Your startup is growing, and you need some extra help, but not enough to justify hiring another full-time team member. Should you use the services of a freelancer or a gig worker? Should you bring on a contingent worker? What’s the difference, anyway?
Though all three of these types of workers — freelancers, gig workers and contingent workers — refer to labor that your business does not employ full time, there are important distinctions you need to understand before you hire any of them.
What Are Freelancers?
Freelancers, also known as independent contractors, are one-person service-oriented businesses. Though not all freelancers use a business license, all of them are self-employed and assume responsibility for every element of business operations.
Typically, freelancers work directly with businesses, who hire them to take on work that current staff cannot accomplish. This might be because the company has more business than its current workforce can manage, or it might be that the company wants to take advantage of a freelancer’s unique knowledge and skill. The freelancer communicates directly with their client, and often, the freelancer has the opportunity to influence the project in an interesting and exciting way. Clients pay freelancers using a 1099, as opposed to a W-2 for employees, and freelancers do not receive perks like health benefits or paid time off.
Freelancers have full authority to accept and reject projects and clients as well as to set their own rates and hours. Most freelancers expect relationships with clients to expire after a certain period of time — such as at the conclusion of a project — at which point they must find more work for themselves. It is all but certain that you will need to hire a freelancer at some point in your startup’s growth.
What Are Gig Workers?
At first glance, gig workers appear similar to freelancers. Gig workers provide services to clients without reporting to a particular boss; they have some authority to accept and reject tasks, and they are paid with a 1099. However, there are key differences that set gig workers apart.
First, gig workers do not operate a business. Instead, they perform tasks assigned to them by another business. For example, a gig worker might spend time driving for Lyft, fetching orders for Instacart, pet sitting for Rover or doing household chores for TaskRabbit. The parameters of a gig worker’s role are clearly identified and set in stone by the app they work through and the clients they serve, so gig workers have much less freedom to exercise other skills they might have.
Next, gig workers are not responsible for finding their own clients or setting their own rates. Apps make it easier for gig workers to connect with clients who need help, but sometimes, the payment system in the app prevents gig workers from earning back what they spent to complete their tasks.
Usually, the services gig workers can provide are not the most applicable to business needs. Thus, you can probably ignore gig workers in your search for the right type of labor for your startup.
What Are Contingent Workers?
Neither freelancers nor gig workers are employees, but contingent workers are — they just might not be employees of your company. Typically, contingent workers are employed by staffing agencies or recruiters, who loan them out to businesses that need extra assistance at certain tasks or during certain times of year. Business clients pay the staffing agency, as opposed to the workers themselves, and the agency issues W-2s to its workforce.
Like freelancers and gig workers, contingent workers only provide their services on a temporary basis. Like freelancers, contingent workers tend to have unique knowledge and skills to provide to business clients. However, like gig workers, contingent workers have less control over whom they work for and how much they earn.
If you expect to rely heavily on contingent workers as your startup grows, you need a system for organizing different elements of your workforce. You can use contingent workforce management software to make it easier to understand who is providing what services when.
Conclusion
As your startup grows, you need to know what types of workers you can lean on for support. Freelancers, gig workers and contingent workers all have uses — and knowing the differences between them will help you keep your workforce organized and on task.
