Legal challenges and market forces to make gig economy find its level

The gig economy and job market disruption

The gig economy is here to stay. However, the way that some marketplace tech giants have exploited it to achieve market capitalisation is unlikely to remain exactly the same.

We can divide gig economy workers into three main groups:

• At the top of the pile are the consultants, people with high value professional services skills or other specialised talents which are not commoditised.

• In the middle are those with mid-value skills where there is some commoditisation. People freelancing typically have creative, marketing or other mid-level business skills.

• At the bottom of the heap are the roles requiring highly commoditised low-level skills, such as in catering, warehouse and delivery driving and riding.

The headline benefit message from companies operating with gig economy workforces is that workers get the potential to pick days and hours to suit, take holidays when they want and enjoy a better work-life balance.

These benefits might ring true for those at the top and in the middle. However, few at the bottom level see these as equitable compensation for the benefits they don’t get. In short the gig economy doesn’t work for everyone, including many recruiters.

Disruptors on the run!

Unless we are talking about agencies supplying outsourced HR services to a tech giant like Amazon, the gig economy has disrupted the established HR industry. This has impacted the supply of low skilled workers, and this also holds for mid-table freelancers and high value consultants.

All of these groups may have once used agencies to obtain placements. Now, some low skills workers contract directly to gig economy companies, and many with mid and high level skills sell services directly via consultant and freelancer marketplace websites, avoiding the need for recruiters to hawk their services.

Marketplace tech giants, including Uber and Deliveroo, that have built their multi-billion dollar market capitalisations on gig economy HR practice, have faced at least 40 major legal challenges around the world.

Legal action is underway by delivery workers to improve their rights. Litigation is also in progress on related matters, including competition law. Proceedings are ongoing in 20 countries including Australia, Chile, Brazil, South Korea, Canada and across Europe.

The good news for workers and recruitment businesses that have been disadvantaged by the HR practices promoted by gig economy companies, is that globally, the disruptors are on the run and may need to rethink.

Where is the gig economy heading?

• Different countries are likely to react in different ways. In countries such as India, where large scale daily wage working has been a fact of life for centuries, conditions may be more favourable to the disruptors. This is especially true if basic benefits, like accident compensation, can be provided to the self-employed workforce.
• There are some questions over the fundamental business model. While the core business idea may remain intact, the challenges underway in countries around the world are driving change. Making self-employed workers permanent employees increases fixed costs for wages and benefits and is likely to significantly impact profitability.
• The gig economy still has a place. Market volatility and uncertainty in the operating environment is now a permanent feature. This makes gig economy HR practice an attractive proposition for companies that need workforce flexibility to absorb the ebb and flow of as market demand fluctuates.
• While they may not disappear anytime soon, they need to adapt. In developed economies, where the mood remains more hostile, it seems these tech firms may need to structurally rethink how to deliver shareholder value.

The uber-efficient back office from ETZ!

While some may see the gig economy as part of the race to the bottom, others may attach significant value to it. As ever, industries take time to adapt and governments and regulators take time to adjust to disruptive forces. It just needs a little time for the gig economy to find its level.

Whatever the future for the gig economy, it seems recruiters are always likely have a place in the jobs market. ETZ’s leading timesheet, invoicing and payment technology streamlines recruitment agency back office processes to enable uber-efficient and profitable operations!

To find out more about how we could help your agency, call us on +61 (0) 405 458 821 or book a demo.