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Self-Employment

  1. Self-Employed Person
  2. Independent Contractor
  3. Gig Economy
  4. SEP IRA Plan
  5. IRS Publication 334
  6. Self-Employment
  7. Freelancer
  8. Self-Employment Tax

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Gig Economy: Definition & Overview

Updated: January 16, 2023

Before the internet and cellphones, there were non-traditional, short-term, and contract jobs, but the gig economy has introduced a new means of bringing people together with customers and those looking to recruit them.

Read on as we take a closer look at exactly what the gig economy is. We’ll discuss how the gig economy works, what the perks and downsides are, and what impacts the gig economy.

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    KEY TAKEAWAYS

    • The gig economy is centered on flexible, contract, or freelance work. This frequently involves establishing online connections with clients or customers.
    • The gig economy can be advantageous to consumers, employers, and workers. This is because of the demand for flexible lives and the increased adaptability of labor to meet those needs.
    • However, the deterioration of long-standing business and consumer ties might have negative effects on the gig economy.

    What Is the Gig Economy?

    The gig economy is where businesses frequently recruit independent contractors and freelancers. This is rather than full-time employees, and temporary, flexible jobs. The traditional economy of full-time employees, who frequently concentrate on their professional career development, is threatened by the gig economy.

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    What Is Gig Work?

    Many people work part-time, in temporary jobs, or as independent contractors in a gig economy. For those willing to use them, a gig economy produces less expensive, more effective services like Uber or Airbnb.

    The advantages of the gig economy may be lost on those who don’t use technological services like the Internet. Cities typically have the most advanced services and the deepest roots in the gig economy.

    A gig can be any job, which includes a wide range of positions. The labor can be everything from delivering food or driving for Uber to programming code or doing freelance writing. For instance, contract employees as opposed to tenure-track or tenured professors include adjunct and part-time professors. By appointing more adjunct and part-time professors, colleges and universities can save money. This is all while better matching teachers to their course requirements.

    Who Is a Gig Worker?

    Gig workers include independent freelancers and employees of online platforms. As well as staff members of contracting firms, people hired on-call and temporary employees. To supply services to the clients of on-demand businesses, gig workers can enter into formal agreements.

    How Does the Gig Economy Work?

    A labor job market that consists of freelance or part-time jobs rather than full-time, fixed contracts is known as the gig economy. Gig workers can be found in a variety of professions. Including performing artists, document editors, delivery drivers, and technical assistants. The gig economy is characterized by people who work on a project-by-project basis. This is rather than as long-term employees of one company, regardless of their educational background or career choice.

    It is also feasible to work in the gig economy while still employed by a company under a contract. For instance, you might hold a job as a secretary or a teacher during the day. And in your free time, you might work a gig-based job like bartending or babysitting to help augment your income. Compared to employees who work full-time for a single organization, gig workers end up performing a larger range of jobs.

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    Who Is a Part of the Gig Economy?

    Jobs in the gig economy include well-known occupations found in a variety of industries, such as the following:

    • Financial and Accounting
    • Administration
    • Visual arts
    • Construction
    • Education
    • Freelance writing
    • Computer technology
    • Communications and the media
    • Project administration
    • Software creation
    • Transportation

    What Are the Perks of the Gig Economy?

    Having the flexibility to work from home has its advantages. Typically, these include:

    • Low entry barriers. The gig economy is open to everyone, regardless of their skill level.
    • Having the freedom to alter your own work-life balance.
    • Flexible work schedules, frequently allowing for the choice of when and how long to work.
    • Having the freedom to choose the tasks and work you do.
    • The freedom to conduct business from any location in the world.
    • In comparison to many traditional occupations, a gig economy can enhance work-life balance. This is from the perspective of the employee.
    • Freelance positions that appeal to independent employees offer fresh prospects. And they seem to fit their preferences and schedules.

    What Are the Downsides to the Gig Economy?

    There are drawbacks of freelance labor. These drawbacks frequently consist of:

    • Not having your company cover your pension, health insurance, paid sick leave, or paid holidays.
    • There is little job security in terms of redundancy packages or notice periods for termination.
    • The flexibility offered may cause some employees’ work-life balance to become disrupted.
    • An issue of gig employment is finding enough work for a solid source of income. This can lead to an inconsistent income.
    • Long-term relationships between employees, employers, and clients are challenging to establish. This is in an organization where temporary workers come and leave frequently.
    • Individuals may find it challenging to advance their careers.
    • Retirement plans can be difficult to establish which concerns gig workers. 

    What Impacts the Gig Economy?

    The gig economy is impacted by shifting political, cultural, and commercial settings.

    The gig workforce may change as a result of modifications to governmental rules and business practices. This is regarding the classification of gig workers. This is as either full-time workers or independent contractors. An independent worker may suffer from a lack of benefits and a base wage level that a full-time employee would.

    Additional elements that have an impact on contract work and employment, in general, include the following:

    • Digitization: The employment landscape has been significantly impacted by AI and other automated technology. In other circumstances, digitization has resulted in fewer jobs being accessible as certain job types, such as customer experience, and content automation workers, are being replaced by software.
    • Needs for flexibility: The pressure on businesses to hire more gig workers has intensified due to other factors. They include the requirement for a more adaptable workforce that can be quickly extended or decreased due to financial strains on firms.
    • Effects over generations: Younger employees, including millennials and members of Generation Z, also have a propensity to switch jobs more frequently than older, more established employees. The gig economy job is part of that trend.

    COVID-19 pandemic: Numerous companies and organizations are under pressure to continue operating and being visible as a result of the pandemic. The gig economy and the expanding digital market have aided in this.

    Summary

    A gig economy is a form of a free market where businesses frequently use independent contractors for brief assignments and temporary roles are popular. A task that lasts for a set amount of time is referred to as a “gig” in colloquial language. The phrase has historically been used by musicians to describe a performance engagement.

    Freelance job workers, independent contractors, project-based workers, and temporary or part-time workers are a few examples of gig workers. Customers and gig workers are frequently connected using digital technology and gig apps.

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    FAQS on Gig Economy

    Why Do They Call It the Gig Economy?

    The term “gig economy” refers to a system of labor where each task is comparable to a single “gig,” while the term “gig” can refer to a variety of tasks.

    How Do Gig Economy Workers Deal With Paying Taxes?

    It’s possible that miscellaneous income, rather than self-employment income, will be taxed on revenue from one-time jobs or very casual employment. The workers will pay taxes by filling out an income tax return. 

    Who Started the Gig Economy?

    Tina Brown, a former editor of The New Yorker, coined the phrase “gig economy.” According to the report, workers in the information economy were more frequently pursuing “a collection of projects, consultancies, and part-time bits and pieces while they transacted in a digital marketplace.”

    Why More People Are Choosing the Gig Economy?

    For a variety of reasons, more people are choosing to work in the gig economy. The capacity to be more imaginative and independent at work is one of the primary reasons. Additionally, as desired or necessary, I will accept shorter-term jobs.

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