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Is the Gig Economy a threat to the Recruitment Industry?

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The recession of 2008 was, for a lot of people, the spark that ignited the ’Gig economy’, - the need tomake extra money to make ends meet. Due to redundancies coupled with the increased difficulty offinding employment, people turned to ‘gig working’ over the internet on website or app-based workplatforms where they could earn money by doing one-off, odd jobs.

The number of these on-demand startups is growing quickly, Uber and AirBnB being two of the mostwell-known, but also websites such as UpWork, Freelancer and PeoplePerHour have gained hugepopularity in a short space of time.

*Figure 1: data from www.similarweb.com

These ‘digital work platforms’ cover a widerange of talents such as Web Developers, SEOconsultants, PR Writers and Graphic Designerswhere work can be done on a computer fromafar and sharing work is easy to do online.There are other websites/apps that coverskillsets that aren’t seen as technology-oriented

What is the gig economy?

such as Plumbers (Rated People), Taxi Drivers(Uber) and Dog Walkers (Tailster). However it istechnology that enables people to advertise orapply for these jobs that is the main driving forcebehind this growing trend and helped support therapid growth of the gig economy.

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UpWork.com Freelancer.com PeoplePerHour.com

Website visits last 6 months*

Website visits last 6 months

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The market for gig economy platforms andrelated services will be worth almost £43billionglobally by 2020 with £2billion in the UK alone,forecasts consultancy PricewaterhouseCoopers.

However it’s still early days as by their estimationit only makes up a mere 2% of the totalrecruitment market.

The online work platform PeoplePerHour,forecasts that 50% of people in the USA and theUK will be freelance by 2020.

In the UK, the number of self-employed peoplehas increased to 4.7million, closing in on thenumber of people who work in the public sectorwhich has decreased to 6.9million. According tothe International Business Times, “87% of Britssee ‘gig economy’ taking over from 9–5working days in 10 years.”

LinkedIn is the largest business social networkwith 450 million members. Up until recently it hasprimarily relied on companies paying to advertisetheir vacancies on the platform, with candidatesapplying for the job by sending their CV whichthen gets forwarded to the hiringmanager/recruiter.

It has now launched its own job sharing platformcalled ‘ProFinder’. This works in the same wayas Freelancer.com et al, but arguably will bemuch easier for people to register their details asit uses the existing profile infrastructure millionsof people already have.

The gig economy is a trend that is gainingmomentum at a significant rate with people whowork for themselves becoming an economicforce to be reckoned with. The rise of self-described ‘Entrepreneurs’ and people classed asself-employed has grown more in the last 8 yearssince the recession than in the 30 yearsprevious.

Interestingly, the number of self-employedpeople is now similar to the number of workers inthe Public Sector due to the number of self-employed increasing but also the number ofpublic sector workers decreasing. There could bea direct correlation between the two, but a lot ofpeople who are employed full-time also have aself-employed business on the side. It’s alsodifficult to accurately measure exactly how many‘gig workers’ there are, as some people mightonly do a few hours a week and not bother toregister as self-employed.

The gig economy is worth £2bn and growing…

199720062007200820092010201120122013201420152016

Employed / Self-Employed Split

Public Sector Private Sector

Self-Employed

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The traditional method of finding work ischanging. Once upon a time the normal way toget a job would be to apply for a job via anadvert in a newspaper, magazine or website.Or go into a high street recruitment agencyand register with them, then await a phone callwith any potential job vacancies they match foryou. A lot of the time this wouldn’t be aguarantee you would find work, or if it didwould very rarely grant immediate results assome hiring processes can be long-winded.

With the eruption of digital work platforms thatno longer needs to be the case. Let’s use anexample of where this can be utilised as aWorker:

You work full-time in an office as a SalesManager, however working in sales doesn’tscratch that creative itch you have. Outside ofwork you happen to have a talent forphotography and decide to advertise yourphotography skills on one of these websites.You decide how much you want to charge,what hours you work and can pick and choosethe type of work you do.

On the other hand some people are not usingwork platforms to supplement their income butto replace a full-time job. It’s easy to see why.Now you can get up in the morning, turn onyour computer and log on to see what jobs areavailable to bid for.

What does this mean for Workers?

A couple of hours improving one company’sSEO, an hour helping revamp one company’slogo and a few hours driving people round forUber.

You can set your price and working hours to asmany or as little as you wish to suit your lifestyle.A lot of the reason people who already work full-time do a couple of hours here and there to topup their income is because they can do it fromhome.

Advantages of the Gig Economy to Workers:

- It gives them flexibility- It allows them to set their own price- It gives them a global marketplace to work

in and market themselves on.

Risks:

- It’s not a secure way of working- It could devalue their worth- It lacks traditional employment protections

“BEING INDEPENDENT IS A LOT MORE

COMPELLING THAN IT USED TO BE.”

STEPHANE KASRIEL, UPWORK.COM

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In some ways, the growth of the gig economycan be a good thing, depending on your staffingneeds.

For things like one-off or infrequent projects thatyou don’t need a full-time person for i.e. WebsiteSEO, logo design, data entry, proof-reading etc.then this method of finding people is ideal for aquick fix. Obviously it won’t work across all skill-sets, for example if you were looking for 20Aircraft Engineers then you’d be better going toa specialist recruiter who are more likely to havea database of relevant people.

Let’s use an example of where this can beutilised as an Employer:

You run a small business and decide you need anew website but neither you nor any of youremployees have any web design skills. Youdon’t want anything too fancy and thereforedon’t need someone looking after the websitefull-time, you just want someone to do a goodjob and pay them for their time. This is whereone of the aforementioned websites could be ofuse. You simply post a job, and then skilledpeople will quote to do your job. You can alsocheck out their previous reviews from otherpeople. Once they’ve done the work, you paythem. No CV screening. No long drawn outinterview process.

It’s likely that it will only really be the small tomedium size businesses that will see the

benefits of gig workers as it will save themmoney on the cost of hiring and hourly rates, notto mention it will speed up the hiring process.Larger companies with well-establishedrecruitment processes will find it less useful dueto the higher volume of recruitment they woulddo in comparison, the concerns that the ‘gigworker’ won’t have the brand loyalty and buy-inthat a permanent employee would have, andtherefore this may be reflected in the quality oftheir work. Also worth considering is the fact thatwhile one day they could be doing some workfor you, the next day they could be doing similarwork for one of your competitors.

20% of decision makers perceive that usingdigital work platforms could be more of a riskthan a benefit for their business, against 17%who say the benefits are greater than the risks.63% remain neutral or undecided.

Advantages of the Gig Economy toEmployers:

- Speeds up recruitment process- Worldwide candidate database of high-

calibre professionals- Lowers cost

Risks

- Screening of worker still required- New protocols and structures may be

needed- Concerns about the workers brand loyalty

What does this mean for Employers?

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The UK’s recruitment industry is currentlyworth £31.5 billion which is a £7 billionincrease from £24.8 billion ten years ago.However there are concerns that the gigeconomy will start to erode this figure oncemore people start to jump on the gig workingbandwagon due to people selling their serviceson the various website platforms rather than govia a recruitment agency or job board.

The UK workforce grew by 172,000 in April–June 2016, and was 606,000 larger than in thesame period last year. More than half (55%) ofthe quarterly increase came by way of self-employment.

How people work and want to work haschanged over the years and recruiters need toadapt to the new styles of worker behaviour toensure they continue to be relevant to thefuture employment market.

Could the Gig Economy’s growingnumber of digital work platformsturn out to be another tool forrecruiters to find talent?It’s too early to tell, but could the job ofrecruiters in future become more valued whenit comes to finding the more specialised talentin higher-end markets, that a work platform justwon’t be able offer?

Recruiters build human relationships with theirclients and candidates, they have to tempt the rightcandidate in the direction of the employer. Not onlythat but other value added extras such as pre-screening candidates, checking they are the right fitfor the organisation, not just skill-wise butpersonality and work ethics. Not to mentionreferencing them to make sure they comerecommended and their work history is accurate.

This change in the industry could actuallycause recruiters to up their game inrelation to the more high-end, businesscritical positions that the online workplatforms can’t / won’t / don’t want tocompete with.At the moment, the gig workers that you can choosefrom online platforms are often organised by theirrating (given to them by previous clients), the skillsthey offer, timescales and the price they charge.You won’t be able to vet them by how they comeacross personality-wise, how good they are atanswering competency questions, how smartlythey’re dressed or even that gut feeling that thecandidate is right for your business.

But does that matter anyway? Surely not if you areonly hiring them to do data entry for you for 3 hours,or amend your website slightly.

Does the Gig Economy threaten the role of recruiters?

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Work platforms are there to fulfil thatimmediate need of “I need this done rightnow”.

Recruiters are going to have tohone their skills in the big gap inthe market of less immediatelyavailable, more niche skilledpeople that need to be attractedvia various methods.Advantages of the Gig Economy toRecruiters:

- Work platforms could be anothermethod of finding candidates

- Allows them to hone their serviceofferings to employers

- Will allow true recruitmentprofessionals to stand out in themarket

Risks:

- Concerns it will replace the contingent,lower end of the market

- Threatens industry standards due tolack of regulations

- Could aggravate recruitmentcommunity due to regulatory injusticesbetween sectors.

SummaryAs with anything new to any well-establishedindustry, there are always going to be those forand against it. Advantages and disadvantages.Strengths and weaknesses.

The lack of industry-wide regulations, laws andvarious other types of protection for the employerand employee is the main, immediate concern,however as long as people go into gig workingwith their eyes open then this shouldn’t be toomuch of an issue.

Due to the relevant infancy of gig working, it’snaturally difficult to predict what the scale of thiswill be in the next decade. If the exponentialgrowth of it over the last few years is anything togo by, it could end up making the split ofemployed/self-employed much closer.

The reality is, it’s here to stay and oncemore people actually understand whatthe gig economy is and how it mightbenefit them, more workers will lookbeyond the traditional 9-5 mentality andchoose a work/life balance that couldbe much more beneficial to them.

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References‘Is the 'gig economy' turning us all into freelancers?’

The self-employed will overtake the public sector with the ‘gig economy’

Gig Wiki

What does the gig economy mean for HR?

Sharing economy: 87% of Brits see 'gig economy' taking over from 9-5 working days in 10 years

Recruitment industry now bigger than its pre-crisis peak

‘Gig Economy – the Uberisation of work’

What HR professionals need to know about the gig economy