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Over the last decade, Australia’s workforce has seen a significant shift towards contract, temporary, and freelance work but employers should take note of their compliance obligations.
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The gig economy: What you need to know to get it right
02 October 2018
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12 minute read
According to the Australian Bureau of Statistics, about 2.5 million Australians are now employed on a casual basis.
What has driven growth in this type of work is the gig economy. New technology platforms are enabling greater access to short-term, on-demand contract work, giving workers increased flexibility to do the work they want, when they want.
The likes of Uber, Airtasker and Deliveroo are the faces of this new trend. But, more and more, businesses are leveraging this new flexibility in the workforce to become more agile, adjust the size of their workforce to suit demand, and to reinvigorate themselves with new skills and experience.
This is seeing a large number of skilled professionals become gig workers, as businesses look to leverage their expertise and wisdom to help them achieve their goals. However, before rushing to replace your permanent workforce with gig workers, businesses need to have a clear understanding of what they hope to achieve and the regulations that apply.
In-house vs gig economy labour costs
Before deciding whether gig economy workers are the right way to go for your business, it is important to have a strong understanding of current labour costs. If labour costs are high, it would be worth finding out where the biggest cost centres are, whether it is a role with fluctuating demand and whether they are critical to the business.
If it is a role that goes through peaks and troughs, requiring a specific set of skills, then maybe the business would be better off hiring a gig economy worker to complete the project. Some businesses do this when they are running change management programs, bringing in change experts to revamp the business then having them move on and remove the overhead once the project is complete.
When bringing in an outside expert resource, it is important to consider the fact they will need to be paid differently to employees. This makes payroll significantly more complex, as gig workers will be paid either by the hour or upon completion of the project.
This can make cash forecasting more complex, as the fluctuating level of outgoings can result in the payroll department not having an accurate picture of all the outgoings. This is particularly true if you have a high turnover of gig workers.
Just as a high turnover of permanent staff can be expensive, if you do not have an efficient way to keep track of gig economy workers and their payments, payroll and administration, costs could balloon.
In some instances, it may be better to upskill current employees. This could involve a one-off training cost but, once they have acquired the skills needed, the business would have this resource on tap, as and when they need it, while paying a consistent monthly salary.
Avoiding compliance complications
The gig economy has received a lot of attention in Australia in regards to compliance with regulations, most notably with the Foodora case where workers were misclassified as gig workers. There is an increasingly thin line between an employee and a contractor, which is seeing businesses get caught up in Fair Work claims.
It is important for businesses to understand a gig worker is not an employee. Under Australian regulations, independent contractors, such as gig workers, negotiate their own fees and working arrangements and can work for a variety of clients at one time.
As such, it is critical businesses outline in writing what duties the gig worker will carry out, how long they will do this for or the quantity of work, as well as their payment rates. It is essential this is agreed upon prior to you giving the job to a gig worker, otherwise it may be difficult to prove later on that the employee was hired as a freelancer.
Employers also need to be aware of industrial relations laws in Australia – most notably the Independent Contractors Act 2006 and the Fair Work Act 2009. To help businesses understand the differences between employees and contractors, the Australian Taxation Office provides some useful information on the differences between employees and contractors.
Free-up payroll to take full advantage of the gig economy
For businesses looking to take advantage of the flexibility the gig economy provides, it is important they provide payroll teams the time to properly research, understand and manage this new form of work.
Gig workers will require specialised payment processes to meet their payment needs and requirements. Gig workers will negotiate various payment terms and generally invoice upon completion of a project, rather than on a monthly basis in line with your current payroll cycle. It means more people to pay and more out-of-cycle payments.
All of this means a more complicated payroll process.
By streamlining as many administrative tasks related to the permanent workforce as possible, such as monthly pay runs, payroll teams can keep the costs of managing a varied workforce down, while ensuring processes for gig workers are as efficient as possible.
Additionally, by automating or outsourcing these standard payroll tasks, it allows the payroll team to focus on innovation, improving processes to meet the changing demands of the new world of work. This will help the business navigate the big changes to payroll, expense, super and tax systems expected to come.
The gig economy is not a passing fad but is, in fact, a global trend that is set to redefine the workforce. For businesses in Australia looking to take advantage of the opportunities the gig economy presents, it is important they ensure payroll is well prepared to manage this part of the workforce.
This means giving them the time and resources required to manage this frequently changing employee base. It means understanding the regulations in your market and how this will impact the way in which you hire gig workers. It means having the technology to correctly track and pay gig workers.
In doing so, not only will the business benefit from the flexibilities and unique skills the gig economy provides but also – if you get it right – your business will become a ‘client’ of choice for the most talented gig workers.
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Inna Wahlberg, general manager, Ascender Asia & Middle East
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