Whose responsibility is the gig economy?

19 Jul 2017 By Jonny Dunning and Barry Flack

Jonny Dunning and Barry Flack on why HR, not procurement, must be in charge of the growing number of contingent workers inside organisations

The rapid growth of the gig economy hasn't been without incident. Stories in the press debating the rights of workers are common, highlighting the confusion around gig workers, contractors, consultants and freelancers. But the gig economy is also creating a number of management issues for organisations of all sizes.

As the number of freelancers increases, so do the challenges around maintaining visibility: where are they engaged? What are they costing? Are they being used effectively? This lack of visibility leads to several issues, including ‘phantom’ skills shortages, which occur where there is no visibility of where and how freelancers are engaged in a business. The result is unnecessary hiring – it’s easy to see how an organisation, in its desire to move projects along, could recruit new freelancers needlessly when they may have unseen, underutilised freelancers already engaged elsewhere. It's also common for a company to be engaged with several very similar freelancers, doing very similar jobs, but being paid very different rates.

Freelance marketplaces enable any line manager with a credit card to hire a freelancer. This ease of hiring creates unchecked and mismanaged recruitment processes, often bypassing existing HR and established onboarding processes. It's possible to engage a freelancer with as little as a verbal brief. Without a formal contract, it exposes the organisation to a risk of incorrect or incomplete work being delivered. And unless there is a system in place to remove the freelancer from accessing sensitive business information when their contract finishes, freelancers with access to internal systems or those who are included on internal email distribution lists pose a data and information security risk.

And then there is regulatory risk; an example of which is IR35 legislation in the UK. Without the right checks being made, it is possible for a line manager to unknowingly create an IR35 risk by hiring a freelancer for a role that looks like employment.

In the process of addressing an increasing freelance or contingent workforce cost, the gig economy's 'problems' are frequently discovered by commercial or finance teams. The investigations that answer the question of how much you are spending on freelancers inevitably lead to other difficult questions around the number of freelancers, inconsistency in rates, security access and regulatory risk – often without a clear understanding of who is best placed to answer these questions.

The confusion around responsibility is an unfortunate by-product of the gig economy's speed and flexibility. The distributed authority, where any line manager with a brief can hire a freelancer, creates an environment where the responsibility for overall direction and control is also distributed (and diluted).

Brandon Hall Group's 2017 Contingent Workforce Study shows that, in larger companies, the sourcing and management of contingent workforces predominantly resides with procurement teams rather than HR. This is problematic for two reasons. First, it indicates that hiring decisions are being made by business units and line managers, without complete oversight of an organisation's resources and talent strategy. Second, it clearly shows that contingent workers are managed in a different way to traditional employees. The resulting lack of oversight and inconsistent management practices ultimately create issues associated with poor visibility and gaps in onboarding.

HR, already responsible for acquiring, onboarding and managing a business’s traditional employees, is the logical choice for managing the increasingly important impact the gig economy has on the workforce. Only with complete end-to-end control over acquisition, retention and utilisation can HR effectively resource short-term requirements as well as successfully plan for the future. And HR is already equipped with the right tools and technology, such as employer value propositions (and more commonly freelancer value propositions) and freelancer management systems.

And of course, HR has a proven track record of understanding, planning for and delivering on the needs of people – something that is infinitely more nuanced than an average procurement exercise could account for.

Jonny Dunning is CEO of weliketowork. Barry Flack is an HR consultant and tech adviser

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