The gig economy might be transforming many aspects of the traditional employee-employer relationship – there is still not a consensus on whether gig workers are contractors or employees – but the way gig workers are paid has yet to change with the times.
The latest Pay Advances Playbook takes a close look at different types of gig workers to determine their expectations for getting paid and to gauge their interest levels in pay advances.
Who Are the Gig Workers?
According to the study, working in the gig economy is a paycheck-to-paycheck situation.
Payday-expectant workers make up the largest share at 41.9 percent. Another 29.6 percent are payday-centric, while financially stable and secure gig workers combined represent just 28.5 percent of the sample.
All of these different types of gig workers also have different reasons for getting involved with the gig economy. The least financially secure, payday-dependent and payday-centric were the most likely to cite gig work as a primary means to support themselves and their families and as a way to pay day-to-day bills. A majority of financially secure workers (55.4 percent) were attracted to gig work for its flexibility.
The contrasting motivations workers have for participating in the gig economy
are closely related to their interest in pay advances. Paycheck-to-paycheck workers are not only more interested in pay advances than other personas, but also view them as a way to gain greater financial control and flexibility.
Large portions of paycheck-to-paycheck workers have expressed interest in pay advances, with 84.1 percent of those who are payday-dependent and 83.6 percent
of payday-centric respondents doing so. But interest in pay advances isn’t exclusive to those who are struggling financially. Even two-thirds of all financially stable and financially secure gig workers are interested in pay advances.
To further drive home the importance of pay advances for gig workers, many would be willing to switch to digital platforms that provide them. An earlier study found that a majority (51.8 percent) of gig workers would consider switching to platforms that offer pay advances.
In the new study, roughly two-thirds of these workers say they would be at least “somewhat” likely to switch to providers that offer pay advances. Additionally, 30.2 percent of payday-centric and 35.2 percent of payday-dependent workers consider themselves “very” or “extremely” likely to switch to providers that offer pay advances.
The desire for pay advances complements past findings that also show how important fast payments are to gig workers; 85 percent of them would work more often if they were paid faster.
What About Fees?
Majorities within all paycheck-to-paycheck personas are willing to pay fees of at least 1 percent. The study shows that 38 percent of payday-expectant workers are willing to pay fees of between 1 percent and 3 percent, and 6.8 percent are willing to pay more than 5 percent.
In an interview with PYMNTS, Johnny Reinsch, CEO of Qwil, a liquidity as a service platform, explained how the company works. Qwil buys the invoice from the client, staffing firm or freelance marketplace and pays the freelancer or SMB a discounted amount, determined by Qwil’s proprietary underwriting algorithms.
“By adding a bit of technology and injecting ourselves into the ecosystems where freelancers and SMBs find work and get paid for the work, we’re able to have an impact at a massive scale,” Reinsch said.
According to Reinsch, the total fees amount to a few percentage points – on average, roughly a 20 percent annualized charge. So far, freelancers accept offers to use Qwil and get advances about 40 percent of the time. Adoption is greater once it’s made clear that these are not payday loans with high interest rates and fees.
Qwil is registered as a public benefit corporation, so in addition to providing profits to shareholders, the company has a “charter purpose” to provide some social good and meet high bars for transparency and legal accountability.
The goal, said Reinsch, “is to make sure we really are adding material value to society – not extracting it in the form of fees.”
Interestingly, according to the latest Pay Advances Playbook, fees associated with pay advances are not a major deterrent. Fewer than one in five (14.6 percent) payday-dependent workers who are not interested in them believe they are too expensive. The biggest negative among payday-dependent workers (37.1 percent) and payday-centric workers (37.8 percent) is that using pay advances would restrict financial flexibility.
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