The Rise of The Gig Economy: How Electronic Payments Can Help (Pt. 2)
In part 1 of our series on The Rise of the Gig Economy, we showed you how on-demand workers, short-term jobs, temporary or seasonal work, and an influx of independent, migrant workers have become a trillion-dollar global workforce. In part 2, we now focus our attention on the problem with payments, and more importantly, how we can fix them.
According to research from Harvard and Princeton economists, independent contractors now make up 8.4 percent of the U.S. workforce, or approximately 12.5 million workers. However, only 51 percent of gig workers in Q4 2017 reported being paid within one week of providing their services.
These payments problems damage employer and gig worker relationships. A survey from accounting software solutions FinTech Tipalti found that 74 percent of respondents would consider leaving an online marketplace because of poor payment processing habits. Only 17 percent of gig platforms pay in real-time. 29 percent of gig workers reported problems with not getting paid for their work, while 27 percent reported being paid late.
This is an issue that the Gig Economy needs to solve because, according to payroll company ADP, 80 percent of U.S. firms currently employ independent contractors, and gig work is unlikely to decrease any time soon.
So what can be done?
Offering faster payments and helping freelancers avoid incurring work expenses would encourage more people to participate in the Gig Economy. With electronic payments, gig workers can be paid in real-time, and multiple times per day which, for some gigs, is essential.
Payment management solutions, such as prepaid cards, can help managers, accountants, and worker crews better track and reconcile expenses, offer real-time monitoring, and instantaneous payments. Prepaid programs also provide controls that can limit spending, including on the types of items purchased by a cardholder.
Prepaid can also protect gig workers from having to pay out-of-pocket for work-related expenses. Subscriptions, materials, gear, etc. are often paid for by the gig worker’s personal credit card, which causes all sorts of problems, Now, workers can use prepaid cards and cut through the red tape. Unexpected expenses are, well, unexpected, but that doesn’t mean you can’t plan for them! With prepaid, you can.
Gig workers taking on travel-based jobs incur expenses when they travel, including food, gas, and accommodations. A prepaid card solves this expense problem and skips the tedious and time-consuming process of keeping physical receipts, creating expense reports, and submitting to management for approval and reconciliation.
Mastercard says prepaid can “address the challenges of workers who juggle multiple jobs, variable paychecks, and inconsistent benefits.”
“Helping small businesses and gig employees helps cities prosper,” Craig Vosburg, President for Mastercard North America, said. “With an estimated third to half of the people earning some gig income over the next four or five years, that’s a significant part of a city’s workforce and tax base… For the challenges they face around cash flows and getting access to capital, electronic payments can be valuable to smaller entrepreneurs.”
As the Gig Economy continues to expand, it makes sense to address payment pain points. It is an investment in the future, an investment in greater control, and an investment in the relationship between a company and its workers.
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