How smarter payments are making the Gig Economy safer
The freelance market has expanded rapidly in recent years drawn in by the flexibility of creating own schedules and skipping the 9-to-5 grind.
While the gig economy attracts strong participation, many of the space’s workers and employers still rely on old-fashioned payment methods. The Gig Economy Index outlined that a significant share of employees are still paid using cash and checks, and the lack of additional options could inhibit freelance work. More than 84 percent of surveyed gig workers said they would take on more jobs if they were paid faster.
The rise of smarter payment systems could shift the space toward more modern options, like direct deposit or real-time solutions, which could meet a gig worker’s need for speed.
Dave O’Flynn, Chief Product Officer at Engage, recognises that systems used to pay freelancers must get smarter before they get faster, which involves streamlining the sometimes-complicated freelancer hiring process. “A very large percentage of the time, [a] recruitment agency will outsource some or all of the payroll to an employment business or a [professional employment organization],” O’Flynn told PYMNTS in a recent interview. “It’s a very inefficient and mistake-prone process.”
Time to retire timesheets?
Many inefficiencies involved in hiring and paying freelancers are tied to how they report their work. Companies are still using outdated timesheet forms, which O’Flynn noted. “Horrendously, in 2018, the standard way that all these people communicate is by emailing Excel spreadsheets full of sensitive, personally identifying information”.
This can cause trouble if the wrong recipient mistakenly receives a file. O’Flynn also pointed out that if an old Excel spreadsheet file is submitted, the wrong worker could receive payments. In these instances, some workers may be paid twice while others go unpaid.
Engage Tech addresses these freelance hiring process frictions with our cloud-based solution that automate work verification documents and payroll requirements.
“The hard part is not filling in a timesheet,” O’Flynn said. “The hard part is making sure everyone involved with that timesheet sees it safely, correctly and securely without anyone doing double entry.”
This automated verification approach prevents freelancers and gig workers from having to submit original documents or to verify and retain original copies. It also shields employers from potential data breaches or GDPR violations. In the UK companies can face fines of up to £20,000 per illegal worker, while employers can face up to five years in jail.
Engages platform allows only relevant parties to view the necessary data until the assignment is completed. This helps securely store workers’ data on the platform and keep it from being shared or accessed by new employers until a new assignment is initiated.
“The fact that it lives in one place, where everybody who needs to see it can see it,” he said, “takes away this whole informal network of horribly insecure practices around people’s private information.”
Smarter payments, happier workers
Removing cumbersome and manual identity verification elements in the gig economy can encourage more workers to participate, O’Flynn said. Another strong step, however, would be removing common payment frictions.
Faster payment systems global rise is an encouraging sign that workers will encounter fewer payment process delays. O’Flynn is also interested in how digital banks develop services that utilize faster payments’ infrastructure. Services that deliver or come close to delivering real-time capabilities could have the most impact on freelancers’ lives.
“If you’re filling out a timesheet as a freelancer, generally you’re filling out one timesheet per week and you’re getting paid maybe a week later.”
While this arrangement might satisfy freelancers who are on high day rates, the wait is considerably more difficult for minimum wage-earning freelancers who face greater financial stress.
The availability of near-instant payments could alleviate that stress and inconvenience by helping freelancers use their smartphones to digitally submit timesheets. Once timesheets are submitted and approved, funds can enter their accounts within two minutes to two hours, which keeps workers from waiting up to a week for checks. Removing common payment frictions also eliminates barriers to gig economy participation.
“It becomes worthwhile to work one shift as a barista, one shift as a security guard or one shift as a nurse,” he said. “Being able to do hour-by-hour payments opens up a whole world that wasn’t previously there.”
As payments become smarter, faster and more secure, they can also promise freelancers more stability and security, which could bring more participants into the gig economy.