Insider: News and Views from EY, Spring 2017

Is the gig economy a fleeting fad, or an enduring legacy?

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Leveraging specific skills and capabilities that are beyond the existing workforce. More nimbly responding to peaks and troughs in workforce requirements. Controlling labor costs. Even helping to overcome resistance to change within a legacy workforce. These are some of the benefits of tapping into the contingent workforce.

The world of work is changing dramatically, and the shape of the workforce is changing with it. As organizations respond to the forces of globalization and technology innovation, they need to be agile enough to address rapidly shifting consumer preferences, compete with more nimble start-ups and scale or descale resources depending on demand. In a low-growth environment, they also need to be able to rigorously manage costs.

Contingent workers: more than a passing trend

The rise of the gig economy is helping to address these needs. In a recent survey we conducted of employers in the US, one in two organizations indicated that they had increased their use of gig workers in the last five years.

And it seems to be more than a passing trend, as two in five organizations expect to increase their use of the contingent workforce by 2020. In fact, one in three employers of 100,000 employees or more expect to use 30% or more contingent workers in the same time frame.

The benefits and challenges

Leveraging specific skills and capabilities that are beyond the existing workforce. More nimbly responding to peaks and troughs in workforce requirements. Controlling labor costs. Even helping to overcome resistance to change within a legacy workforce. These are some of the benefits of tapping into the contingent workforce.

Yet, as the gig economy grows, there are new challenges. Broken governance models, lack of accountability for the contingent workforce, multiple vendor management systems, manual talent management processes and only basic cost measures are only a few of the issues being grappled with.

There are also a number of risks relating to employment law and regulatory compliance, as well as the security of information, intellectual property and cybersecurity. Relatively few organizations feel fully confident in their ability to insulate themselves robustly.

What giggers really want

Part of the received wisdom on the gig economy seems to be that contingent workers are only doing so because they are unable to find permanent employment. Evidence from an EY survey of more than 1,000 contingent workers in the US suggests otherwise. More than half of giggers see contingent working as how they want to progress their career.

In fact, a clear majority of contingent workers would not prefer full-time employment. Two in three contingent workers believe the benefits of contingent working outweigh the downside always or most of the time. This remarkable transformation in the world’s labor market appears to be driven by changing worker attitudes as much as it is by changing employer needs.

In a gig economy that’s here to stay, organizations and workers need to adapt

As the gig economy grows, new challenges emerge for organizations. Are contingent workers as motivated as permanent employees? Are they as well-managed? How well are contingent workers performing? The EY survey of major employers suggests that organizations have not yet found an optimal operating model for managing their contingent workforce.

This is creating inefficiencies – and potentially serious risks. High-profile cases have emerged in which business leaders are not fully aware of working practices among their contracted workforce. Do employers even know who is ultimately responsible for the contingent workforce? From an accountability perspective, organizations need answers to this critical question and others.

When it comes to managing the contingent workforce, many organizations currently suffer from fragmented governance models, and manual systems and processes. In many cases, organizations are using basic tools to measure contingent workforce performance rather than data analytics.

When contingent workers start and finish their assignments, some employers report using manual processes for managing the onboarding and off-boarding process. Inevitably, this means there are oversights. In fact, evidence from contingent workers themselves suggest that 55% did not go through an onboarding process. This presents a host of potential risks for employers or organizations using contingent workers.

While there are major opportunities to gain efficiencies from the flexibility that embracing the gig economy offers, organizations need to fix the lack of leadership accountability.