The gig economy is changing how business works, but too many companies are failing to adapt. By switching to an agile work model, companies can save money by hiring highly specialized workers--even those at senior levels--only when they need them.

The gig economy represents a seismic shift in the relationship between employers and the workforce. Fifty-seven million Americans – 36 percent of the labor market – now have some sort of alternative work arrangement, according to Gallup.

But too many companies are failing to adapt. White collar workers and highly skilled labor now make up an increasingly large percentage of the at-will market, but most companies are still structured around a permanent workforce, with contingencies built in for inexpensive freelancers and pricey consulting firms.

That model that is rapidly becoming obsolete, said Jody Miller, founder of Business Talent Group, a leading provider of on-demand talent.

"The fastest growing segment of the gig economy by far is people earning over $100,000 a year," she said. But "companies are not approaching this new resource in an efficient way that really optimizes it, because they're not set up to do it."

"Companies need to figure out, How do we access this talent pool?" she said. "How do we deploy it? How do we keep track of it? How do we know and teach our executives how to use it? There's a lot of learning that has to happen."

One aspect of the gig economy that companies are struggling to figure out is how to classify workers. "It's very difficult for anybody to determine whether a worker is an independent contractor or an employee," said Gene Zaino, president and CEO of MBO Partners, which provides solutions that help companies manage independent contractors. "It depends on the state, it depends on the IRS, it depends on state unemployment, it depends on workers' comp, it depends on the Department of Homeland Security."

But figuring it out is a big step toward full participation in the agile workforce. "You can't be in a world today where every job has to be a permanent employee," said Miller. You won't be able to "move fast enough." Both Miller and Zaino, who spoke at the ADP Commons at the 2019 SXSW® Conference in Austin, Texas, said companies save money when they hire highly specialized workers only for the periods when they need them. [See video below.]

A recent ADP survey of 726 companies found that only 6 percent had adopted an agile workforce model. And while 35 percent had adopted a hybrid model, 32 percent still used an "old workforce" model. Forty-four percent of those companies said they believed that contingent workers will make up less than 5 percent of their workforce in the next three to five years—far lower than the overall population of freelancers suggests.

Both Miller and Zaino noted that freelancers had long been misunderstood as people who failed out of the workforce. "It used to be if you were an independent contractor, you were just not good enough to have a real job," said Zaino, "and I just knew that was wrong. These people love what they do."

Indeed, a February 2019 Harris Poll survey that found 60 percent of Americans agree that freelancing is the modern version of the American Dream. And it's not hard to see why: Freelancers reported higher degrees of happiness with work and lower levels of stress than full-time employees.

"When you're talking about higher-skilled workers, they absolutely want to do this," said Miller. "They want to choose what they work on, they want to choose what they think about, and they want to choose who they work with."

"You cannot hire them," she said. "They will do a nice project for you, but they will not take that job."

Tags: Trends and Innovation Employee Classification Talent Workforce Planning Talent Management Articles People Management and Growth

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