Rise of the gig economy and its implications on HCM tech

The COVID-19 crisis has undisputably changed the way we work, and it surely accelerated the gig economy. To sustain a livelihood, gig workers have upskilled themselves and even adopted new normal work modes. In 2020 itself, the gig economy grew by 33% expanding 8 times faster than the overall US economy. As of 2021, research has 52% of the workforce interviewed claiming they have plans to quit their jobs and work as freelancers instead. 

This explains how the gig economy has managed to grow substantially over the past few years. What’s interesting is that the gig economy doesn’t just apply to job profiles with low or minimum competencies. Many are making a conscious choice in this direction to avoid organizational politics and other challenges of working full-time. Recent research shows that 16% of Americans undertook some kind of gigging last year, such as driving for a ridesharing app, shopping or delivering essentials like groceries, performing household chores, etc.

Major demographic changes have compelled companies to find new and innovative ways to manage their most important asset – employees. While the new workforce brings flexibility and scalability, it has also made things complex. These complexities are affecting conventional workforce management models.

Thankfully, HCM (human capital management) has managed to evolve more than ever, since the pandemic induced growth in gig jobs. HCM typically involves traditional administrative tasks of the human resources department, such as recruiting employees, training them, payroll, compensation, and performance management.

What is HCM technology?

HCM software refers to an integrated suite of technologies that can aid companies in managing employees, right from recruiting them to offboarding. It caters to the end-to-end solution that comes with hiring and managing employees. The software handles many functions vital to effective workforce management. The aim of this software is to optimize employee experience and ensure transparency across the organization. It makes goal setting and achieving easier. 

Even before the pandemic, most companies were already gearing toward a monumental transition in this direction. Along with streamlining and supporting HRM processes, HCM software also helps leaders take informed decisions related to hiring and managing employees and also focuses on employee development. HCM tech is witnessing rapid developments ever since artificial intelligence, cloud-based systems, and machine learning are also contributing to this space. 

HCM and the gig economy: What’s the relationship like?

The reason why most companies are moving beyond employing traditional workers is the fact that a flow of stable contract workers provides scalability.

So what happens to a broad industry with no HR in place? 

Companies are not lying behind when it comes to streamlined HCM technology to accommodate the proliferation of the contingent workforce. Since the entire gig economy also lacks federal laws and other perks like paid and medical leaves the only way for contractors to seek redress is to sue, which is concerning. Or else, they can shift to some other gig. 

How does the rise in the number of gig workers affect HCM tech?

The gig economy and hustle culture are here to stay, and organizations must make sure that HR management is aligned in tandem. To engage employees and drive value creation in this fast-growing ecosystem, companies are required to think about the relationship with their gig staff on a strategic level. Without the right technology, they will fail to drive flexibility and scalability across a host of functions like HR and payroll. 

A few key requirements of the emerging workforce include shorter pay cycles, on-demand pay, a swift billing process, etc. Here’s all you need to know:

Shorter pay cycles: Freelancers or gig workers do not work based on a monthly pay cycle. Therefore, organizations must take to HCM software that offer shorter pay cycles. As per Gig Economy Index, PayPal is one of the most common ways to pay gig workers. 

On-demand pay: The newest cohort to join the workforce is Gen Z. This league typically refuses to wait for weeks to get paid. Commonly referred to as Earned Wage Access (EWA) or on-demand pay, a company makes a percentage of funds earned available to the contractor before they get paid. The payment is then deducted from their next payroll.

Recruiting and onboarding: New-age HCM tech creators must consider that geography is irrelevant for contract workers. Technology needs to be agile enough to be accessible to remote workers irrespective of their geographical positioning. An ideal HCM software would be that which displays a separate chart for temporary or gig workers. An advanced HRM system will also facilitate the management of the freelance pool. Organizations that recruit gig workers need a solution that lets managers, HR, and procurement access the same data.

Does one size fit all?

No, modern-day requirements with gig workers in place have eradicated the traditional one-size fits all HCM solution. HCM tech needs to cater to compliance with tax and employment laws, scheduling, contracts, and more.

The benefits of a scalable workforce 

• Cost optimization: Empowering your in-house workforce helps reduce fixed labor costs. A scalable workforce helps eradicate overhead costs on salaries, insurance coverage, and various staff benefits that full-time employees demand.
  
• Faster turnaround: A scalable workforce provides you the feasibility to enhance or decrease staffing depending on the project. Recent technological advancements have improved staffing issues for HR teams.
  
• Improved productivity: As a company scales, there is demand for a larger workforce. In such cases, firms can hire short-term or contract employees to tackle sudden work influx.
  
  
  

Key takeaways

The most successful organizations will be the ones that can source, engage, and optimize their workforce. To achieve this you need a unified and comprehensive strategy equipped to tackle a diverse workforce and their needs. Here’s where cutting-edge HCM technology will prove imperative.

Companies that are still relying on traditional systems need to make the shift soon if they want to work with contractual workers. The key is to adopt more fluid operating environments for gig workers. The perfect HCM system must allow gig workers to provide feedback, access training sources, and look at the various layers of the organization. The pandemic has taught us how flexibility is now a necessity. This is compelling more companies to sign up contractual workforce across different parts of the world. 

How can Netscribes help you?

If you are eager to meet the latest employee needs by leveraging sound HCM tech, but are wondering where to get started we can help. To join the league of B2B organizations that make informed technology choices for the gig economy, fueled by relevant market and competitive insights contact us.