Looking for good contract employees? Here are the perks 70% of gig workers demand

Photo of a contract employee who is employed by a business on a short term basis.

Freda Sojka and her small business attract customers by repelling insects.

Simply Soothing manufactures a natural insect spray called Bug Soother that—no pun intended—flies off shelves from the Midwest to Europe.

Sojka, CEO and founder, relies on seasonal contract workers to meet surges in demand for both retail distribution and online sales. This year, the company with 8 full-time employees in Columbus Junction, Iowa, more than tripled its workforce. After an unpredictable sales spike, this quickly became the company’s most profitable year.

“By the time we know the season’s going to be crazy, there’s no time for planning,” Sojka says.

Enter contract workers.

Simply Soothing’s experience is consistent with small businesses nationwide. On behalf of Principal, the Harris Poll conducted an online survey of 1,020 business owners who employ 500 workers or fewer.1 A majority (60%) says that hiring independent contractors is “vital” to success. Nearly half (49%) currently employ contract workers.

But effective management of seasonal workers—especially if you want to rehire them in a tight job market—is more than an employee 1099 form and a signed agreement. “We try to be flexible with them as much as we can,” Sojka says.

Flexibility was the favorite benefit for nearly half of survey respondents.

Keeping good people happy

Marilyn Whipple is a contract worker who lives just outside of Boston. Custom scheduling 3 jobs—driving for 2 ride-sharing companies and gig work as a pianist and musical director—helps her meet her monthly income goal after she retired at 59.

“I couldn’t find other ways to make part-time income that were as flexible as driving,” she says.

Yet Whipple also has the luxury of not needing the benefits of a full-time job. Her husband, a public schoolteacher, can cover her health insurance until she’s old enough to enroll in Medicare.

Gig work as a younger employee, she says, “would be a struggle. I wouldn’t have chosen to do it full time.”

Estimates for the size of America’s gig economy are notoriously varied, from fewer than 5% to more than 40% of the workforce. When you include retirees like Whipple and other workers who turn to gig work only for supplemental income, the share is higher.

And it can be tricky to cultivate their loyalty. Most businesses (71%) hire contract workers for less than 4 months.1 Sometimes temp work is a path to full-time employment, especially for larger businesses. But even smaller firms like Simply Soothing make that possible.

“For a lot of our temporary workers, my whole purpose is to hire them as employees,” Sojka says.

Photo of Marilyn Whipple.

Marilyn Whipple drives for 2 ride-sharing companies.

There’s much that a small business owner can do to attract and retain good contract workers if your company isn’t ready to add them to the full-time payroll. That includes good benefits beyond the staple flexibility. Our Harris Poll data shows that 70% of gig workers want more than just a reliable paycheck, requesting perks such as:

  1. Flexible hours (47%)
    • This is what has fueled the modern rise of the gig economy, in combination with mobile technology. Simply Soothing even allows job sharing among its seasonal employees.
  2. Training (25%)
    • Sojka says it’s important to manage surges in hiring, when it’s more likely that new employees will be trained by colleagues who have only slightly more experience.
  3. Health insurance (23%)
  4. Dental insurance (17%)
  5. Life insurance (16%)
  6. Disability insurance (13%)
  7. Retirement benefits (12%)

One note of caution for business owners trying to cater to contract workers: It’s possible to provide too much of a welcome with benefits. Internal Revenue Service (IRS) and state regulations outline how longtime independent contractors could be classified as employees, requiring you to pay back taxes on employment, or other unexpected costs.

Consult the IRS’ 20-factor test to help you anticipate and avoid complications.

Meanwhile, the California Legislature in September passed a bill that may reclassify hundreds of thousands of contract workers as employees. The law goes into effect January 1, 2020. Gig-economy issues also factored into a recent auto manufacturing strike. The legal and regulatory landscape of the gig economy remains in flux—much like the individual schedules of its growing ranks.

Next steps:

1 SMB Trends, an online survey of 1,020 small- and medium-sized business owners with 2-500 employees conducted October 2018 by Harris Poll on behalf of Principal.

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

Freda Sojka, Simply Soothing, and Marilyn Whipple are not affiliates of any company of the Principal Financial Group.

Insurance products and plan administrative services provided through Principal Life Insurance Co. Securities offered through Principal Securities, Inc., 800-547-7754, member SIPC and/or independent broker-dealers. Principal Life, and Principal Securities are members of the Principal Financial Group®, Des Moines, Iowa 50392.