Jun 26, 2020

Gig Economy Accounting: Are You Ready to Embrace the Change?

Ahu Yildirmaz, PhDBy Ahu Yildirmaz

The gig economy is a segment of the workforce in a state of change. States are independently implementing policies that will have a lasting effect on gig workers everywhere.

The professions where gig work is most commonly found is unique in Pennsylvania, according to our newest study at ADP Research Institute, Illuminating the Shadow Workforce: Insights into the Gig Workforce in Businesses. The study uncovered gig workers make up 39% of business services and 27% of professional, scientific, or technical services. These aren’t the only professions with short-term W-2 employees or 1099-MISC workers, though. The gig economy touches every industry.

Working with freelance / gig economy workersFor the CPAs, there is an opportunity. Practitioners can move beyond reactive work (like tax returns) for these workers and expanding into the role of strategic adviser. Also, CPAs can help clients stay ahead of the curve when it comes to gig worker regulations and compliance, as well as talent/compensation and process improvements.

The COVID-19 workplace faces numerous challenges, and gig workers may become critical to ensuring companies remain flexible during these uncertain times. With workers increasingly turning to gig work to supplement existing income or to bolster their income in retirement, businesses must manage these workers accordingly. These are just two examples where CPAs can play an important, strategic role on best practices for managing this sector.

In addition to the business opportunities, accounting firms can leverage gig workers as a seasonable/flexible workforce to achieve agility and further enhance their firmwide skill sets without having to make major talent investments.

Flexing the Workforce

With a depressed and volatile job market, accountants and the businesses they work with are looking for ways to bring greater flexibility to their talent pool. Gig workers (those covered by W-2 or 1099-MISC forms) can be a great way to properly staff busy season while also providing more adaptable payroll costs during the rest of the year.

One in six workers are classified as gig workers. With 70% of these workers choosing this path of work, it’s essential for CPAs to take a deeper dive into the unique contributions these skilled workers can bring to a dynamic and agile business, on both the client side and in their own operations. Over the past decade, companies have seen a 15% increase in the number of gig workers. Surprisingly, both the extra-income and 1099/W2 workers have contributed equally to this growth.

Solving the Skills Gap

The AICPA predicts that more than 75% of today’s CPAs will retire within the next 15 years. While the employment of accountants and auditors is steadily increasing, a myriad of challenges – from aging boomers and millennial turnover to declining experience levels and technology automation – is affecting the industry.

Accounting firms are struggling to manage this massive skill loss, especially when it comes to specialized abilities necessary for certain projects in the accounting world. By embracing gig workers, CPAs can utilize contingent workers for their specialized skills on a project basis, including periods when the full-time workforce cannot handle the workload without significant education, projects with short-notice, or commission-based work.

Our study also found that 40% of these workers are over the age of 55, while 40% consider themselves retired. Financial necessity does not appear to be the main reason why they’re doing the work: “doing what I enjoy” was the most popular reason they cited for returning to the workforce. This intrinsic drive within this section of the workforce provides accountants with a wide, passionate talent pool that can be leveraged for specific projects and scaled in or out as needed.

Looking Ahead

The gig economy is not a fad. It has staying power. In Pennsylvania, understanding any unique changes in business and professional services will make CPAs necessary to gig workers in those industries. For CPAs working with large companies or small business clients, gauging gig worker demand with the ebbs and flow of the natural cadence of business will make their counsel invaluable.

Ahu Yildirmaz is co-head of ADP Research Institute in Roseland, N.J. Follow her on Twitter at @Ahu_Yildirmaz.

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Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.