The Growing Gig Economy and Its Effect on the Accounting Industry
CPAs knowledgeable about the gig economy understand it’s a segment of the workforce in a state of change. States are independently implementing changes that will have a lasting effect on gig workers everywhere.
In New Jersey, the industrial breakdown of where gig workers are most commonly found is unique according to our newest study from the ADP Research Institute, Illuminating the Shadow Workforce: Insights into the Gig Workforce in Businesses. The study uncovered gig workers make up 36 percent of business services and 18 percent of professional, scientific and technical services – but these aren’t the only professions with short-term W2 employees or 1099-M contractors. The gig economy touches every industry.
But for the CPAs of New Jersey, there is a unique opportunity to diversify their offering. By moving beyond reactive work — like tax returns — and further expanding into the role of strategic advisor, CPAs are helping clients stay ahead of the curve when it comes to everything from regulations and compliance to talent/compensation and process improvements. One area where New Jersey accountants are proving invaluable to businesses is in strategic advisory services surrounding the gig workforce.
As the current workplace faces numerous challenges in navigating unfamiliar territories, gig workers are critical to ensuring companies remain flexible during these uncertain times. In addition, with workers increasingly turning to gig work to supplement existing income or bolster their income in retirement, businesses must manage these workers accordingly. These are just two examples where CPAs can play an important, strategic role in advising clients on best practices for managing one of the fastest growing sectors in the workplace.
To better understand the growing needs of — and opportunities within — this segment of the workforce, the study showcases how the evolving gig worker functions in the modern workforce and how businesses need to innovate their strategies to best meet gig workers’ changing needs and behaviors.
CPAs and the accounting firms they work for can provide an array of strategic services to businesses of all sizes. From managing complex tax implications and regulations to providing extensive feedback on the best managed services technology, the rise of gig workers is providing accountants with actionable opportunities to strengthen their partnerships with clients and expand their capabilities and offerings beyond traditional tax preparation.
In addition to the business opportunities, accounting firms can leverage gig workers by taking advantage of a seasonable/flexible workforce to achieve true agility and further enhance their firm-wide skill sets without having to make major talent investments.
Seasonality (Flexing the Workforce)
As the job market faces growing volatility, 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 for both groups to properly staff any busy seasons, while also allowing them to more adaptably manage payroll costs during the rest of the year when the workload is less demanding.
With one in six workers now classified as gig workers, and with 70 percent of these gig workers choosing this path of work, it’s essential for CPAs to take a deeper dive into the unique contributions these skilled, tenured 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-percent increase in the number of gig workers. Surprisingly, both the extra-income and 1099/W2 workers have contributed equally to this growth.
By making gig workers part of their regular workforce and encouraging their clients to do so, CPAs can effectively scale their business during some of the busiest times of the year. This allows them to be better equipped to meet the needs of their clients while also controlling payroll expenses by limiting employee overtime costs – especially if there is uncertainty around how long the worker will be needed.
Solving the Skills Gap
The AICPA predicts that more than 75 percent of today’s CPAs will retire within the next 15 years, with eligibility starting as early as this year. 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 deeply affecting the industry.
Accounting firms are struggling to manage this massive skill loss within the industry, especially when it comes to specialized skills that are inherently necessary for certain projects in the accounting world. By embracing gig workers, especially those gig workers receiving Form 1099-MISC from their employers, 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 percent of these 1099-MISC workers are older and over the age of 55, while 40 percent consider themselves retired. Additionally, financial necessity does not appear to be the main reason why they’re engaging in gig work, as “doing what I enjoy” was the most popular reason they cited 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 for Accountants in New Jersey
Recognizing the diversified workforce is key to long-term success as a CPA. It not only affects policy at the governmental level, it will alter how companies engage with the workforce. The gig economy is not a fad; it has staying power.
In New Jersey, understanding any unique changes in the financial industry and professional service 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.