The gig economy: Exciting opportunities, substantial risk for food manufacturers
Independent workforces are getting more popular, but how does this impact the industry?
People once dreamed of a working world that would allow them to set their own hours and work when -- and sometimes where -- they wanted. Today, that fantasy is becoming a reality.
Non-traditional business models are thriving, and people than ever are experimenting with different ways of working.
Food industry players embrace this trend as well. Food manufacturing jobs are becoming more difficult to fill. In fact, an estimated 2 million manufacturing jobs will be empty by 2025, resulting in lost productivity and earnings.
Many food manufacturers are turning to the gig economy to supplement their critical workforce needs. The “gig economy” is an environment in which temporary positions are common and organizations contract independent workers for short-term engagements as opposed to permanent jobs.
A recent study by the Metropolitan Policy Program at the Brookings Institution showed that the gig economy is increasing far faster than traditional payroll employment. Another study by Intuit predicted that by 2020, 40% of American workers will be independent contractors.
By embracing these experienced freelance workers, food manufacturers can gain access to a skilled workforce that is ready to fill open positions and shifts on demand.
Pro: Big benefits for employers and freelancers
Chris Reffett leads sales for the food division of MS Companies. His company uses mobile apps to capture real-time operational data to create a "gateway to the gig economy,” which helps food companies meet the changing needs of the industry.
“I’m a Gen Xer who grew up under my baby boomer parents, who believed you go to work for one company, build up your 401k then retire, but with millennials, we’re finding that’s not what’s important,” he told Food Dive. “People want flexibility to work on projects as much as they want, and to work for a particular company or bounce around to different projects and not just get paid an annual salary. The data shows us by 2020, the amount of people in gig employment will be double what it is today.”
MS Companies not only trains people so that they’re ready when needed, but also helps employers find the perfect people for their particular needs.
“We think this has a lot of value in manufacturing… it allows them [employers] to bring on trained and engaged workers to meet the high-demand peak periods without bringing on a permanent workforce. It gives employers flexibility to bring those people on when needed,” Reffett said. “We continue to engage these employees throughout the year with our employee engagement app, training them through our cloud based system, so when needed, they are not going in cold. They are warm, ready to work.”
“This alternative can benefit the worker who is highly sought after and coveted, because that worker can demand the highest pay and be paid for a variety of employers all at peak productivity at peak pay.”
Sales leader for the food division of MS Companies
By employing a gig workforce, companies can save on benefits, office space, training, and don’t have to find other work tasks for slower periods. This strategy allows manufacturers to contract with experts for specific projects, who might normally be too expensive to keep on staff. They can also have a trained workforce ready when high-demand periods come.
Freelancers reap substantial benefits from the gig economy, too. Independent contractors can improve their work-life balance with job flexibility, and don’t have to worry about getting bored with a long-term stint at a company or job.
“The gig economy is about disaggregating the style of work from a full-time, brick-and-mortar job to tiny tasks that can take place in a variety of places, under a variety of payment arrangements,” Reffett said. “This alternative can benefit the worker who is highly sought after and coveted, because that worker can demand the highest pay and be paid for a variety of employers all at peak productivity at peak pay.”
On the other hand, for less specialized work, a gig arrangement benefits employers because they hire only the labor they need at a specific time.
Bruce Bronster, hospitality partner at Windels Marx, noted the gig economy is playing a strong role in all aspects of foodservice and retail.
“What’s good about this is the employer need not pay for downtime. This is especially important in the food industry where margins may be paper thin, so the shaving of a few basis points of cost can be the difference between profit and loss,” he told Food Dive. “While the economics of the gig arrangement may be beneficial to the employer, many of the protections for the workers stay in place -- OSHA, safety, overtime, if applicable, FICA and other welfare benefits.”
Additionally, independent workers obtain their own health insurance and plan for retirement on an individual basis.
Con: More freedom means less control, accountability
Steven Kronenberg, a trial attorney at The Veen Firm, PC, focuses his practice on consumer protection and employee rights. He noted that independent contractors have fewer protections against injury or discrimination.
“Many independent contractors are also essentially on-call workers. This makes it harder for them to predictably and cost-effectively manage family responsibilities like child care, especially during non-business hours,” he told Food Dive in an email. “If food manufacturers could hire contractors, they would do so for economic reasons. However, short-term benefits to the bottom line might not outweigh the long-term costs and risks.”
Craig Peters, also a trial attorney at The Veen Firm, PC, said the gig economy is tearing a hole in the social safety net built into the economy.
“By attempting to reclassify employees to independent contractors, companies undermine the major pillars of the social safety net that was created to provide Social Security, reduce childhood poverty, elderly homelessness, and a host of other social challenges,” he told Food Dive in an email. “The diminished cost of hiring workers as independent contractors will be offset, in many instances, by the inability of companies to control their workforce.”
Additionally, many of these companies have been running away from corporate responsibilities — like paying for insurance, employer Social Security and Medicare — in order to save money in the short term. However, Peters said, the long-term costs of not having a cohesive workforce may more than offset the short-term savings for a company.
“The majority of the food industry is just starting to explore the ability to hire independent contractors. The industry seems to have been wary of creating a stable of workers that are not subject to the scheduling demands that are present for most food industry companies,” he said. “The primary reason to hire workers as independent contractors in the food industry would be to save money. If a food industry company had highly variable workflow, it may be a benefit to hire workers only on an as-needed basis as contractors.”
“By attempting to re-classify employees to independent contractors, companies undermine the major pillars of the social safety net that was created to provide social security, reduce childhood poverty, elderly homelessness, and a host of other social challenges.”
Trial attorney at The Veen Firm, PC
Peters added that the dangers from improperly prepared, stored or served food are serious and can lead to significant injury or death. Because of this, hiring workers who come and go and aren't well versed in food prep, storage and service could be a recipe for disaster.
“Food processing workers usually need training to produce safe and high-quality products,” Kronenberg said. “Hiring more contractors will lead to a lesser-trained workforce. This creates a significant risk of mistakes that lead to costly recalls and litigation that reduces profit margins and raise insurance premiums. Even if a company can minimize direct costs, there is a serious risk of damage to the brand in the court of public opinion.”
Companies that hire independent contractors often say this relationship gives employees flexibility to work as little or as much as they want. However, this practice doesn't provide an incentive for building company loyalty, which increases the frequency and cost of worker turnover.
“Most food companies rightfully take pride in their products,” Kronenberg said. “If they take as much pride in hiring and training full-time employees, it will show in the quality of their foods.”
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