“Gig economy” is the latest buzzword of the business world, but the concept is here to stay ad it is not just a passing trend. How big this workforce of independent contractors and freelancers is still underestimation. The primary reason behind this is because there is no ample government statistics that can track it. But whatever may be the figure it is evident that the gig economy is expanding rapidly.
However, as there are many advantages to this mode of employment, there are many challenges which organizations face due to this system. In this blog particularly, we will discuss the increasing necessity of background screening prevalent in the gig economy.
What Actually Is A Gig Economy?
According to the definition of Cambridge Dictionary, “A gig economy is a way of working that is based on people having temporary jobs or doing separate pieces of work, each paid separately, rather than working for an employer.” This is a growing economic force. In 2015, according to the Intuit forecast the gig economy will involve 7.6 million people by 2020. The study further found 79% of the existing service providers who are in demand said this part-time workforce has the probability to grow by 18.5% in the coming five years.
CNBC also performed an in-depth research at this change of the economy. The research found that over the past 20 years, the number of freelance and remote working employees have increased their rate by 27% more than the permanent staffs. With the rise of applications like Airbnb and rideshare serviced certain industries like ground transportation and hospitality are experiencing this economic change ubiquitously. This new age trend of the economy is growing at a very rapid rate and hence will have an effect on the employment sector of many decades to come.
Maintaining Trust and Safety in the Gig Economy
As companies scale their workforces with the help of the gig economy, ensuring the competence and safety of these workers has never been more important. The hiring process for these individuals is typically shorter and less complex than it would be for permanent employees; in fact, many companies have no formalized procedures in place for handling the recruitment and management of independent workers. But as this workforce grows, so do the risks of skipping the background check.
As more hands and eyes have access to internal information, sensitive data, financial assets, and valued customers, the need to protect the security and integrity of the organization and its customers is vital. In most cases, the risks associated with in-house employees differ relatively little from those that can be associated with contractor employees. Establishing a robust background screening policy and partnering with a skilled, experienced background screening provider are the first steps in achieving confidence when partaking in the gig economy.
What are the Regulatory Concerns of Gig Economy?
Despite the advantages of both workers and companies, there are concerns from a regulatory standpoint that need to be considered. There are, of course, relatively familiar issues about legitimate contractor status as regulated by the Department of Labor and the Internal Revenue Service. Furthermore, the EEOC announced that the gig economy will be a strong focus for the agency in 2017. They are concerned about potential discrimination and lack of diversity in recruitment and hiring practices which extends to background screening. This concern is especially focused on issues regarding federal laws such as Title VII, which protects employees against discrimination, but does not currently apply to independent contractors. It is critical to keep updated with any changes the EEOC may make in accordance with its new priority.
Similarly, have to keep Ban the Box and Fair Chance legislation in consideration and how these laws apply to independent workers. These laws govern how and when a company can ask a worker about their criminal history. The rule, however, varies depending on the state, county, and city. Organizations that rely on contract employees should be aware of the rules implemented in their respective region, particularly if they operate from multiple locations.
Finally, there should also be the consideration of state and local requirements for background screening of independent workers. This issue was recently brought to the fore for ride-sharing companies like Uber and Lyft in cities of Austin and Houston and the State of California. All of these areas have enacted strict criminal background check laws in order to protect consumers of these services. However, the problem with the mandated approaches is that many of these laws require FBI fingerprint background screening, which returns incomplete and often inaccurate data, and does not meet Fair Credit Reporting Act (FCRA) standards. Companies that are required by law to administer this kind of screening must be aware of their shortcomings and be prepared to augment the legal minimum to maintain a strong compliance profile.
The fact that an independent worker is not a regular employee means little to any third party who experiences him or her as a representative of your company. If you sell the services or work of the independent contractor under the name of your company, you are creating a connection that will be perceived as real. If the unsupervised work is substandard or worse, if the contractor causes damage or harm to a customer, fellow employee, or the public at large, your company’s reputation can suffer greatly.
Judging by the growth in the ‘gig’ economy, it’s clear to employers that the benefits of hiring independent contractors can be quite significant. Improved productivity and flexibility, along with lower fixed costs, are key reasons for selecting independent workers. However, risks must also be addressed. When you consider an organization’s responsibility to provide a safe workforce, due diligence cannot stop with employees. Employment screening is just one hiring strategy that crosses the boundary between employee and independent contractor.
One final point to consider is that independent contractors move quickly; from accepting a contract to starting the project, there is little downtime, which means background screening needs to be fast.
Companies must be able to trust their screening partner to deliver rapid turnaround times in order to leverage their independent workforce.