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Exploring the Future of Staffing Agencies in a Gig Economy


The term “gig” first appeared in the 1920s, when jazz musicians used it to describe their intermittent performances. As the world and traditional work models have evolved, the term “gig workforce” has taken on new meaning to describe a contingent, or on-demand, workforce that can quickly respond to market complexity and volatility.
World events, like the 2008 global financial crisis, further fueled the gig economy when many unemployed workers began to look for independent/contractual jobs. The global COVID-19 pandemic reinforced the importance of an alternative workforce model and how it can contribute to keeping the economy afloat.
Now, Statista estimates that by 2027, freelancers, or gig workers, will comprise just over 50% of the U.S. workforce.

What makes the "gig workforce" so popular? 

The growing popularity of the "gig workforce" is associated with several factors, such as

On the employers’ front: 

  • Economic uncertainty. With the fear of recession, many companies choose to invest more in temporary workers than FTEs to meet their productivity demands. 
  • Cost-effectiveness. Employers save enormous overhead and staffing costs as the "gig economy" allows more workers to work fewer hours. They are able to cut down on office and training costs (since most "gig workers" are already skilled). Additionally, employers are not bound to keep "gig-based employees" on the payroll. Or pay them perks or benefits like life and health insurance, retirement benefits, paid leaves, etc. 
  • Access to a rich talent pool with skills and experience allows employers to match supply and demand.  

On the workers’ front:

  • Shifting work preferences of millennials and baby boomers. Many of them don’t want to stick to a traditional work model.
  • Growing demand for flexibility, work-life balance, and independence to adjust schedules around priorities.  
  • An inclination towards demanding/challenging jobs/roles that capitalize on skills. Workers don’t want to do run-of-the-mill jobs. They want their opinions, and suggestions put on the table. They seek equal participation.

What does the rise of "gig economy" mean for staffing agencies? 

There was a time when the "gig economy" was seen with a lot of apprehensions. The companies weren’t sure whether the so-called ‘on-demand workforce’ would deliver as expected. There was a lot of debate around whether "gig jobs" are actual jobs. Should independent workers be treated equally or at par with FTEs? Are they sincere and accountable? The thoughts/opinions around this were geographically distributed and were subjected to cultural norms—the standard against which these "gig jobs" were measured varied. In most aspects, assembled careers or side jobs were looked down upon. Hence, many staffing agencies never considered "gig workers" holistically in their service plans. 

However, a monumental shift has occurred in the last few years. Independent workers have found more visibility. Employers are ready to take chances on them with short-term or project-based requirements. They have peeled through stereotypes and eliminated the stigma around contract workers.

As looming uncertainty around the "gig workforce" diminishes, traditional jobs decline, and employers gain confidence in their human capital arrangement (including part-time, short-term, and freelance workers), must HR staffing and recruiting agencies revamp their business model, realign their business strategies and welcome the "gig workforce" with open arms.

Contrary to popular belief HR staffing agencies have not lost their relevance due to the growing gig economy. Their role has expanded and transformed into a more nuanced one. How?  

Despite the meteoric rise of the on-demand workforce, hiring a worker can be a tedious task for small and even mid-level companies. Although there are several channels, online freelancing platforms through which companies can directly hire a contractor or a freelancer, finding a well-qualified, highly skilled worker can be taxing. If found, vetting them can be cumbersome.

Plus, there is no guarantee the worker will stick around. Furthermore, employers cannot ignore discrepancies around compensation and matching exact skill sets with the job. Even if the employers successfully overcome all these hurdles, they will always doubt the worker’s sincerity, stability, and commitment to the job. That’s why HR staffing agencies have an unmatched significance. 

Their scope has broadened with the arrival of the gig marketplace – from finding the right talent to allocating it to the right place to supporting it comprehensively. Companies can depend on staffing agencies to close critical gaps in talent management and build human capabilities that think and scale impact.  

How staffing firms can incorporate a gig workforce in their service plans? 

  1. Customize their offerings. As the market evolves and the "gig workforce" picks up steam, new fundamentals define an organization’s human capital requirements, work is no longer defined by jobs but by skills and experience. Workplaces become agile, and the need for staffing agencies to customize their offerings according to the needs of the employers becomes a must.

    By opening their doors to gig workers, freelancers, and contractors, staffing agencies can collaborate more meaningfully and expand their work scope. What’s worth noting is that staffing agencies understand the local talent well. They are also well aware of the openings and can work with employers to bring the best talent on board.  
  2. Adopt technology. Today everything is driven by technology. And that may be one of the biggest challenges for staffing agencies. Organizations have traversed into a more agile and digitally connected landscape, and the new workforce ecosystem has become more diverse and technologically dependent. With their tech-saturated upbringing, the millennial "gig workforce" shares an inextricable relationship with technology.

    And, recent studies have indicated that even baby boomers are catching up on their digital adoption post-pandemic. Hence, digital transformation is essential for staffing agencies to up their game and successfully foster relationships with clients. Agencies must incorporate tech-staffing solutions, and keep their eyes peeled on any advancements and technology trends that are driving the new workforce.
  3. Act as an intermediary. Addressing human capital requirements has become highly complex for organizations primarily because jobs have become more challenging with the advent of technology, and there is a growing demand for specialized skills. Workers are expected to upgrade themselves every few months. If a worker doesn’t fit a particular requirement due to a lack of skills, the staffing agency can communicate it to them. The 24*7 digitally connected generation thrives on communication.

    They continuously seek feedback and improvement areas, so HR staffing agencies can be beneficial in that respect. Another way HR staffing agencies can act as an intermediary is by ensuring that contractual workers get paid for their services at the going market rate and that they don’t experience discrimination based on their job or position within the company. 
  4. Update their knowledge. The gig economy is here to stay and to be a part of this gigantic marketplace, the new league of workers is putting its best foot forward. They are taking additional training, upgrading their skills and knowledge, multi-tasking, and securing new, diverse income streams. Staffing agencies can be instrumental in helping workers secure the best opportunities.

    They can host engaging webinars and podcasts on the evolving employer expectations, prepare "gig workers" for the requirements of the future, help them bridge the skill gap, and be ready to excel in the VUCA world. They can also act as mentors. Sometimes, even highly qualified workers resist picking up a role or signing up for a job they are highly suitable for. The staffing agency can convince them that they are the best match and fit the bill perfectly.   

Staffing agencies are evolving, not dying. They're adapting to a changing employment landscape where contingent work and a boundaryless environment are becoming more common. This shift, driven by organizations and a growing "gig economy" favored by millennials, requires staffing agencies to offer collaborative opportunities to both employers and employees, fostering innovation and progress.

Welcome to Interim HR, your ally in the evolving gig landscape. As the job market shifts towards contingent roles and boundaryless work environments, Interim HR stands ready to connect innovative organizations with the dynamic talent of the gig economy.

IHR cannot and does not provide legal advice. It’s important to consult with qualified counsel before adopting any new policies. It’s also your responsibility to determine whether legal review of work product is necessary prior to implementation.