What is the gig economy? Definition plus pros and cons

There's a growing trend of people leaving permanent, full-time jobs for flexible and temporary work. In the gig economy, workers earn income by completing short-term jobs as independent contractors or freelancers. For example, many gig workers in Malaysia perform food drop-off, online delivery, and ride-hailing services. In this guide, we'll define gig economy, explore the features of this labour market, and discuss the pros and cons of being a gig worker. Here's what we'll cover:

• What is the gig economy?
• Key features of the gig economy
• Pros and cons of joining the gig economy
• Legal requirements and labour rights of gig economy workers
• How will the gig economy evolve over the next few years?
• Conclusion
• FAQs

What is the gig economy? 

A gig economy is a labour market where part-time and temporary positions are common. Organisations hire an independent contractor or freelancer for a short-term project. This way, they may need fewer full-time permanent employees.

Gig workers have more flexibility and independence than those with permanent jobs. However, they also have less job security and rarely get benefits such as health insurance and annual leave.

The number of Malaysians working in the gig economy has seen a sharp rise of 25% from 2.4 million in 2021 to three million in 2023. One reason for this trend is that more work is available on online platforms. Younger workers are choosing this labour market due to the drawbacks of traditional positions. These include inflexible working arrangements, few opportunities, and lack of pay increases.

Key features of the gig economy 

Many younger workers are leaving their traditional jobs for temporary and flexible work. Explore the main features of the gig economy:

Flexibility and autonomy

Workers in the gig economy can choose freelance jobs according to their schedules and interests. For example, they may only want to work three days a week for a better work-life balance. Or they may look for a job that allows them to decide their own working hours. They can also choose several employers instead of depending on a single company.

Project-based workers can work from wherever they want. For example, they may do freelance writing while they travel. Or they could work on a video-editing project from home.

Diverse opportunities

In a permanent full-time job, workers have routine duties and tasks. Gig workers can choose different roles from various fields. For example, they may do a painting job, drive for a ride-sharing service, and pack and load items at a warehouse all in the same month. They can try out various jobs that need different skill sets.

Short-term engagements

Employers usually look for gig workers to do short-term projects because it's more affordable than hiring a full-time worker. Employers can also select the best person for a job that requires specialised skills. Gig workers may prefer the project to last only last a few months so they can do other projects after it ends.

Pros and cons of joining the gig economy 

There are many advantages and disadvantages associated with the gig economy. Learn more about them before deciding to become a gig worker. Here are some of the pros:

Benefits of the gig economy

• Flexibility and control: Gig workers can enjoy the flexibility of choosing their own work hours, projects, and employers. In many cases, project-based workers have a deadline but can choose when to work. They can be their own boss and be in control of their work hours and location.
• Diverse opportunities: They can pick from many gigs across various sectors. This also allows them to expand their skills and income sources.
• Entrepreneurial skills: Gig workers learn to brand themselves and market their services to potential clients. They also develop negotiation skills when discussing rates, timelines, and services they provide. Gig workers build self-management skills by planning their schedules and tracking their income.
• Financial freedom: Professionals with highly specialised skills can benefit from well-paying gigs. They may enjoy higher earnings compared to traditional employees. Independent workers can also work as much as they want to increase their earnings.

Even though there are many benefits of working in the gig economy, there are also drawbacks that you need to consider. Here's a list of them:

Limitations of the gig economy

• Inconsistent income: Gig workers usually have irregular earnings, as their income depends on the work they can get. There may be periods when there are fewer job opportunities, so their monthly income may be unstable. This can make it difficult to plan their finances.
• Lack of benefits: Employers don't offer traditional employment benefits to gig workers, such as health insurance, a pension, annual leave, sick leave, and performance bonuses. Independent workers have to pay for their insurance and plan for retirement on their own.
• Uncertainty and instability: Gig work may be unpredictable. That can affect financial security. It may also be hard to get loans and mortgages approved for without a stable income.
• Dependence on market demand: Shifts in market trends and consumer needs may mean low demand for certain jobs. This can cause you to lose certain jobs and directly impact your income.
• Job security concerns: Gig work might not include a contract. When it does, the contract may not specify any notice period. This means that you can lose your job and income stream immediately. Freelancers overcome this problem by having multiple streams of income from different projects.

Legal requirements and labour rights of gig economy workers 

Currently, gig workers in Malaysia don't enjoy the basic rights, benefits, and protection that traditional workers do. They're not part of the definition of employees under the Employment Act 1955 (Act 265). They don't have the coverage of labour laws and regulations, such as minimum wage, Employees Provident Fund (EPF), overtime pay, sick or personal leave, and health insurance.

Gig workers usually enter a temporary contract with the employer and get payment for the task once they complete it. They may need to provide an invoice. People working gigs may face legal challenges, such as late payment or non-payment of wages. Employers may also terminate contracts with gig workers without prior notice.

With the establishment of the Gig Workers Commission, employees in the gig economy will receive the same protection and benefits as formal employees. They'll be able to contribute to the Social Security Organisation and get worker protection. Here's a table demonstrating the differences between formal employees and gig workers:

Formal employees	Gig workers
Working hours	Fixed	Flexible; depends on work arrangements
Income	Fixed monthly salary	Fluctuates according to the job
Benefits	Health insurance, retirement plan, bonuses, and other perks	No benefits
Statutory rights	Annual leave, sick leave, maternity leave, protection against unfair dismissal, minimum wage, EPF contributions, overtime pay, and disability insurance	Disability insurance (under certain conditions)

How will the gig economy evolve over the next few years? 

With advancements in technologies, there will be more gig platforms and markets. This means there will be a larger volume and variety of work available for gig workers. The platforms may also be more specialised, making it easier for workers to find suitable jobs. According to a report by the Association for Entrepreneurship, AI can match people with relevant jobs by analysing skills, experience, and qualifications. It also quickly validates their documents and automates parts of the recruitment process.

Collaboration tools, such as instant messaging platforms and cloud computing, make it possible for people to work remotely. Team members can work on a project at different times from different locations. For example, a freelance mobile app developer can have meetings with their team members or clients over a video call. The gig economy has been growing and is set to grow even more. At the same time, greater attention has been paid to regulating the gig economy and protecting employment rights of independent workers.

Conclusion 

There are many benefits of being a gig worker. These include flexibility, diverse work opportunities, and financial freedom. But it's also important to consider the drawbacks, such as inconsistent income, lack of benefits, and job security issues. You may be planning to join this growing economy. Equip yourself with skills to take on many different opportunities. By diversifying your income streams, you'll be more likely to have consistent work.

FAQs 

Here are answers to common questions about the gig economy:

1. What are the advantages of the gig economy?
   Working in the gig economy can give you a high degree of flexibility and autonomy. You can choose when, where, and how much to work. You can also try out different types of jobs and learn new skills. With specialised skills, you can set high rates for your services and increase your earnings.
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2. How does the gig economy impact job stability?
   Gig workers may not have much job stability, as they usually do short-term projects. They may be unemployed between stints. But if they work on long-term projects or do multiple jobs simultaneously, they may have more job stability.
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3. Are gig workers considered freelancers?
   Gig workers is a broader term, so not all gig workers are freelancers. It depends on their work arrangements. For example, a driver may work with a food delivery service provider and enter an employment contract. They're still in the gig economy, but they're not freelancers. If they provide a service for a fee and don't have an employer-employee relationship with any company, then they're a freelancer.
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4. What industries are most impacted by the gig economy?
   The main industries for the gig economy include banking and financial services, construction and property, trade manufacturing and supply chain, and healthcare. This labour market also affects the transport and logistics industry, as many delivery and ride-hailing drivers are gig workers. In the creative and technology industries, work is often project-based, and you can do it remotely. For example, employers may hire a freelance copywriter to rewrite website content.
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5. How can gig workers access benefits typically associated with full-time jobs?
   They can insist on having a written contract between them and the clients to protect their interests. This helps to prevent unfair dismissal or non-payment of fees.
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6. Are there any legal protections for gig workers?
   Gig workers aren't employees under the definition in the Employment Act. But they have this protection: if they get injured while working, they can claim temporary disability and receive other associated benefits. They're only eligible for these benefits if they've registered themselves under the Social Security Organisation (SOCSO) and made monthly contributions. However, with the new Gig Workers Commission, they may soon enjoy the same legal protections as formal employees.
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7. What are the potential financial challenges faced by gig workers?
   Independent workers may have an unstable income if there's a drop in market demand for jobs. They may not be able to get enough work, causing a decrease in their income. Employers may also choose not to renew the short-term contract without giving any notice. This can mean a sudden loss of income.
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8. Can gig economy jobs be a long-term career choice?
   Yes, it can be a long-term career choice if you continue to upskill. This way, you can become highly specialised in a particular skill and increase the rates for your services. By diversifying your skills, you can also do many different jobs. These steps help you to have job security and a more stable income.
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9. How do gig workers manage taxes and retirement planning?
   Gig workers need to keep track of their earnings and file taxes. They can do it in person at the nearest LHDN facility or through their online e-filing system. They can also register to become EPF members and make voluntary contributions to their accounts through i-Saraan.