Gig Economy

What counts as gig work

The term covers several quite different models:

• App-based local services: rideshare, food and grocery delivery, home services. Workers pick jobs in an app and are paid per task.
• Online freelance marketplaces: design, writing, software and admin work bought by the project or hour.
• On-demand shift platforms: apps that fill hourly shifts in warehouses, events, hospitality, retail and healthcare. Some classify workers as contractors; others employ them on W-2 and act more like a staffing agency with an app.
• Independent professionals: consultants and fractional specialists working through their own business.

All of these sit inside the wider contingent workforce, alongside temps, contractors and statement-of-work vendors.

Why employers use gig and on-demand labor

The main draw is speed and flexibility. A distribution center that needs 40 extra pickers this Saturday, or a stadium caterer staffing a playoff game, cannot run a normal hiring process for it. Shift apps can fill some of that demand within hours from a pool of pre-vetted workers. Employers also use gig labor to test demand before opening permanent roles and to cover sick calls and no-shows.

The trade-offs are real. Gig workers rotate between sites, so training depth, consistency and safety knowledge are lower. Show-up rates for on-demand shifts can be uneven. Quality-sensitive work, regulated tasks and roles that need a few weeks to learn are usually better served by temps or employees.

Classification: the central legal issue

Whether a gig worker is an employee or an independent contractor decides who owes minimum wage, overtime, payroll taxes, unemployment insurance and workers' compensation. In the US, there is no single test.

• Federal wage law (FLSA) uses an economic reality test that asks whether the worker is economically dependent on the business or in business for themselves. Department of Labor guidance on the test has shifted between administrations.
• The IRS uses a common-law control test for tax purposes.
• Several states, including California, Massachusetts and New Jersey, use stricter versions of the ABC test for some or all purposes. California codified its ABC test in AB 5 in 2019, and voters later passed Proposition 22 in 2020, which created a separate framework for app-based rideshare and delivery drivers.

Companies that set schedules, require uniforms and supervise gig workers like staff take on the most risk. See worker classification for the tests in more detail. Rules vary by state and country and change often, so get legal advice before building a gig labor model.

A worked example

A regional grocery chain uses a shift app to cover weekend and holiday gaps in stocking roles. It keeps app shifts to tasks that need under an hour of training, gives every shift worker the same short safety briefing on arrival and tracks fill and show-up rates per store. Over six months the app fills about 85% of posted shifts. The chain also learns that workers who return to the same store three or more times perform almost as well as part-timers, so it starts offering those repeat workers part-time jobs, turning the app into a sourcing channel.

Recruiting in a gig economy

Gig work has changed what hourly candidates expect: same-week starts, instant pay options, choice over shifts and a fully mobile application. Employers competing for the same people respond with faster hiring, flexible scheduling and earned wage access. Our article on talent acquisition in the gig economy covers sourcing and engagement tactics in more depth.