By Keisha Ward, courtesy of SBAM Approved Partner ASE
In the 2018 article, The Gig Economy-Is Employment in the U.S. Changing?, we discussed the details of a trending form of employment that was sweeping the U.S. workforce. The article described a study by Intuit predicting that by 2020, 40% of American workers would be independent contractors.
To recap, workers such as an independent contractor or freelancer gravitate toward gig opportunities due to improved work-life balance. According to TechTarget, there are many reasons why we are seeing this growth in the gig workforce. Number one is technology. Flexibility is important to today’s workforce, and technology allows workers to be mobile and allows them to perform their jobs from anywhere in the world in some cases. Other factors that drive individuals toward gig work verses full-time employment are:
The Great Recession: The economic downturn in 2008 pushed many Americans into choosing flexibility rather than structure. During the recession many lost promising full-time careers and learned to adjust. Gig workers do not conform to the belief that a 9-5, 60-hour work week is mandatory for their livelihood.
They embrace freedom: People who choose the gig economy are not interested in a desk or cubicle dwelling. They prefer to work gig-to-gig and use the down time between jobs to pursue other interests.
Obama Care: One of the many perks to full-time employment are medical benefits. Today, gig workers have the option to choose coverage made available by the Affordable Care Act.
Where does the Gig Economy currently stand?
In January the Assembly Bill 5 (AB5) was made effective in California. According to Forbes.com, the purpose of AB5 is to define and more clearly classify independent contractors. Initially, the bill was expected to encourage fair pay and benefits to freelance professionals. Like we talked about in 2018, more than one-third of all Americans are a part of the gig economy, and that number is growing – so the new law commands attention. While the initial impacts of the law will focus on California workers, it could creep into other states as well. Whether or not your business is located in California, the new bill could still impact you and your team. If you work with any contractors who reside or work in California, you may now need to add them as employees instead of working with them as independent contractors (who receive 1099 tax forms) or hire your freelance support through a placement agency.
According to the bill, a worker must be classified as an employee unless the following three conditions are met:
A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.
B) The person performs work that is outside the usual course of the hiring entity’s business.
C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.
Forbes suggest companies prepare by:
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Knowing how to classify their freelancers
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Developing clear expectations and a firm completion date
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Communicating often
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Staying updated on changing laws surrounding this matter
It is important to consider all factors prior to hiring a freelancer on your own this year – no matter your state of residence. The regulations are expected to continue to evolve and are currently being looked at by several states including New York and New Jersey.
ASE Additional Resources
HR on Demand – ASE’s newest service supports the gig economy. We have experienced, skilled HR consultants on board and ready to step in when you need long-term management or project-based help. As a special introductory offer, you can save $250 off your first project through March 31, 2020. Learn more here or contact Anthony Kaylin.