The gig economy, a market of independent contractors and freelancers who provide short-term work over a permanent employee position, is growing at a substantial rate.
This includes Uber drivers, Airbnb hosts, TaskRabbit taskers, and WeGoLook Lookers. By 2020, it’s estimated that about half of the United States population will be freelancing in some way.
But, let’s set the record straight: Gig workers, for the most part, are not employees. They are entrepreneurial businessmen and women.
Here’s why it’s important for gig workers to make the distinction known.
Employee or Contractor: What’s the Difference?
The United States notes distinct differences between employees and independent contractors. Much of these differences are in place to help employers understand the tax implications of contracting a gig worker versus hiring someone as an employee.
According to the Internal Revenue Service (IRS), three main categories of rules apply when making the distinction: financial, behavioral, and type of relationship.
If an individual, for example, gets reimbursed for expenses by the payer, is controlled by the payer as to how, or when, he works, or provides long-term work and has paid benefits, that individual is considered an employee.
As a general rule, an independent contractor then has control over his or her hours and how the work is performed, has no benefits from the payer, and does not have an ongoing business relationship with the payer.
Unfortunately, these distinctions become very muddled in the case of gig workers, who often do perform long-term work for others or fall into some other “employee” designation, but not all of them.
Why are Gig Workers Fighting the “Employee” Label?
There has been some controversy in the courtroom over whether Uber and Lyft drivers should be considered independent contractors or employees.
Courts have argued that Uber spells out certain control methods over its rideshare drivers, such as a customer feedback system and a mandatory 10-minute waiting time if a rider doesn’t show up in time. These “controls” may cross the line, courts say, from a contractor to employee position.
All the while, many gig workers have fought for the status of independent contractors rather than employee, even though an employee status could give them more stability and benefits. So why are gig workers fighting the title?
One of the biggest perks of being a gig worker is the flexibility it allows an individual. 73% of workers prefer flexibility over a traditional 9 to 5 job, even if benefits are provided from steady employment.
Over half of Lyft drivers also drive with another company because it gives them more money-making opportunities to fill in their schedules as they wish.
Worker or Contractor? Neither! Gig Workers are Entrepreneurs
In addition to better flexibility from independent contract work, the fact that gig workers are technically entrepreneurs is incredibly appealing to them.
Even the IRS defines an independent contractor as someone who is “self-employed.” In other words, the independent contractor is, in fact, an entrepreneur who creates business for her or himself.
An independent contractor is responsible for his or her business expenses and taxes, including self-employment tax that covers Social Security and Medicare taxes, just as one would if she had her own business.
Entrepreneurs are responsible for anything having to do with their business. This includes the risks, rewards, finances, failures, and schedules, to name only a few. And there's something very liberating about that kind of control over your own financial destiny.
So carefully consider jumping to conclusions believing that gig workers all want to be employees. For the most part, this isn't the case. They are entrepreneurs.
When an individual chooses the gig worker life, they are essentially taking part in a growing economy of workers searching for employment freedom and effectively creating an entrepreneurial role for themselves.
By Robin Smith, CEO and Co-founder WeGoLook
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