The Impact of Gig Economy on Contractors

How The Gig Economy Affected Contractors

If you are a contractor offering your services to companies on short term projects or for contracts regularly, you are now part of the ‘gig economy.   Even if you have already heard this term, maybe you thought that it was only referring to large companies that rely exclusively on contractors like Uber, but this is far from the reality.

As a contractor, you are now part of a global change in the way that work is sourced, delivered, managed and paid for, as companies are foregoing the expense and commitment of formal employees in favour of independent contractors and freelancers.

What is the Gig Economy?

The gig economy is the growing practice of engaging contractors to fill roles that may have been previously held by full-time employees.  The term ‘gig’ comes from the entertainment industry, where musicians, comedians and others were hired for one or more nights, sometimes by multiple venues.  But there was no long-term commitment, and once the gig was over the act had to move on.

It is the same deal now for many in the service sector, such as ride-hailing (Uber, Lyft), food delivery, cleaning services and even dog walking.  But the gig economy goes far beyond simple services and has now taken root in the corporate world.  Professionals in the IT sector, attorneys, accountants, customer service reps and creative professionals are all being hired as contractors by one or more companies simultaneously.

The main motivation for companies to turn to contractors is two-fold: less commitment and lower expense.  It is up to 40% cheaper to hire a contractor to perform the same work as an employee, and there is no need to worry about employee benefits or fluctuations in workload.  If the business is at a low ebb, the contractor can be left idle with no consequences.

There is also built-in flexibility to the contractor relationship, which in the eyes of HR departments is an advantage over traditional employees.  By having a ready pool of talent, ‘on-call’, projects can be started more quickly with a known skill set and reliable worker standing by.

How is the Gig Economy Changing?

As with many areas of modern life, the gig economy is changing along with technological and business innovations.  It is easier now to integrate contractors with in-office employees for collaboration and communication.  Platforms such as Trello and Slack allow for seamless cooperation on short term projects and allow the contractor to stay engaged even if they are in a distant location.

This means that HR departments can use a strategy of hiring contractors for urgent project needs, without the need for lengthy interviews and approvals as with employees.  If the contractor does not work out, another can be easily hired.  Sourcing talent in this way is a trend that will continue, as many professionals may have a spectrum of skills to offer to their clients.  There is no longer a need to slot yourself into one role or function if you have the background and experience that matches the client’s needs.

Impact on Contractors: Pros and Cons

The primary impact on contractors is apparent: wider acceptance by businesses and more avenues for obtaining work and new clients.  But as with any change, there are both pros and cons to be aware of as a contractor:


The advantages of the gig economy for the contractor include:

  • More professional networking among HR departments, recruiters and contractors to both source and retain top talent
  • Greater opportunity in marketing multiple skill sets to the same company, or other clients
  • With technology, there is an opportunity to have a feeling of inclusion with the client, as a ‘quasi-employee’ who is engaged even from a virtual or remote location
  • The growth of freelancer platforms such as Upwork, and the emergence of talent sourcing firms that are focused on contractors


Despite the advantages, there are some downsides for contractors as this mode of work gains in popularity:

  • Contractors in developed countries could find themselves out-bid by freelancers in undeveloped countries that can offer a lower rate based on their local economy.  (for example, in the Philippines a virtual assistant can be hired for as little as $3 per hour, while their counterpart in the US would cost three to five times more).
  • Certain skills and talent niches could become flooded with new contractors, such as in the IT or customer service sectors that are shifting to remote work.
  • There may be the perception that contractor rates should be lower than an equivalent employee, and contractors will have to be more adept at adding value to their services or even gaining additional training or education.

Even with these disadvantages, there is little doubt that the opportunity for new and existing contractors is increasing.  Those who are no longer interested in traditional employee roles can more easily carve out a career in their chosen profession, and market themselves across multiple platforms.