New Rules of Engagement: When Your Team Is Not Employed By Your Firm

There’s no better time to get something than at exactly the moment you need it. The rapid growth of the ‘on-demand’ economy, where goods and services are ordered online and delivered promptly, has meant a new way of doing business – and working.

In the US and the European Union, 162 million people – around 20% to 30% of the workforce – are now working in the on-demand economy, according to research from the McKinsey Global Institute.

This workforce encompasses a wide spectrum of professions – with everyone from consultants, coders and designers finding on-demand work via platforms such as Upwork and Toptal, to handymen, plumbers and carpenters finding clients through TaskRabbit and Rated People.

If companies are looking to utilize this workforce while retaining the in-house talent they need, they have to understand why and how people become on-demand workers.

If managed correctly, on-demand labor can allow a company to reduce fixed payroll overheads, become more flexible and possibly even broaden its service offering

The On-Demand Workforce

The on-demand economy has fundamentally changed the nature of the employer-employee relationship, with the ‘employees’ consisting of a pool of affiliated workers from which the firm either draws or simply connects customers directly.

This new structure has far-reaching implications. Firstly, if the definition of ‘employee’ changes, so does the very idea of engagement. “It’s no longer about engaging an employee long-term,” says Pete Sanborn, Managing Director, Human Capital Advisory, Aon, “but instead ensuring that the individual is excited by and outperforming on a specific project.”

A flexible, on-demand, workforce has certain advantages over the traditional full-time staffing model. “It improves workforce planning as companies can more easily budget for assignments and projects,” says Sanborn. “And it encourages workers to continually improve their own skillsets.”

This, in turn, enables firms to acquire highly specialized skills as and when needed without having to increase headcount.

Types of On-Demand Workers

While the on-demand economy brings benefits for workers, like the ability to be their own boss and work the hours they choose, it also poses challenges. These include ensuring they have the right retirement benefits, and protecting themselves against loss of income due to illness or – in certain sectors such as ride-sharing – from legal liability.

For employers, understanding the dynamics of their relationship with this new breed of workers is also important. If managed correctly, on-demand labor can allow a company to reduce fixed payroll overheads, become more flexible and possibly even broaden its service offering.

There are four kinds of on-demand worker:

  • Carol is a free agent. A highly skilled, 32-year-old computer coder, she was formerly employed by a Silicon Valley tech company and now works freelance six months of the year for high-paying clients. She chose to work on-demand and values the independence to travel that her new schedule allows.
  • David is a casual earner. A 27-year-old teacher, he is a permanent employee of a local school. To supplement his income, he teaches online language classes in the evenings and weekends.
  • Jane is a reluctant. She used to work as an in-house designer for a startup, but since the company was acquired, she has been working freelance for a range of clients, which she engages via several online platforms. She is only an on-demand worker as a necessary fallback while she seeks permanent employment elsewhere.
  • Michael is cash-strapped. He is a 40-year-old mechanic who works during the day. However, his shift pay isn’t covering his expenses, so he also works as a driver outside of his regular shifts to help make ends meet.
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