Gig Economy: Readying For The Surge

HR is on the frontlines of a transformative shift in the employment landscape

 

The gig economy, marked by its flexible work arrangements, is undergoing rapid expansion, fundamentally altering the conventional employment landscape. Businesses are transitioning towards shift-based work models, departing from fixed scheduling, in efforts to enhance talent agility and utilization. Embracing gig and shift-based work is becoming more prevalent as companies aim to optimize labor costs and cater to the flexibility and opportunities demanded by the next generation of employees.

HR professionals are on the frontlines of a transformative shift in the employment landscape.

How big is the sector? According to a McKinsey Global Institute report, as many as 162 million people in Europe and the United States engage in independent work. For small businesses, the flexible job market brings many opportunities to innovate, scale, and remain competitive in a fast-paced market.
 
But it's not only small businesses engaging with the gig economy. The data shows significant growth in the sector since 2016 – with no signs of slowing down. In 2022, 36% of the workforce engaged in gig work, up 32% from 2016, increasing from 44 million participants to 58 million. In 2023, 61% of gig workers – 35 million – are using gig work as their primary income, up from nine million in 2021.
 
According to the World Economic Forum, more than 50% of the global workforce will be part of the gig economy by 2025.

Four main trends fuel the surge in the flexible job market, reflecting a convergence of currents unleashed by the pandemic, the economy, and demographic shifts.
 
The need to optimize talent. The competition for talent is driving up labor costs. Companies need to maximize their talent to get their labor costs under control while meeting their business needs. However, with static scheduling, there are significant inefficiencies and costs. While the talent wars may not subside, shift-based scheduling enables organizations to activate labor cost efficiencies by closely aligning the talent resources with the actual business need. The infrastructure and the technology are now available to enable this optimization.
 
The pivot from role-based to skills-based resourcing. Instead of seeking job candidates with specific work experiences or degrees to fill an open position, companies are unpacking the necessary skills for a job and hiring based on those skills. This broadens the talent pool and provides job opportunities for a more diverse group of workers. This also aligns with how the newest workers approach their career trajectory.
 
The emergence of talent marketplaces that leverage AI. Talent marketplaces that leverage AI-generated algorithms are helping to facilitate this transition, efficiently matching skills with job requirements. These internal marketplaces give businesses an advantage in attracting and retaining Gen Z talent by offering flexibility and opportunities for career progression.
 
Gen Z's impact on the workplace. Gen Z is building on the changes the millennials asked for in the workplace, notably a call for more flexibility and work-life balance. For Gen Z workers, however, these are no longer perks but must-haves. As the Gen Z cohort emerges as the largest demographic in the workforce, there will be more calls for workplace flexibility and balance.

The Gen Z cohort is large and loud. Over a quarter of the nearly 8 billion in the world population falls into the Gen Z demographic – and this massive cohort is impacting the workplace. By 2025, 20 million Gen Z will be in the workforce, accounting for 27% of total workers – overtaking millennials as the generation with the largest working population.
 
A key priority for Gen Zers is radical flexibility – where flexible work schedules meet employee expectations about how, when, and where they work. Recent data shows that 90% of Gen Zers said they're much more likely to choose jobs that allow them to work from anywhere, compared to 71% of Gen Xers and 59% of baby boomers.
 
They are also more likely to balance career progression and life goals and look to broaden their skills – even at the expense of higher salaries. The 2022 Gartner Candidate Survey found that 53% of Gen Z candidates are willing to forgo 10% higher pay for "more opportunities to learn new skills." Nearly a third, reports LinkedIn, are willing to take minor pay cuts – 2% to 5% – in exchange for a hybrid work schedule, while 38% would do so for a better work-life balance.
 
And if their current job doesn't meet their expectations, they are willing to take action. A 2022 LinkedIn study revealed that 72% of Gen Zers would consider leaving a company that doesn't offer a flexible work option, compared to 69% of millennials, 53% of Gen Xers, and 59% of boomers. They are switching jobs at a rate that is 134% higher than in 2019, compared to millennials at 24% and boomers at 20%.

While the gig economy fits in well with the aspirations and expectations of this new generation of workers, businesses still encounter some challenges to ensure its success. As demand for talent reskilling and upskilling increases, organizations must implement guardrails to protect their companies as they grapple with regulatory compliance and service quality. Competition for top talent continues to escalate – especially when involving digital skills.
 
To thrive in this environment, HR professionals must adopt strategic measures. Businesses must restructure quickly and find creative ways to assign people to the right jobs. Here’s how:

 

As the gig economy becomes a staple in the hiring landscape, integrating AI for skills identification and digital platforms for internal gig marketplaces will be vital for success. The future of work is undeniably dynamic, and HR must prepare for seismic shifts in working expectations and adapt their workforce policies as change unfolds.