Challenges 

Traditionally, payment and rewards have been based on hierarchical salary structures or job roles. However, the gig economy demands a shift in how we reward workers, especially those acting as change agents. These agents, crucial for team success, understand systemic issues and work collaboratively to integrate gig workers and realign company goals. As organisations create new roles, such as Chief AI Officers, which are temporary but crucial, there is a need for adaptable and fair reward systems that reflect the evolving nature of these positions.

With the rise of remote working and the expansion of the gig economy, traditional reward systems are evolving. It is estimated from TR2050 Think Tank discussions that companies expect to have between 25 – 33% of gig workers making up their workforce in the next 5 years. Bonuses and company perks are gradually giving way to more flexible options such as remote working allowances, flexible scheduling, and paid time off. This shift is driven by the gig workforce’s promise of flexibility, cost savings, and access to diverse talent. However, it also presents risks and challenges, including job security, platform dependency, pay equity, and potential exploitation of staff. It is possible that these workers are not “in the system” and there may already be inequalities without us knowing.

Providing benefits to gig workers without classifying them as employees is a significant challenge. This tension complicates efforts to engage the gig workforce effectively. Industry needs to develop new capabilities within the reward function, including educating and negotiating with regulators, to create a productive and engaged gig workforce.

Opportunities:

Looking ahead, companies must extend their interest beyond traditional employees. The current lack of strategic workforce planning highlights the need for a more deliberate approach. Companies should build a balanced workforce mix that considers business unpredictability. Startups and young companies, with fewer structural constraints, can leverage significant opportunities by systematically integrating gig workers.

Adapting reward systems for the gig workforce includes several innovative strategies:

1. Flexible Benefits: Traditional benefits packages are being restructured to include remote working allowances and flexible scheduling options. These benefits cater to the gig worker’s desire for autonomy and work-life balance.
2. Paid Time Off: Offering paid time off to gig workers can enhance their loyalty and productivity, aligning their rewards more closely with those of full-time employees.
3. Financial Incentives: Organisations are exploring new financial incentives, such as financial planning assistance, quality bonuses and retention bonuses, training programs, and certifications, to attract and retain gig talent.

The gig economy appeals to many younger workers, though not universally. Organisations can retain employees by offering gig economy benefits to traditional employees, such as extended travel, without the need to resign. This approach could involve offering base pay without bonuses in exchange for extended time off, blending traditional employment with gig-like flexibility.

Categorising the workforce for tailored rewards involves four groups:

1. Fungible Skills: Easily replaceable roles often outsourced by large organisations (e.g., reception, catering, maintenance).
2. Ecosystem Influencers: Individuals outside traditional employment who influence the company’s success (e.g., influencers, advocates).
3. Standard Skills: Similar to traditional full-time employees.
   X-Factor Individuals: Highly valuable employees critical to the company’s future.

Each group requires a tailored reward strategy, with a focus on personalised approaches for critical talent. Balancing attention across all groups is vital to ensure overall organisational success.

Recommendations:

Organisations need to balance long-term workforce planning with attracting diverse, flexible gig workers. Long-time freelance gig workers often prefer flexibility and innovative reward systems like cryptocurrency. Disrupting traditional employment models and adopting more flexible employment practices, such as at-will employment, could be beneficial.

To adapt to changing workforce structures, organisations must address several key areas:

1. Segmentation within Large Organisations: Segmenting a multi-generational workforce to meet diverse needs without overcomplicating processes.
2. Fairness in Pay: Ensuring fair pay, especially for frontline staff, to address societal disparities in wealth distribution.
3. Intergenerational Fairness: Addressing differences in wealth accumulation and lifestyle choices between baby boomers and newer generations.
4. Nomadic Workers: Navigating social security, tax, and location obligations for workers who prefer working from anywhere.
5. Skills Management: Understanding, listing, and managing skills within the gig workforce on a sustainable basis.

The gig economy’s impact on reward practices underscores the importance of fairness and equity:

1. Purpose Beyond Reward: Addressing fairness and equity within the workplace and in broader societal terms.
2. Voice of the Employee: Ensuring employees feel valued, recognised, and fairly rewarded.
3. Role of Reward Professionals: Using data to drive fairness in compensation, aligning with legislative trends and societal expectations.
4. Holistic Approach: Adopting a joined-up perspective on the entire workforce and the purpose of reward.

Conclusion:

Adapting reward systems to the gig economy requires a fundamental change in strategies to ensure fairness and equity, reflecting broader societal values and maintaining the company’s reputation. Organisations that effectively integrate gig workers and address the challenges of a changing workforce structure will be well-positioned for long-term success.