COVID-19 to Kickstart the Gig Economy
Businesses of all types, both products and services, have had to either temporarily close or make major adjustments to their production or delivery of services due to the Coronavirus pandemic. The question now is how this pandemic and the ways in which we’ve responded will influence businesses in the future. There are expected to be major changes that could be permanent, especially for businesses that have had large areas filled with employees in cubicles or semi-private open offices.
The work-from-home crush due to the virus is already morphing into a more permanent situation for many employees, and for the most part they like their new situations. The next step according to some business efficiency experts is for both the business and the employee to assess their situations comparing employment to sub-contracted status.
Businesses and Employees Seeing Opportunities
The business is finding that they can sustain and even increase productivity for some jobs by allowing their employees to work from home. Facilities costs will be reduced, adding to profitability and lower insurance costs as well. How much more can they save if they move from fulltime employees to independent sub-contracted workers? There can be more savings in the cost of insurance and employee benefits.
The employees who have aspirations for self-employment and more control of their time and lifestyle see the gig status allowing more freedom, as well as the potential of higher income. They’re studying all of the pieces of owning a business, tax consequences, and potential problems. It could be the perfect opportunity to spin off on their own and start a new business. The opportunity may lie in who initiates the process; will it be the business or the employee?
Taking the Gig Leap
If you’re in a situation of working from home due to the pandemic and thinking about this status change from employee to freelancer, make it a fully informed decision. Moving from employer provided insurance, steady income, and other benefits to responsibility for all of it on your own is a big step. Consider all of the pieces:
- Where you’ll office.
- Liability and other business insurance.
- How you’ll find clients other than your current employer.
- Do you have the funds to carry you through startup until income is flowing?
- Do you understand how income and self-employment taxes work?
- Have you discussed the transition with close family who will be affected?
Even though you may be the one who wants to be in business for yourself, you should understand the IRS rules are for classification as an independent contractor versus an employee. It is the job of the business to make sure these rules are followed or risk having you reclassified as an employee later. Though it will have a greater impact on the employer, it will disrupt your new business and possibly your income stream as well.
As bad as the effects of the virus have been on the economy, this could be an opportunity for many to take the self-employment or freelancing leap that wasn’t in their thoughts just a few months ago.
With Tax Hive’s years of experience in tax and business services, we use our expertise to make your life easier so you can focus on building your business. Ever changing rules require a team who knows you, your business and the tax implications. Our tax professionals meet your needs while helping you manage tax risk, control costs and reap maximum benefit. If you’re ready to get started, CLICK HERE to see if you qualify for a FREE strategy session with one of our specialists today.