequate scale of operations for permanent hiring.

As far as employers’ unmet expectations from freelancers are concerned, there were a few. Fluid contract terms and oral agreement of quotations resulted in absence of certain terms such as the provision of a notice period, succession planning and benefits to freelancers.

Next, irrespective of the quality of work, employers noted that freelancers ranked below full-time employees on the scale measuring professionalism.

Three minor themes identified during the interviews are: i) issues with respect to management, hiring and loyalty of the freelancers, ii) lack of smooth communication and accountability (as highlighted in 40% of the employers) resulting in project delays and iii) gaps in loyalty (as pointed by 60% of the employers).

Recommendations for reconciliation

Connecting the literature review with the results from the interviews of freelancer and SMEs, there are three broad aspects where the scope for reconciliation was explored.

First is ambiguity with respect to the role of a freelancer as per the requirement of the employer. A fundamental disconnect was found between the expectations of the freelancer with the employer when employers were primarily driven by the motivation for cost-cutting and bridging a temporary skill-gap, whereas the freelancer was seeking a longer-term engagement through repeat business from a client with a key focus on client relationship. This disconnect was further exacerbated when communication was highlighted as being not clear and direct, resulting in the haziness of the role which freelancers are supposed to play. Hence, it is recommended that proper contract terms are laid down around this issue. This can be done by specifically outlining the two areas: i) the position that the freelancer is supposed to fill in and ii) the relevant job description.

The second aspect explored was the security of work and compensation for freelancers. Literature review had highlighted a need to have labour laws such as minimum pay to make the gig ecosystem much more favourable for freelancers to thrive. The data analysis highlighted two interesting aspects. The first was that freelancers reported that they were earning more than full-time employees in 81% cases. The second was that freelancers preferred to not continue working as a freelancer in the long-run in 69% cases. These two can be tied together to highlight the lack of job security and the absence of a formalized system of labour laws to regulate the management of gig workers. In view of the limitations of the current labour laws in India with regards to the gig economy, it is recommended for companies to adopt an HR based framework of gig worker management as a best practice with a specific focus on areas such as job security, minimum wages, loyalty, performance and related aspects.

The third and last scope that was explored in the literature review was policy formulation for succession planning and change management. The interviews revealed that in most cases, formal contracts didn’t exist and there was huge uncertainty around freelancers leaving projects midway. It is thereby recommended to have a formal contract in place which clearly outlines the role of a freelancer in case of contingencies like the one mentioned before or situations such as moving operations in-house.

Conclusion

The gig economy is developing in India and especially as the gig culture is picking up during current times of Covid 19, it is expected to stay. Thus, ironing out the expectation differences between employers and freelancers becomes relevant. There are several areas where differences can impactfully be aligned. A clear statement of tasks and outcomes required by the employers to freelancers can make engagements more effective by reducing the scope for deviation. Standards for compensation and job security can lift a great deal of uncertainty from the whole equation. A formal contract can clearly outline the work arrangement between the two, especially in case of contingencies. Although there has been a growing trend of freelancing in India, we are yet to see the Indian freelance market getting mature.

Article and Artwork By Soumya Kushwaha (SRCC’18, IIM A’20)



References

1. Bhattacharya, S. (2019, Aug 13). The Economic Times. How gig economy is becoming a key part of India Inc’s strategy.

2. Harshasheelam. (2020, June 22). The exploitation of the gig economy in India. Retrieved from Inventiva: https://www.inventiva.co.in/stories/harshasheelam/the-exploitation-of-the-gig-economy-in-india/

3. Kapoor, N. (2020, March 11). How Is Gig Economy Redefining The Job Trends In India. Retrieved from BW People: http://bwpeople.businessworld.in/article/How-Is-Gig-Economy-Redefining-The-Job-Trends-In-India/11-03-2020-185940/

4. Manishii Pathak, S. J. (2019). India And The Gig Economy. Indus Law.

5. Will There Be A Boom in Gig Economy Post COVID-19? (2020, May 16). Retrieved from Boom Live: https://www.boomlive.in/videos/will-there-be-a-boom-in-gig-economy-post-covid-19-8116

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