[By Joe McKendrick]
One out of six workers are part of a “shadow” workforce, virtually unknown to business leaders. But that isn’t necessarily a bad thing — for executives or for the shadow workers.
A recent study out of the ADP Research Institute finds 16% of corporate workforces are contractors or contingent employees, and this share is growing. The technology revolution not only made place irrelevant for many jobs — one no longer needed to be right there on the floor to have access to corporate resources, information and communication — but also made employment relationships more of a loose concept. There’s a great deal of work being done outside the core of full-time employees, by networks of contractors, consultants and other so-called “gig” workers. In his work Megatrends from almost four decades ago, author John Naisbitt predicted the corporation would evolve into a “confederation of entrepreneurs.”
Over the years, I’ve encountered many independent contractors working within organizations, sometimes at high levels of management. For these gig workers, working from home, from remote offices, or even within the corporate walls, means greater flexibility, reduced stress from office politics, and opportunities to pursue their crafts. For employers, it means being able to draw from a vast, global pool of talent as needed, without the delays inherent in onboarding or relocation.
The digital economy has created incredible opportunities for these more entrepreneurial-minded workers. Resources such as cloud and mobile apps provide just about every type of business function needed to serve and please their clients, at virtually no cost. This includes financial management tools, collaboration platforms, presentation venues, and the ability to communicate globally. New York Times columnist Thomas Friedman famously dubbed this the “DIY Economy” several years back, and this is even more so the case these days.
There have been legislative efforts to clamp down on the use of gig workers, pushing to have many contractors reclassified as standard employees. California’s AB 5 law was enacted at the beginning of this year, and the US House also passed a bill (The “PROAct”), mainly intended to support labor organizing, but also including provisions on re-classifying independent contractors as regular employees. Such initiatives are justified when it comes to protecting low-wage service workers, but for many professionals, from managers to computer programmers to media content creators, independent contracting is a choice, seen as providing greater opportunities and flexibility than restrictive employment arrangements. In a post here at Forbes, Teresa Ghilarducci makes a very important distinction between the low-paid service workers who are exploited as “independent contractors,” versus the higher-paid professional consultants who are independent by choice
The ADP study finds demand for skilled workers is creating opportunities for tenured, skilled workers in the gig workforce, and many independent contractors prefer their employment status. This consists of workers paid as either 1099-MISC (1099-M) workers or short-term W-2 employees working one to six months.
ADP’s researchers analyzed the anonymous and aggregated payroll data of more than 75,000 large companies, employing more than 18 million workers, supplementing the data with a survey of more than 16,000 workers and interviews with 21 company executives.
The research suggests these workers may be driving 16% or more of a company’s performance. Many companies appear to decide whether to engage gig workers through a third-party staffing agency or through internal resources based on urgency, time and budget.
There are many ways to describe gig workers, and here are a few classifications:
- Contingent worker
- Flexible worker
- Free agent
- On-call worker
- Part-time worker
- Platform worker
- Project-based worker
- Self-employed worker
- Temporary worker
The 1099-M contractors who are independent contractors, often hired for their skillset on a project basis. These skilled, tenured workers tend to be older, highly educated and choose to work on what they enjoy. Close to one-third of 1099-M gig workers, 30%, are aged 55 or older. For some, their gig work is supplemental income to their retirement savings. Another group includes short-term W-2 employees who are younger, less educated, have a lower income, and are typically working on a seasonal or on-call hire basis.
More than 70% of 1099-M gig workers say they are working independently by their own choice, not because they can’t find a 9-to-5 job, the report shows. Most seem happy with gig work and place a premium on flexibility as a driving motivation behind their decision, over financial security or benefits. In fact, 60% of 1099-M gig workers say they will continue to gig for the next three years.
“Precisely because gig workers are an invisible workforce in organizations, there is untapped potential to bridge talent gaps by tracking and assessing the skill sets and performance of this population,” the ADP report states. “By focusing efforts on examining the current workforce and assessing what current talent is capable of — whether gig workers who enjoy working in this way or even traditional workers near or over the age of 55 who may desire the flexibility of working independently — businesses will be better equipped to retain some of the company’s highest performing workers.”