Balancing Flexibility and Compliance: Crafting HR Policies for the Gig Economy | Ranjini Chakraborty | Director HR | Giesecke & Devrient MS India Pvt Ltd
It’s 2024 and one thing that we as a community need to accept is that we need flexibility to survive and thrive. Whether in personal growth and necessarily at the workplace. Gig economy is a way of working where people work flexibly, and on a project-to-project basis. This is very beneficial in many ways; one being hiring people for a very specific skill set and letting them come on board to do a defined job. This not only allows the organization to delegate confidently but also saving huge costs by paying just for the job delivered instead of paying people on payroll. It is estimated that 1.6 million workers worldwide get their income from the gig economy and as per research in 2019 by the India Staffing Federation, India is the world’s fifth largest flexi-staffing market, trailing only the United States, China, Brazil, and Japan.
There are undoubtedly multiple benefits to both workers & companies such as:
● Cost effectiveness: Allows for remote work minimizing the need to maintain an office, internet etc and saves the companies the cost of providing for retirement plans, trainings, employee benefit packages, sick leaves etc.
● Produces Better Output: The flexibility and adaptability of gig work eliminates the need to be an all rounder at work, be acquainted with all the departments and puts great focus on delivering the work hired for. It is because the freelancer can charge only for the work delivered, also fuels them to deliver the defined work the best.
● Talent pool: The gig economy offers a great opportunity to create a talent pool with just the talent pool required. Easily accessible at the time of requirement. This helps in community building and companies must invest in this for a longer term.
How Does the Gig Economy Affect HR Teams?
One of the most poignant areas it affects in HR functions is recruitment & hiring. Traditional HR practices to attract and retain regular employees don’t work on gig workers because of the clear differences in goals. Some points to note in the new system –
● Talent acquisition: This cannot be limited to traditional methods; HRs need to scout through online mediums and create a pool
● Efficient integration: Freelancers cannot be treated as regular employees, there needs to be a system in place to align them with their goals by also providing them necessary tools.
● Retention: This is a huge challenge since freelancers are not bound to feel long term commitment to the organization. Understanding and sticking to the nuances of the contract helps!
● Performance metrics: Traditional methods might fail here. HR teams must follow metrics that coincide with the nature of gig work, emphasizing the work delivered as against the hours logged in. Clear communication and efficient feedback become crucial components.
Compliance Challenges in Gig Work Culture
The benefits might be plenty but what needs to be addressed is also the fact that the concept is still relatively new for an organizational structure, especially with human resources. It came into being as a side business but took centre stage mostly after COVID when people hit a burnout and learnt the many benefits of the digital era.
However, it may also come with its own set of compliance roadblocks:
1. Certification Issues: For companies, identifying ‘independent contractors’ is a multi-faceted problem. From a legal standpoint, this may result into legal liabilities, as different employment classifications come with distinct rights & obligations. Financially, it may cause tax issues and HR-wise, driving away good
talent etc. For eg: as per a blog, the Biden administration proposed that gig workers who are “economically dependent” on a company be considered regular employees to give them access to more benefits and legal protection than independent contractors in October 2022.’ This made gig workers more expensive to hire than full-time employees.
2. Unstable benefits and entitlements: Gig workers cannot be identified as full-time employees. As per the National Coordination Committee on Gig Workers (NCCGW) said that about 12 million gig and platform workers are facing systematic exploitation, wage theft, illegal termination, mental torture, and unfair labour practices. The lack of employment rights also translates to gig workers not having same protections as traditional employees. So, the constant tiff remains as challenging for the companies as for the workers.
3. Evolving Regulations: The dynamical nature of gig work, legal and rapid digital transformation result into constant regulatory changes. Staying in tandem with these is crucial for HR compliance to avoid business discrepancies. It is not only about the awareness but also implementing and reorienting work operations.
In nutshell, the rise of gig economy has undoubtedly been a significant movement in shaping and reorganizing HR policies. But one cannot ignore the great opportunities it’s presented too. By embracing the distinctive facets to gig work and adapting HR policies accordingly, companies can tap huge potential and be in tandem with the pace of market needs.
As the workforce learns to accept and optimally tap the gig workers, HR professionals must develop strategies to manage these non-traditional employees effectively. Recruitment & hiring to training, compliance, retention, each aspect of HR policy must be prepared to accommodate the uniqueness of the gig economy. Businesses can thrive in these times by leveraging the opportunities it offers, the need is to balance the flexibility of the new model and make it HR-compliant for collective benefits.