The gig economy, for better or for worse, is here to stay.
Giants like Uber and Lyft have disrupted the global transportation market by providing on-demand transportation. The big players in the delivery sector have also seen market share wrestled away by small-but-nimble players such as Deliveroo and Foodora. Looking at these companies in-depth, most are not remarkable. That is, the success of these start-ups has not been because of earth-shattering innovations. It’s because of the way they’ve leveraged technology to restructure the way they handle their workforce.
These companies have emancipated themselves from the shackles of financial burdens and lack of mobility — and it’s paid off tremendously. Let’s start by talking about exactly how burdensome are the shackles of traditional work.
Employing Full-time workers bleeds bank accounts
For simplicity’s sake, let’s assume you run a high-end courier business. Your value proposition? On-demand and on-time delivery under 1 hour. For this, you need to hire a fleet of experienced couriers. In addition, you’d have to equip them with state-of-the-art vehicles, permits, and other regulations. Oh, and did I mention you’d have to train them as well? No matter the case, you’ll end up paying significant costs on top of each courier’s nominal salary.
Let’s see some numbers.
In the US, an employer can pay up to a 40% premium on an employee’s base salary. Hiring just one courier at a $30000 yearly salary will cost you $42000, an annual $12000 setback. If your fleet has 10 couriers? That’s $120000 a year you could have otherwise reinvested into your business. In Europe, these expenses could be even higher. Take for example Sweden. For each of your couriers to make 35000 SEK a month, your cost per courier would be closer to 60000 SEK a month. That’s a 54% premium! So that same fleet of 10 couriers would cost you an extra 2,916,000 SEK per year — yikes!
Onboarding also costs money — and time
Having those couriers is expensive, sure, but staffing your team with the right people is what makes or breaks your company. Finding people and onboarding them could cost tremendous amounts of money — to the tune of thousands per annum.
In Australia, each of your ten couriers will cost you $400 to onboard. This includes printing out legal documents, work contracts, as well as any promotional material. But even if you shed some of the physical costs, there’s also time costs. Recent data from US-based elearning company Panopto state that 49% of their onboarding process lasts a month or more. During this time, the new hire is performing below productivity expectations, delaying your ROI.
There’s also the risk that the new hire won’t even go through the onboarding process. They may realize the job offer is not suited for them, or they don’t like the company. The solution? Invest in good HR professionals who know your business and marketplace from the inside-out, and can thus source the best candidates.
But for that, you’ll have to pay a premium. Many top recruiters charge a 15% to 25% fee on top of an employee’s first-year salary. So for a top-class courier who asks for $40000 a year, the going rate oscillates around $6000.
Doing simple math, sourcing your 10-person team of top-notch couriers at 40000$ each will cost you 60000$. Can you truly afford to spend that money up-front?
Gig workers to the rescue
So far we’ve seen how acquiring talent, and paying for that talent, is essentially gutting your nascent premium delivery business’s bank account. It’s time to talk about how to stop the bleeding. No. More than that. It’s about stopping the bleeding, suturing it up, and ensuring it never bleeds again.
The solution? Freelance gig workers
Gig workers are freelancers who are on the lookout for usually small and time-sensitive tasks in exchange for a fixed amount of money. Like any freelancer, gig workers are easy to hire, easy to pay, and easy to fire. And because of the structure of gig-based jobs, they are cost effective without compromising on work quality.
Let us envision the aforementioned high-end courier service under the context of the gig economy and gig workers. You, as the owner, invest time and money in building a website and mobile application through which you advertise small-scale jobs or ‘gigs.’ An example of how this ‘gig’ could look like can be seen below:
The courier — equipped with his own smartphone and having downloaded your company’s app — can choose to apply to your gig. By looking at the package dimensions, they determine whether or not their own vehicle is capable of fitting it. Moreover, they can see whether or not they are geographically positioned to fulfill this particular gig. As the person in charge, you have just freed your business from the burden of having to supply vehicles to your fleet. That responsibility is shifted instead to the courier — it is they who must ensure they have an appropriate vehicle, as well as take charge in the maintenance of said vehicle.
Furthermore, the worker understands that they’re receiving a one-time payment for temporary services performed. As an employer, you’ve just divorced yourself from the responsibilities of finding appropriate workers, onboarding them, and paying the premiums of a salaried worker. Responsibilities such as adequate insurance coverage and unemployment benefits shift to the worker, freeing up your budget in the pursuit of loftier (and more profitable) goals.
To simplify: structuring your business tasks as a series of ‘gigs’ available to an audience of on-demand (and liability-free) gig workers frees you from having to pay exorbitant fixed and variable costs, while getting the work done.
Gig workers hyper-charge your growth strategy
Reorganizing your human resources as gig workers also has the added benefit of flexibilizing growth. Once more, we make use of our high-end courier business example.
Let’s assume the high-end courier business was a massive success in New York City. Why not go bigger? Why not Toronto? Go big or go home, right? Well, before you cross the border, there’s a few obstacles you’d need to surmount. There’s regulatory issues, as well as generating traction from the consumer side. But there’s also the critical need to rapidly hire qualified staff to rapidly grow the Canadian venture.
On-demand and ready-to-go gig workers are the key to testing the waters, as well as dealing with any unexpected surges in consumer demand. You place ads for new Canadian couriers to join the team, and you have them fulfill deliveries as they come. As the Canadian venture takes off, and more requests for deliveries trickle in, you adjust the number of Canadian couriers you want on your fleet — without incurring additional overhead, and at the touch of a few buttons.
But what about if the Canadian venture goes south? What if the market changes unexpectedly, and you’re forced to restructure accordingly? Remember — you don’t have a fleet of bikes and vans you need to sell at fire sale prices. Nor do you have a 10+ staff of workers you’re gonna have to lay off and pay fat severance packages for.
Having a traditional workforce is expensive. In much of the developed world, the cost of salaried labour is 30 – 40% on top of a worker’s base salary. Finding the right workers is also time-consuming and expensive, usually relying on recruiters or staffing agencies who charge premiums for the service.
Structuring your business tasks as a series of gigs, and having an on-demand staff of freelance gig workers accomplishing those tasks, shifts the costs of business away from you. Instead, the money can go to fuelling your company’s growth. What’s more, having a gig-structured business can make it easy to expand into new markets and cities, as staffing is on-demand and shifts seamlessly with business requirements. The way to a profitable and successful business is through freelance gig workers — are you ready to take the step?