Managing independent contractors is critical in the growing gig economy

As businesses continue to procure more independent contractors and workers seek more independence, financial freedom, and control over their work-life-balance, the gig economy will likely grow for years to come.

ADP Research Institute

One in every six enterprise-workers is a gig worker. In many cases, the number is even higher. In about 40% of enterprises, one in four workers is a gig worker. -ADP Research Institute

Why more businesses turn to independent contractors 

Baby boomers have been the backbone of the American workforce for generations, but more than 75 million of these essential workers will be retiring in the coming years, according to research by the Society for Human Resource Management. 

Unlike their predecessors, the up-and-coming generation prioritizes flexibility and is always looking for the next opportunity to hone their skills. Retaining and empowering workers to decide how they’d like to work will continue to be a key part of future HR efforts.

Adding to the talent shortage issue is the amount of burnout workers have been feeling over the last few years. A survey by the American Psychological Association (APA) found that burnout rates are at all-time highs across industries and professions.

Results from APA’s 2021 Work and Well-being Survey*

Results from APA’s 2021 Work and Well-being Survey*

  • 26% negative impact from work-related stress
  • 19% lack of effort at work
  • 36% cognitive weariness
  • 32% emotional exhaustion
  • 44% physical fatigue
  • 1,501 U.S. adult workers

This level of burnout resulted in a record-setting amount of resignations throughout 2021. Termed the Great Resignation, nearly 4 million Americans quit their jobs in the month of July 2021 alone, signaling a dramatic shift in power from the employer to the workers. It’s clear that businesses across industries need to adopt a new way of procuring talent in order to thrive, and one of those strategies is to use independent contractors.

Best practices for managing independent contractors

In order to participate in the gig economy and retain great talent, businesses must apply some best practices for managing independent contractors.

Invest in the right technology

The gig economy brings workers together in collaboration from across the globe, significantly impacting organizational talent while also creating new challenges.

Technology, namely an independent contractor management system, gives you tools to help streamline and automate the majority of your contractor management processes, from onboarding to pay. These include:

An independent contractor management system can help you manage onboarding at scale while also facilitating project assignment and contractor payment, ultimately saving you time and resources.

Engage independent contractors with a talent strategy

Once you find the right worker for the assignment, the next step is retaining that worker. In order to do that, you’ll need to create a differentiated worker experience, one that maximizes their engagement and satisfaction. A few ways to do this include:

  1. Provide feedback

    If you like working with a particular independent contractor, be sure to provide a good review and also reach out to thank them for representing your company so well. Let them know you'll keep them in mind for future work. Making them feel appreciated goes a long way.

  2. Always improve

    One of the best ways to improve your engagement with independent contractors is to ask them for feedback and actively listen to their input. Ask them questions such as: Was there a clear scope of work? Were we responsive enough? Do you feel that you were heard? You require your employees and contractors to continuously improve, but you need to hold the same standard for yourself and your internal processes. Regularly polling your freelancers to see where you can improve can build goodwill and retain your hard won talent.

  3. Be inclusive

    Even though independent contractors and gig workers are typically engaged on short-term projects, they still want to feel as though they're working with you to achieve an end goal. Consider a brand ambassador program where workers can accumulate points (which can then be redeemed for prizes) by engaging in different activities with your company. Or set up a referral program where workers receive a bonus if the person they’ve referred successfully completes an assignment for you.

HR Functional Perspectives: Contingent Workforce, Deloitte

"As more companies understand the issues associated with contractors and manage them well, they can benefit from improved operational performance, lower labor costs, informed staffing decisions, more organizational flexibility, and stronger HR alignment with business objectives."

- HR Functional Perspectives: Contingent Workforce, Deloitte

Offer payment options for independent contractors

Surveys performed by Fiserv (as reported in ADP Spark Magazine) found that 31% of independent contractors have been paid with a paper check, yet only 13% of them actually prefer to be paid that way. The report further indicates that 80% of workers prefer to be paid electronically. 

Not only have direct deposit and other means of electronic payment become standard, they also provide a digital trail that makes it easier to track down payment in the event of a delay or issue. Offering flexible and fast payment options to your contractors is a crucial component to retaining them. Ensuring that payments are accurate and on time, in the method they prefer - from ACH to pay card to electronic options - will help build positive relationships with your contractors and keep them loyal to you.

Growing in the gig economy

Talent shortages are among the main challenges facing many organizations today and contract workers have an important role to play in filling the gaps in this labor shortage. Recruiting independent contractors allows businesses to scale up and down based on customer demand, remaining agile and competitive while leveraging specialized talent.

It’s important to remember that managing independent contractors and keeping them engaged is different from managing a traditional W-2 workforce. Businesses need to put the right recruiting strategy, HR processes and technology platforms in place to successfully leverage this type of talent and keep growing in the gig economy.

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