Benefits for the gig economy
The 9-to-5 workday is dead, and it’s been supplanted by the rise of the modern so-called gig economy — with a workforce bolstered by freelance and contract workers who work around the clock with flexible hours to meet new demands.
For HR professionals and benefit advisers, the strategic mission at hand is to determine how employee benefits and perks can fuel alternate avenues of employment to win the talent war. But complications along the way to redefining the employment contact can stall those efforts if they fail to pursue a thoughtful approach.
Anywhere from 57 million to 75 million U.S. workers fall within this segment, according to varying narrow and broad definitions from the U.S. Bureau of Labor Statistics and Federal Reserve. A 2018 Deloitte research paper noted that the number of self-employed individuals is projected to triple by 2020 to 42 million. Meanwhile, more people toil away on short-term projects as full-time employees, juggle part-time jobs or peddle multilevel marketing products.
Without a doubt, the desire for more flexible work schedules is a driving force behind the gig economy. “There’s no such thing as a 9-to-5 anymore,” says Robby Peters, vice president of business development with Sequoia Consulting Group and co-founder of PeopleTech Partners. “It’s much more about setting your own schedule and being your own boss.”
It’s also not so much about individuals driving for Lyft or Uber or delivering food for Grubhub or DoorDash as it is matching their skillsets to multiple employers on a project basis and aligning their interests, he adds. That arrangement has worked well for many years in Silicon Valley where Peters says the average tenure is less than 18 months and the work is more project-oriented.
It’s easy to see why the gig economy appeals to new generations entering the U.S. workforce, explains Paul Younkins, founding principal and senior consultant with TriBridge Partners. “It means new stimuli, new ideas, new jobs, new vocations, new things to learn and opportunities to constantly try something new,” he says.
The gig trend reflects deeper appetites for intangibles, a fun or caring culture, personalization and greater purpose at work, opines Jordan Peace, co-founder and CEO of Fringe, whose perks platform allows for more than 85 offerings to be customized for workers of all stripes. “It’s about finding a workplace where they feel a sense of belonging.”
MAKING LIFE EASIER
As such, he says employers are more attuned to the importance of providing lifestyle services to help workers strike a better work-life balance. Transportation is the hottest category across his employer client base “because of the simple fact that people don’t want to drive anymore.” Food and beverage delivery also are wildly popular as evidenced by the use of Blue Apron or Sun Basket. “People hardly have the time to cook, much less plan and prep meals each day,” Peace says.
Some of the more unconventional offerings he sees come in the form of Trilogy Mentors, a K-12 online mentorship for working parents who want to give their children an edge at school, as well as clothes-rental services provided by Le Tote and Rent the Runway.
“What’s going to make me interested in coming to work for you is not half a year at 6% match on a 401(k),” Peace says. “I’m more thinking about the benefits that are going to impact me while I’m working for you for three to six months.”
Few industry practitioners are as attuned to rethinking the workplace than Carolyn Frey, chief people officer at Philz Coffee who is on the HR frontlines of the gig economy. About 1,000 of the San Francisco company’s 1,300 employees are barista team members and most have multiple jobs to make ends meet.
Just 20 hours a week is the threshold to qualify for benefits, which include a subscription to the One Medical Group direct primary care practice featuring virtual visits and mental health counseling. Philz pays 75% of any cost-sharing tab and also offers dependent coverage, which Frey says is “quite unique in our space.”
While also offering access to financial wellness classes, two free meals a day for most employees and plenty of coffee, Philz also has a unique scheduling approach that typically honors the preferences of team members as long as it meets the needs of the business. “The single most important thing to them is that flexibility,” Frey explains.
Length of service is a critical barometer for benefits design in the gig economy. While a short-term medical policy would close any coverage gap for people on a 90-day assignment, Younkins notes that the benefit offering obviously will look different for someone on a two-year project whose package might more closely resemble the package for W-2 staffers. Since voluntary benefits are portable, he says they may make sense as a baseline offering for self-employed individuals or temporary workers.
Benefits selection in the gig economy is predicated upon a keen understanding of the type of talent employers are trying to attract and retain. In many cases, Peters says gig workers can benefit from a host of services that improve financial wellness, as well as their employer’s massive purchasing power.
One such tool is Alice Financial, which he says helps part-timers with modest earning power get the most out of their benefits by leveraging pretax dollars. Other notable resources include Salary Finance, which he says allows more favorable loan terms, and Chime, one of the nation’s fastest-growing bank accounts that allows for payday advances. Some vendors are also exploring innovative ways that allow gig workers to earmark earnings to pay off student loans, mortgages or other debt, he adds.
On the perks side, Peters cites PerkSpot — which provides exclusive discounts on travel or entertainment, perks and rewards for outstanding performance — as a standout offering. “Even if it’s a business-to-consumer company,” he explains, gig workers will receive much lower prices “because the employer is out there purchasing on behalf of tens of thousands of people, as opposed to just one individual.”
Perks and benefits are expected to help fuel the gig economy because of fierce competition in the space from companies wanting people to work for them, according to Peters. A key strategy to winning the talent war is giving people “a much better experience from the flexibility of work hours and ultimately recognize there are a lot of places in an employee’s personal life they can help.”
While the gig economy offers Americans more flexible work options, it can be a slippery slope for employers. There’s more quality control in place with a W-2 workforce than 1099 independent contractors, whether it’s perceived or real, Younkins observes.
For example, he explains that employees can be told by law what to do and how to do it when making promises to customers, then earn a raise or be terminated, depending on their performance, whereas employers have no real influence over contractors who don’t have a vested interest in the overall culture or organizational brand. The danger, of course, is that organizations run the risk of losing business with a workforce that’s not adequately vetted and performing at a high level.
One troubling aspect of this employment trend is how it might affect retirement security. “Gig-only workers that are going to be a huge problem unless something changes,” cautions Jack VanDerhei, employee benefit research director with the Employee Benefit Research Institute. At a time when the retirement readiness of 401(k) plan participants already has been called into question, he worries about gig workers who don’t have access to an employer-sponsored savings plan.
At EBRI’s May 2018 Policy Forum, VanDerhei suggested that the gig economy more than likely will increase by 4% the retirement deficit for the youngest cohort examined in his research simulation, ages 35 to 39. This would exacerbate the $4.13 trillion shortfall for workers age 35 to 64. For gig workers, he says this scenario is “devastating” while from a public-policy perspective the magnitude is “absolutely a truly significant increase in deficits.”