Small Business Insurance: Thriving In The Gig Economy

Freelance work is everywhere these days in the emerging gig economy. But if you are a small business owner, you need to learn how business insurance works for your non-permanent employees. This shift in the workforce can influence the type of insurance your business may need. Make sure you pay attention and anticipate a plan for changes so that your business succeeds notwithstanding the new adjustments.

What exactly is the gig economy?

When people hear the term “gig economy” they generally think of freelancers and independent workers. But it’s much more than that. It may also refer to a growing sector of knowledge-based workers such as accountants, marketers, and designers, who may complete a specific project “gig” for which they receive compensation. In other words, it’s a diverse pool of specialized skills, experiences, and qualifications, so the typical freelancer is no longer the norm.

Approximately 53 million Americans, that is 1 in 3 workers, are part of the gig economy, based on statistics by the Bureau of Labor Statistics. That number is expected to grow 40 percent this year, particularly as new technologies emerge. No matter how you put it, the gig economy will impact your business, whether small or large, and it’s good to be prepared.

How the gig economy will impact your business

PROS

  • Recruiting on-demand workers: This can be advantageous for small businesses as workers hired on a project-to-project basis will free their business from long-term employment commitment.
  • Understanding the legal implications: Gig workers are independent contractors, not employees, and should be classified as such for legal reasons. Employees and independent workers are taxed differently.
  • Gig workers are compensated for their time: Hiring a gig worker may be smart based on the skill, time commitment and specific project.
  • Virtual collaboration: Thanks to apps that connect people and other collaboration tools such as Google Drive, Dropbox, and Slack, the traditional workspace has evolved into digital. This approach offers flexibility as gig workers can complete their work from anywhere in the world.

CONS

  • Small businesses may jeopardize their growth when they hire gig workers. Why? Gig workers work for the assignment and then they are gone. In other words, they don’t want to grow anybody’s business, but only their own. It’s difficult for small businesses to grow if they don’t have a stable and committed workforce they can count on a long-term basis.
  • The gig economy will drive up wages for those who perform well, and they will become more expensive to hire. A small business that wants to hire top performers will have to pay as much as large companies if they want to stay in the game.
  • Managers will spend more time managing than getting things done. In-house employees can have a meeting and discuss the project. Gig workers are harder to manage, and they tend to have less consistency. The teams can be formed quickly but may be dispersed in no time.

What about your insurance needs?

As a business owner, it’s important you learn how to navigate the insurance market in the evolving gig economy. For instance, if you are hiring a contract worker, make sure they carry liability insurance, so your business is protected if they provide a not-so-good work, the assignment is not completed in a timely manner, or they make mistakes that may cost you a lot.

When it comes to workers’ compensation, a business owner is not required to cover an independent contractor that works remotely. However, if an employee is misclassified as a gig worker, this can create legal issues.  

What to expect

Yes, the gig economy has advantages, which tend to benefit large corporations who don’t mind the temporary losses. As the economy expands and more intermediaries come into the picture, more workers will look for gigs and inequality will increase. In a nutshell, the money will flow to the top and small businesses may struggle unless they are prepared.

Insurance must adapt with the times. Make an informed decision about how to protect your business with business insurance. The need for business insurance hasn’t gone away. In fact, it has increased. Talk to a knowledgeable broker today.   

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