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Can the gig economy support pandemic recovery?

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 By Anne-Frances Hutchinson

 The waning days of the most catastrophic era in living memory are ahead, and all eyes are on recovery. The rise of remote work and the need for millions of unemployed workers to find alternatives to jobs lost during the pandemic has led to a major shift in the nation’s workforce. Today, over one third of it is made up of gig workers. At the very least, the gigging boom—which encompasses freelance, contract, and temporary work—is expected to outlast the pandemic and be an important aspect of getting the nation’s economy back on its feet.

“There’s a strategic shift happening where employers competing in a war for skilled specialty talent have accelerated their adoption of contingent labor—and it’s not only “gig” app and blue-collar jobs anymore. In fact, 40% of all white-collar workers fall into this category,” said Kevin Akeroyd, CEO of workforce management specialists PRO Unlimited.

Their December 2020 survey of market trends in the gig economy revealed that business pros are welcoming freelance work more than ever. “Not only does this new contingent economy offer increased flexibility and high-paying white-collar jobs, but employers benefit from a more diverse talent pool, greater innovation, better fiscal management, and much more,” Akeroyd reported. “By late 2021, we expect over half of skilled workers will be contingent and employers will need to successfully manage this expanding workforce as part of their overall human capital strategy.”

As employers reeled from the disorientation that marked the pandemic’s earliest days, hiring freezes, furloughs, and layoffs were common strategies used to manage the uncertainty.  Initially, temporary hiring plunged by 56%, a more rapid and deeper descent than in the Great Recession of 2008. Those rates bounced back to normal levels by July, and by September the hiring rate had increased by 9% year-over-year.

“It’s no surprise that freelancing is on the rise, especially now that we have fully disentangled ‘where’ we work from ‘what’ we work on,” said Hayden Brown, President and CEO of Upwork, the nation’s leading online talent staffing firm. “Amid all of the uncertainty brought about by COVID-19, the data show that independent professionals are benefiting from income diversification, schedule flexibility, and increased productivity.

“At the same time, companies are finding that these professionals can quickly inject new skills and capabilities into an organization and strategically flex capacity up and down along with changes in demand and workloads. We expect this trend to continue as companies increasingly rely on freelancers as essential contributors to their own operations.”

In their analysis of the current freelance landscape, Upwork found that while freelancing has increased overall, 10% of the workforce has paused it. The occupations most affected are also those most adversely impacted by social distancing and those where remote work isn’t feasible. Of the employers temporarily halting freelance hires, 88% said they were likely to return to it in the future.

“(T)he shift towards greater workforce flexibility coupled with the necessity to maintain continuity brought new demand for independent professionals from businesses. The changing dynamics to the workforce that has occurred during the crisis demonstrate the value that freelancing provides to both businesses and workers,” noted Upwork Chief Economist Adam Ozimek.

 The advantage of highly skilled gig workers

Although much attention has been paid to the unskilled sector of the gig economy, such as workers providing delivery, shopping, and ridesharing services, skilled professionals will benefit substantially from the labor market’s embrace of contingent hiring. Monster predicts that the gig economy will continue to flourish post-pandemic, as companies approach the future with increased caution and take advantage of the economic benefits of hiring independent contractors.

“Employers avoid the cost burden of recruiting new talent, onboarding, training, benefits, unemployment insurance expenses and the exposure to worker’s compensation, and liability when they use a gig worker,” John Schuller, PMP, EVP, Chief Operating Officer CORE, Headway Workforce Solutions told Monster.

While companies benefit from the agility that on-demand workers bring when hiring to meet the needs of specific projects or responding to market fluctuations, those choosing to freelance do so as well. The freelancing pool added 2 million workers from 2019, over a third of whom are now freelancing full-time.

Upwork found that 12% of the American workforce began freelancing for the first time because of the pandemic, and that 48% of new COVID-era participants see freelancing as a long-term, full-time career opportunity. According to Akeroyd, “Millions of skilled workers have chosen the flexibility in time, location, and work experience benefits of contingent as their long-term career path, and have chosen not to take full time jobs anymore.”

Tim Robbins, VP of staffing and recruiting at Monster, expects contingent hiring to maintain its newfound popularity in the near term, at least. “Historically, the staffing industry has been a leading indicator of economic recovery. As we look to 2021, I see guarded optimism for ongoing recovery across the majority of the key staffing sectors,” he said.

“There are key sectors in the space like warehouse and transportation that are experiencing significant growth, due to changing consumer behavior due to COVID-19,” he stressed. In addition to the rise of temporary hiring in healthcare in response to the crisis, “Growth will also be fueled as hospitality and retail recover from the impact of COVID-19, in the second half of 2021,” he said.

Monster found that the most in demand contingent workers are IT analysts, data engineers, IT/tech project managers, marketing managers, clinical pharmacists, and designers.

Speaking to business.com, Brent Messenger, vice president of public policy and community at Fiverr, said, “When the pandemic first hit and during the first wave of lockdowns, we saw an uptick in personal project-oriented services, such as music and crafting lessons, fitness plans, video game coaching, and the like,” he said. “However, after about a month, we began to see a jump in the demand for business-related services, particularly ones that were linked to bringing traditionally offline businesses online or those that help promote businesses online, like social media marketing and more.”

The Upwork survey showed that 50% of current contingent workers are very highly skilled. The availability of remote work spurred by the pandemic has also made gig work more attractive to 58% of professionals who hadn’t previously considered it.

“Non-freelancers new to remote work say they are considering freelancing in the future because it has made them a more productive worker (73%), they’d prefer working remotely over returning to a traditional office (74%), and to earn extra income to cope with the impact of the pandemic on their personal finances (85%),” they said.



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Amazon.com, Inc. (NASDAQ:AMZN), (DASH) – COVID Relief Bill Could Trigger Larger Tax Bills For Gig Workers

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Gig workers and third-party sellers on e-commerce platforms such as Etsy, Inc. (NASDAQ: ETSY), Walmart Marketplace (NYSE: WMT) and even Amazon (NASDAQ: AMZN) could find themselves with tax issues in 2022 thanks to a change in Internal Revenue Service tax codes contained within the American Rescue Plan Act of 2021.

The $1.9 trillion COVID relief bill that just passed the U.S. House and Senate and is expected to be signed into law by President Joe Biden by this weekend amends Section 6050W of the IRS code to require reporting for any transactions that exceed $600 in gross sales through a 1099-K form.

This change means not only are workers required to claim this income on their taxes (as currently required), but any business that pays them, such as Uber (NYSE: UBER), Lyft (NASDAQ: LYFT), DoorDash (NYSE: DASH) and even marketplaces like Etsy (NASDAQ: ETSY), will be required to submit a 1099-K to the IRS on the individual’s behalf. Under current law, payment organizations must only file a 1099-K form on behalf of a seller when total sales exceed $20,000 and/or total transactions exceed 200 in a tax year.

“Payments made in settlement of third-party network transactions, however, are required to be reported only if the amount to be reported exceeds $20,000 and the aggregate number of transactions exceeds 200 with respect to any payee within a calendar year,” Internal Revenue Bulletin: 2011-23, issued in 2011, says.

“There is a segment of the population that is probably making ends meet and of course they should be aware of their tax obligations, but as they try to cobble together an income, should we be going after these people?” asked Katie Vlietstra, vice president of government relations and public affairs for the National Association for the Self-Employed (NASE).

Vlietstra told Modern Shipper NASE believes all sellers and gig economy workers should be meeting their tax obligations, but the new requirement, which goes into effect on Jan. 1, 2022, could have unintended consequences.

“Every individual should be meeting their tax obligation. They should understand their tax liabilities,” she said. “Our concern is … when you are making big fundamental changes, there isn’t a lot of emphasis placed on the technical changes.”

Vlietstra noted the DoorDash driver who makes money on the weekend to supplement a full-time job.

“Is that their true income [on the 1099-K]? Is that expenses? Do they understand what that means?” she said. “My position on this is maybe $600 is the right amount – we have seen some states that have moved to that reporting level – but there hasn’t been a [conversation with] people who are working in the diversified economy.”

Read: Getting gig workers the unemployment they deserve

NASE will be focusing on education this year to ensure everyone complies with the new regulation, and Vlietstra said it will continue to “voice to Congress that we need to circle back on this.”

“I think there are some unintended grabs that could happen,” she added. “Everyone should be meeting their tax obligations, but if I’m selling my table for $800 more than I paid for it, [do I need to claim that]? Overall, the bill was good. We need to get back to work. We need small businesses to get back to work … but in a massive $2 trillion bill, things get thrown in.”

For businesses, the change is straightforward – they need to monitor and report any income they pay out exceeding $600. That includes online marketplaces that are facilitating these transactions. But for third-party sellers on platforms like Etsy, it gets more complicated, requiring more tracking of expenses as income that may have slipped under the IRS’ radar before may no longer.

“You need to be tracking your expenses and what is a qualified business expense,” Vlietstra said. “Make sure you understand what this really means for your tax exposure. Make sure you are tracking gas and meals and other things. As taxes get more complicated, they may need help doing their taxes.”

There are several open questions, though, Vlietstra said. An example would be an individual who sells tickets on a platform such as StubHub. Is that a business? Does that single transaction, if it exceeds the $600 limit, trigger a 1099-K? What about roommates who may pay each via Venmo for utilities? At the end of the year, those transactions could exceed $600, but should that money be claimed as income? How would the roommates record that on a tax return if Venmo issued a 1099-K? And how does a platform such as Venmo know what should be considered income? The answers to these questions, Vlietstra said, are to be determined, but she is concerned that situations such as this could trigger unnecessary IRS audits.

“I feel like we put our finger in a hole and there are still 500 holes spitting water at us,” she said.

Click for more Modern Shipper articles by Brian Straight.

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Ruling in arbitration case bad news for gig workers – Massachusetts Lawyers Weekly

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A recent decision from the 1st U.S. Circuit Court of Appeals found that a housecleaner who claimed her employer had misclassified her as an independent contractor couldn’t sue because she was bound by a “clickwrap” mandatory arbitration agreement.

The plaintiff in Emmanuel v. Handy Technologies, Inc. had submitted an application through the website of a company that assigns housecleaning jobs to workers and clicked a checkbox agreeing to its terms of use.

She subsequently used the company’s mobile app to accept an independent contractor agreement, which was required for her to be connected with customers.

The 15-section agreement included a mandatory arbitration clause in section 12. That portion was not visible unless the user scrolled down through the entire agreement.

The plaintiff performed between 10 to 20 cleaning jobs for the defendant but stopped working because of payment issues. She then brought a putative class action alleging that she and others had been misclassified as independent contractors in violation of the state Wage Act and the federal Fair Labor Standards Act.

When the defendant moved to compel arbitration, the plaintiff argued that she did not have sufficient notice of the arbitration clause to be bound by it.

But the 1st Circuit disagreed. Applying the standard set forth earlier this year by the Supreme Judicial Court in Kauders v. Uber Technologies, Inc., it concluded that an online contract had been formed because the plaintiff had “reasonable notice” of the terms and made a “reasonable manifestation of assent” to those terms.

The court acknowledged that only a portion of the agreement was immediately visible on the plaintiff’s phone screen, and that portion did not include the arbitration provision. But it took the position that it was sufficiently clear that “additional text further specifying the terms of the Agreement could be viewed by scrolling.”

In doing so, it specifically declined to read Kauders as holding that for a user to be bound by terms visible only through scrolling, he or she must be required to scroll through the full text of the agreement.

The problem with that reading is that it fails to take into account that workers like the plaintiff are largely unsophisticated, low-wage gig workers. They are encountering long, dense agreements like the one in Emmanuel on their phones, which makes thorough review next to impossible. Moreover, they are not in a position to negotiate over the terms of such an agreement.

In fact, in some ways, these workers are more similar to consumers facing “take it or leave it” arbitration provisions than traditional employees.

It’s unfortunate that decisions like this one gloss over that reality.

 

Massachusetts Lawyers Weekly’s Editorial Advisory Board provides knowledge and guidance for the editorials that appear on this page. The board is an advisory panel only, with no official voting or participation record. The input from the board is a tremendous resource to Lawyers Weekly; however, the editorials represent the position of the newspaper and its editorial staff, not the members, nor any given member, of the board. 

BOARD OF EDITORS: Robert J. Cordy, Boston; Sophia L. Hall, Boston; Martin W. Healy, Boston; Hon. Margaret R. Hinkle, Boston; Thomas M. Hoopes, Boston; Regina M. Hurley, Boston; Shiva Karimi, Boston; Hon. Rudolph Kass, Boston; Marsha V. Kazarosian, Haverhill; Andrea C. Kramer, Boston; Renee M. Landers, Boston; Richard L. Levine, Boston; Elizabeth N. Mulvey, Boston; Eric J. Parker, Boston; C. Max Perlman, Boston; Patricia M. Rapinchuk, Springfield; Martin R. Rosenthal, Boston; Jeffrey Sacks, Boston; Carol A. Starkey, Boston

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6 Ways Gig Workers Can Invest for Retirement | Business

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In 2021, you can contribute up to $13,500 if you’re under 50, or $16,500 if you’re 50 or older.

There’s no Roth option, so you’ll be taxed upon withdrawal. There’s also a steep penalty if you need to withdraw your SIMPLE IRA funds within two years of setting up the account: 25%, instead of the usual amount, on top of taxes.

As the employer, you’ll have to contribute to your SIMPLE IRA on your own behalf, as well as for any employee who’s earned at least $5,000 in at least two of the past five years and expects to earn at least that much for the current year. You’ll have to choose one of the following formulas:

  • Automatically contribute 2%.
  • Match 3% of contributions dollar for dollar.

Due to the lower limits and the extra layer of rules, a Solo 401(k) or SEP IRA is typically a better option for solo gig workers. However, if you expand and add others to the payroll, a SIMPLE IRA may be a good option.

6. Taxable Brokerage Account

If you’ve exhausted your other retirement savings options or you want the flexibility to invest with fewer rules, a plain old taxable brokerage account works. Since you won’t get any tax breaks for investing in a brokerage account, though, aim to max out your Roth IRA or traditional IRA contribution before you go this route.

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