How COVID-19 Is Changing the Rules for the Gig Economy

COVID-19 has undoubtedly had a widespread global effect and the gig economy is no exception. In this article, we’ll explore how coronavirus is changing traditional legislation and classification of independent contractors and contingent labor in the US, as well as highlighting newly available resources to this segment of the economy.

The gig economy is a growing subset of the labor market that is characterized by short-term contracts or freelance work. These types of employees are often referred to as ‘gig workers’, a playful spin on the concept of a rock band or solo artist picking up ‘gigs’ at venues and local bars.

Gig workers represent a growing segment of the contingent labor category, making up a whopping 35% of the US workforce. Workers in the gig economy cite flexibility as their biggest appeal, and there’s a big benefit for many companies too. Organizations hiring gig workers can reap the cost-savings benefits of enlisting short-term help to supplement their traditional staff augmentation without the burden of bringing on full-time employees.

While gig workers are part of the contingent workforce, there’s an important distinction to note amongst their ranks. Traditional contract workers are engaged through an employer of record (such as a staffing agency) to complete a task with an end-client by an agreed-upon timeframe. These contractors often have access to health insurance and unemployment benefits through their staffing vendor employers. Independent contractors and freelancers often find ‘gigs’ with on-demand technologies and are engaged with clients in a more flexible manner, reducing entry and operating costs for those clients. This difference results in a lack of benefits for those gig workers.

Also read: 3 Keys to Contingent Program Success

The Gig Economy Under COVID-19

Think back to a time before COVID-19. A booming economy, low unemployment, and having gig jobs as full-time or side hustle was the happy norm for many contingent workers. For many, there was little concern over benefits. Now back to today: Enter a world pandemic with a crushing economic blow. Some gig workers are busier than ever, while others are suddenly finding themselves out of work after event cancellations and workforce reductions. The appeal of gig workers’ non-employee classification is now a detractor and a potential cause for concern for millions.

Whether gig workers are now suddenly unemployed or labeled as ‘essential’, the coronavirus pandemic is resulting in changes to legislation, temporary relief , strikes for safety demands, and reclassifications of gig workers, all of which could have long-term effects.

More from the blog: What’s Next for Contractors? Helpful Resources for Contingent Workers Impacted by COVID-19

Sick Leave & Tax Credits

The climbing infection rate combined with the need for Americans to stay home if they’re sick (or caring for a sick family member) has lead to concern. Not to mention about a quarter of the US has no paid sick leave. The Families First Coronavirus Response Act outlines expanded sick leave for the US workforce, including gig workers, who would see their benefits in the form of a tax credit.

By doing this it has provided a level of security that has not always been felt by the contingent workforce, indicating a noted appreciation by society for our gig workers.

The Changing Nature of Unemployment Benefits

The stimulus package (CARES Act) recently signed by the President includes unemployment benefits for gig workers. This is the first time that independent contractors have been included in this type of legislation, which clearly shows their increasing importance in the economy.

This sets an important precedent, as it could prompt legislators to change gig workers’ status from independent contractors to employees. While this is resulting in much-needed benefits for gig workers in this health crisis, a question remains: could it pose longer-lasting issues or will it result in better opportunities for gig workers? For more information on both sides of the debate, check out this article.

According to Staffing Industry Analysts, states are also working to change gig worker employee classification. A recent ruling by the New York Court of Appeals determined that couriers who work for Postmates are employees for the purpose of unemployment benefits. This ruling will allow gig workers to receive the same unemployment benefits as their “employee” counterparts.

Other Financial Resources

In addition to sick leave, tax credits and unemployment benefits, there are also changes in the grants and advances on an Emergency Economic Injury Disaster Loan (EIDL). Previously reserved for small businesses, this has now expanded to sole proprietors and independent contractors. These start at $10,000 grants that do not have to be paid back—even if the borrower doesn’t qualify for small business loans. CNBC additionally outlines other organizations providing resources for freelancers, some of whom haven’t been paid for work completed.

Also, depending on income in 2019 as well as family size, gig workers could be eligible for the Care Act stimulus checks. Check out this helpful FAQ curated by the NY Times.

Only time will tell what long-term impact (good or bad) this new legislation will have on the gig economy. For now, national governments and judicial systems are working to come together to ensure changes are made for gig workers to protect everyone during these turbulent times.

Want to know more? Check out our best-practice guide to COVID-19 and the contingent workforce.