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Will Contractors Change the Future Workforce Model?

August 23, 2016 by Michael Rander 101

In the expanding gig economy, independent contractors and contingent workers are making the most of the flexibility and opportunity to accept jobs that are personally fulfilling. But on the flip side, they do not benefit from job security, benefits, 401(k) retirement plans, vacation, and insurance.

Recently though, Uber agreed to the creation of the New York City (NYC) Independent Drivers Guild. Although this organization is not a union, it will provide drivers with a defined array of protections.

Does this mean that the gig economy is evolving? And if so, how do companies attract and compete for the best workforce under these new conditions?

Is the gig economy evolving? How do companies attract the best workforce under these conditions?

The Race for Quality Talent

The NYC Independent Drivers Guild was created after a five-year agreement was reached between Uber and the International Association of Machinists and Aerospace Workers union. The benefits negotiated under the plan include monthly meetings with Uber management, an independent appeals process for driver terminations, discounted financial planning, legal assistance, roadside assistance, as well as support against unfair fines and the ability to obtain affordable insurance. The guild, however, will not be allowed to negotiate fares, benefits, and contracts. And for now, its influence is confined only to the NYC area.

At the end of last year, a coalition of 37 companies, labor advocates, and venture capitalists including companies such as Etsy, Lyft, Instacart, Handy, and care.com, argued for modernization of support typically given to contract workers, which number more than 53 million in the United States alone. The group specifically called for portable and flexible benefits where every individual – regardless of job type – can access a basic protections such medical insurance, worker’s compensation, sick leave, and retirement savings.

While the group didn’t get detail the financing and practicalities of such a system, the discussion of flexible work versus desired economic security does bring up very interesting questions:

  • How do companies make themselves attractive to a growing contingent workforce that will be an essential part of competing in the rising digital economy?
  • Although implementing such a system will likely become a political mandate and not a corporate decision, how can businesses ensure long-term survival if they are only perceived as racing to the bottom to get the most flexible workforce at the lowest possible cost structure?

Hourly Rates Alone Cannot Attract and Retain the Best Talent

The Uber NYC guild is still one of the first real – albeit limited – attempts at addressing the broader systemic issues facing the gig economy. However, individual companies can still make a difference in attracting contractors with more than just a competitive salary.

The new generations in the workforce – millennials and Gen Z – are increasingly driven by the ability to make an impact. In fact, 53% of millennials would work harder if their organization actively made a difference in local and global communities. Workplace engagement, flexibility, and collaboration are also key drivers for this crop of young talent. For companies that are trying to attract the best contractors, a serious effort in providing these workplace characteristics to full-time staff and contractors can make them truly stand out. The challenge is onboarding contractors and integrating them into a corporate system in a very short timeframe while making them feel not only as an important part of the larger company, but also as having a significant impact.

While the gig economy continues to grow, we have yet to see a large-scale transformation of the conditions for this workforce. Over time, the contractor segment of the overall workforce is expected to increase. And if companies want to attract the right contractors at the right time with the right incentives, they will need to secure the livelihood of that workforce beyond hourly rates.

What is your company doing to stand out in the future of work, and how are you facing the new workforce model of the gig economy?

Learn more about the future of work and the impact of the digital economy. Read the executive research “Live Business: The Rise of the Digital Workforce.”

Michael Rander is the Global Research Director for Future Of Work at SAP.

This story originally appeared on The Digitalist Magazine as part of the 10 Weeks of Live Business series.

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