Independent Consultants and Their Role in the Gig Economy
By Zac Shaw
The term “gig economy” is defined as a labor market made up of short-term contracts and freelance work over permanent jobs. Some may think of driving for Uber or delivering for DoorDash; picking up a freelance project through Upwork or Fiverr may come to mind for others. No matter what you think about, there is no denying that the “gig economy” is growing throughout the United States and the world. For the purposes of this blog though, I want to focus on another type of “gig” worker, “Independent Consultants.” Independent Consultants are those with a special expertise who earn most of their income through contracting and consulting in the “gig economy”. Many fields have Independent Consultants, but the IT industry may have more than most.
IT Jobs are some of the highest paying jobs out there and demand for skilled computer professionals is through the roof. According to the Bureau of Labor Statistics, unemployment in August 2021 was 5.2%, but unemployment within the IT sector was only 1.5%. Literally thousands of IT positions are currently posted on job boards like Monster and CareerBuilder. The big question then is why? Why would someone whose skillset is in such high demand at Start-ups, Fortune 500 companies, and countless government agencies prefer working “gigs” over salaried positions? Here are some reasons why, as well as some potential challenges.
Money and Incentives
Gone are the days of a fat, company sponsored pension and gold watch at retirement. For a variety of reasons, many (not all) companies just can’t offer these perks anymore. The position may pay quite well, but the incentive to stay at the same company for an entire career just isn’t there. While the money available to salaried IT professionals may be good, it can potentially be better for Independent Consultants. Creating an LLC or working as a 1099 contractor can have some extensive benefits like tax deductions and higher hourly rates. Training and continuing education, business related mileage, meals, internet, and home office expenditures are all commonly deducted expenses. Independent Consultants set their own prices and since they are viewed as experts in their field, they can charge a premium for their services. Additionally, instead of an annual 2-3% raise, Independent Consultants can take the expertise and knowledge that they learn from one project and increase their hourly rate on their next one.
Independent Consultants have much more freedom than traditional employees. Most projects that they work on have a set end date, so they can choose to jump right into the next one or take a break for a few weeks or months before finding another. It may not be traditional PTO, but in between projects, they have the freedom to do what they want. In many situations, Independent Consultants have more flexibility with remote and off-hour work as well. Companies look far and wide when they need technical expertise and since Independent Consultants aren’t employees, more flexibility is usually available. Oftentimes, they may not even need to work the same hours and in the same location as employees.
Interesting Work and New Technology
While an employee may be assigned to whatever project their manager decides, Independent Consultants have the freedom to select the opportunity they find most interesting. Interesting can mean different things to different people. In many situations, working with new technologies is a huge determining factor. Experience with new, leading-edge technologies only increases the Independent Consultants value (and rate) for future clients. In other situations, the end goal of the project may be more appealing; imagine working on a project like Twitter or one of the gig economy apps mentioned earlier, like Uber or DoorDash, 10 years ago. This gained experience and expertise only enhances the money and freedom available to the Independent Consultant.
Independent consulting certainly has its benefits, but there are challenges that come along with it, too. People who thrive as Independent Consultants tend to be a little more risk tolerant. Those who are risk averse, may not enjoy the idea of definite end to a project and therefore, regular paychecks. Additionally, traditional benefits like medical and dental insurance are not provided, so one would need to purchase those themselves or get them through a spouse. Lastly, the life of an Independent Consultant can be a lonely one. Working remotely and moving from project to project every 6-12 months, isn’t the best environment for feeling like part of a team. For those that enjoy the camaraderie, consulting may not be the right decision.
No matter why someone decides to take this step, one thing is certain: the “gig economy” isn’t going anywhere.