How to Avoid the 5 Most Common Pitfalls of Gig Work

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If working for yourself is falling short of expectations, try these tips for getting back your mojo

You know the benefits of working for yourself: The dress code is whatever you put on in the morning, your boss (namely, you) never rags on you for coming in late, and you have the freedom say no to work you really don’t want to do. But there are some downsides to striking out on your own, particularly within the gig economy.

According to the US Bureau of Labor Statistics, there is “no official definition of the ‘gig economy.’” Unofficially, they say “a gig describes a single project or task for which a worker is hired, often through a digital marketplace, to work on demand.”

But what is a gig worker? And what challenges might they have to overcome to be successful?

 

A gig worker, a freelancer, and a contractor walk into a bar …

It sounds like the setup for a joke, but this situation is perfectly feasible. While it’s easy to blur the lines between them, freelancers can be contractors or gig workers at times. Though, there are a few subtle differences between them.

Contracting: As the name implies, these individuals are given contracts specifying the work they will do and a deadline for completion. That time period is typically longer than a gig or freelance project, and the work is sometimes done at the client’s office or job site.

Freelancing: The biggest difference between a freelancer and a contractor is whether or not a contract has been established from the beginning. Freelancers typically have little more than a spoken agreement to complete the work at hand, and the work they do is usually completed at home.

Gig work: Gig workers take gigs — or short jobs posted on third-party sites. Sometimes the customer posts a job they need done, and the gig worker responds. Think of a Lyft driver coming to pick you up or a website you need designed, posted on Upwork. Other times, the customer selects the gig worker or their offering from something like a public list, such as with an Airbnb rental or dog sitter on Rover.

In short, all three of these options imply freedom and the chance to not be tied down by someone else’s schedule or company policies. Nevertheless, many gig workers eventually hit a wall, where they must either come to terms with the reality of nontraditional employment, pursue alternate opportunities, or quit.

 

5 pitfalls of gig work and how to avoid them

Gig work is easy to get into and easy to love, given that it capitalizes on the skills and resources you already have at your disposal. Have an extra room? Rent it out on Airbnb. Always getting compliments on your handyman or decorating skills? Advertise your services on Fiverr or TaskRabbit.

Like any job, though, gig work has its pain points.

 

1. Letting the competition leave you behind

Find out!

More and more people are entering the gig economy market. In fact, 28.5 million Americans are expected to start or continue a side-hustle in 2018.

It’s no wonder, then, that competition and expectations are rising. Take Airbnb, for example. According to recode.net, Airbnb guest arrivals were right around 21,000 in 2009. By 2016, that number reached 80 million worldwide. And while more travelers looking for Airbnb lodging certainly means more opportunities for the homeowners and renters who put their accommodations on the site, many of these Airbnb hosts are also finding stiff competition among neighbors.

Suddenly, what started off as a small side-hustle is turning into an all-out war, with battles over the lowest prices, best perks, and most modern amenities. Gig workers must ask themselves if the competition is worth it and, if it is, be prepared to fight to the top.

See the list.

One way to overcome this pitfall is to not allow yourself to get swept up in the competition in the first place. Provide the best service or resource you can, and afterward, make a point of asking your customer or client to leave a review on your profile. A hundred consistently positive reviews trump a slightly lower price tag any day.

Think reviews aren’t all they’re cracked up to be? Check out this thought experiment by Oobah Butler, and how he made his home into the No.1 ranked restaurant on TripAdvisor.

 

2. Letting taxes become overwhelming

If there’s one thing gig workers can count on, it’s that anytime you work for yourself, taxes are going to be a pain. Unlike employees who contribute part of their income to taxes all year long, self-employed workers pay taxes quarterly or once a year. As a gig worker, you may find the number of tax forms you have to fill out mildly exhausting.

Are the Federal Tax Reforms good for independent contractors? Find out.

Luckily, there are a few different tricks to keeping ahead of taxes. Create a filing system to keep track of all things finance. Make a folder for receipts so you can write off your business expenses at the end of the year. Make folders — physical or on the cloud — to sort client invoices and keep track of each payment made.

And here’s the best news: The gig economy actually simplifies certain aspects of taxes. For instance, Lyft files 1099 tax forms for drivers who give at least 200 rides and who generate $20,000 in gross receipts. TaskRabbit has a similar system, where Taskers receive a 1099 from the company if they complete 200 tasks and earn more than $20,000.

But what if you don’t qualify? The nice thing about being part of the gig economy and taking actual gigs from certain sites is you’ve logged all your gigs in one place. Just open up your transactions and use the information from the site to file taxes as an independent contractor, under the rules of your state.

It’s important to note that as an independent contractor, you may be required to send the IRS estimated quarterly payments rather than once-a-year taxes with everyone else.

 

3. Letting financial long-term planning get away from you

When you work for yourself, you know well and good no one is putting away retirement money for you. No 401(k) matching, no HSA savings — nothing. Therefore, it’s paramount you meet with a financial advisor and make a plan for retirement.

According to a Small Business Majority poll, 40 percent of freelancers are not saving enough for retirement. Sixty-nine percent say they don’t make enough to put money in a retirement plan, based on the fact their income varies so widely from month to month.

Laura Shin, Forbes contributor, urges freelancers to put 10–20 percent of their income toward retirement. “If that amount seems daunting to you, start small,” she writes. “Open a Roth or traditional Individual Retirement Arrangement (IRA) and contribute up to the limit, $5,500 (or $6,500 if you’re 50 or older).”

As Shin notes in her article, Roth savings accounts are typically better because the investor pays taxes on their contributions upfront, then is able to withdraw money, come retirement, without paying any additional taxes. Given that you’re likely in a smaller tax bracket now than you will be when you retire, it’s highly beneficial to pay those taxes now rather than later.

And speaking of savings, long-term financial planning is huge, but gig workers can also help themselves by putting money into emergency savings accounts. MoneyUnder30.com has a helpful emergency fund calculator that can tell you, based on your average monthly expenses, current savings, and hireability, how much money you will need to cover your expenses while you’re without work.

 

4. Letting poor communication skills impact your perceived professionalism

Not everyone is a natural communicator. Some people are outgoing and easy to talk to in person but lack the written skills in grammar, punctuation, and spelling to come across well over email. On the flip side, some introverted gig workers feel limited by their shyness or fear their shyness may come across as rudeness.

Like it or not, communication is one of the keystones of professionalism. Whether it’s the written correspondence you send to clients, or the agreeableness and competency you convey when performing a service in person, the chances of you scoring a referral or a repeat customer are based heavily on your communication skills.

In his Customer Think blog, titled “10 Tips for Effective Communication With Customers,” Kushal Dev writes, “If you can’t convince [your customers] about your product or service, they will simply move ahead to the other available options.” And he’s right. Your success in business depends on your ability to communicate.

Dev’s blog centers around verbal communication, which is huge. Many gig workers have in-person contact with their clients, whether it occurs in the car on the way to the customer’s destination or in the customer’s home. If you lack confidence in your in-person communication skills, there are several resources that can help, including Toastmasters and Speak First.

If written communication is where you fall short, consider partnering with someone who provides proofreading skills. Perhaps you can trade your services for a mutually beneficial outcome. If partnering isn’t for you, consider downloading Grammarly, an app designed to reduce errors in written correspondence.

As a gig worker competing in a populated market, you must put your best foot forward at all times. Improve your communication skills, and you’ll come across as professional, competent, and trustworthy.

 

5. Letting go of the dream before it’s time

A recent article in The New Yorker by Nathan Heller included the story of Seth F., a gig worker who’d taken jobs ranging from hanging pictures to writing a complete stranger’s best man speech. Despite the fact he enjoyed the work, he called it “lonely” and said it didn’t feel “sustainable” to him. That’s a feeling many gig workers can identify with personally.

Part of what spurs those feelings of loneliness is the lack of a team. No company culture to drive excitement and no feelings of camaraderie between co-workers.

Then there’s the unsustainable part. For many gig workers, the prospect of work without benefits or knowledge of when the next job is going to come is truly disconcerting. People tend to romanticize the freedom of working for yourself, and they forget how much security comes with traditional employment — constant hours, a regular paycheck, and benefits like sick pay or PTO.

How to create a support system when you work solo.

If you’re experiencing these feelings of unhappiness currently, don’t give up the dream too early. There are other options for bringing fullness to your life — both through personal connections and increased confidence in the sustainability of the work you’re doing.

In an earlier TSheets blog, Rieva Lesonsky, CEO of GrowBiz Media and SmallBizDaily.com, provided six tips for creating a support system when you’re self-employed. She suggests joining local business organizations and industry groups. Talking to other freelancers and gig workers may also help you put together a better plan for the long term. Ask them what they do to stay busy. What recommendations do they have for marketing your skills further? Perhaps they know of a sharing economy site you haven’t discovered yet.

You can also make the work feel more sustainable by putting your efforts toward sites that take a smaller percentage of your proceeds. Wondering where gig workers are making the most? Check out this article from Priceonomics.

 

YOU get a gig, and YOU get a gig!

Gig work isn’t as easy as it looks. Any Uber driver can tell you that. There are a great many challenges gig workers must overcome to find happiness and fulfillment in this new nontraditional career path.

That said, gig work has so much to offer. Leaving it too soon, without at least troubleshooting your pain points, isn’t the answer. So before you let the prospect of complicated taxes or those feelings of loneliness and insecurity get the best of you, why not take a second look?

After all, the gig economy is more than just one person — it’s a network of connections and resources. Use those resources to your advantage. Who knows? With so many gig workers and opportunities out there, you can probably find someone to organize those pesky taxes for you!

1 Comment

  1. Greg Mathias says:

    Great article. And, thanks for your defense of the Oxford comma. Sadly, it should need no defending, though. It’s a strange world in which we live!

    [Reply]

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