Here’s why there’s an industry-wide debate on instant payments and its impact on gig worker retention.
It’s a word that has been going around a lot.
No one has the patience to sit around and wait for something.
This demand for “faster” processes has moved e-commerce giants like Amazon to consider the now-successful one-day shipping and same-day deliveries.
The appeal of something “instant” makes consumers feel powerful and heard.
Studies show that consumer markets are more likely to prefer businesses based on instant disbursements.
Now, this very logic applies to the gig economy companies.
Gig workers or gig entities work with other businesses and individuals that pay the former in exchange for services. Think of gig apps like Fiverr that pay independent contractors after every gig.
In the B2B ecosystem, the gig companies will work with other companies based on demand-supply assessments and shared core values.
Now, let’s assume that you’re an owner of a gig company that specializes in, say, online advertising. Given the demand for your services, many small and mid-size businesses are likely to connect with you for your services.
Once you’ve finalized the deal with the “client”, you’ll draw a 3-month contract to see how things work before you plan things for the long term.
And finally, when it comes to issuing you an advance or paying you the promised compensation, the business hesitates. And even when they do make the payments, the process is slow, outdated, and tedious.
This can be uneasy for gig workers, especially if you plan on contracting with them for a long-term project.
This is the age of millennials and Gen Z business owners. The gig economy simply doesn’t have the time or the patience to wait for payments to be processed, especially when there’s a whole new world of instant payment infrastructure waiting to be leveraged.
Let’s understand why the gig economy prefers instant payment infrastructure and how this demand for instant payments impacts gig worker retention in the following discussion.
Gig Economy in 2022: An Overview
- Contrary to popular belief, the gig economy was one of the most successful emerging markets that survived and thrived through the pandemic.
- 36% of the U.S. workforce joined the gig economy workspace in some form or another.
- “Side hustle” was (and still is) a common term to communicate that the full-time employees of a company were also chalking out a few extra hours to earn extra income from a different source by engaging in gig work.
- The demand-supply landscape of the gig economy makes it one of the most convenient options for SMBs that are looking for no-strings-attached resources to get work done.
Why Do Instant Payments Matter For The Gig Economy?
- The Appeal Of ‘Instant’
Instant payments have a certain “smart” appeal to them. It shows that the business that’s processing the instant payments is on the same page as the gig worker, and is willing to provide a real-time payment experience.
This experience incentivizes the gig worker to manage their expenses better and take on more projects and workload.
- Faster Payments = Reliable
Most gig entities are small businesses and self-employed individuals who work with other SMBs. Instant payment infrastructure, in such a scenario, enables a faster window to send and receive payments. When a small business receives payments quickly, they’re more likely to rely on the business for future projects and contract work.
So, if you plan on retaining a gig worker for your project, make the payments fast and instant. Next time you need the gig worker to take up your work on priority, the gig worker will associate your work with instant payments, prioritizing your work over others.
- Gig Worker Retention
Speaking of retention. Gig workers are more inclined to work with businesses and individuals who will pay the promised amount on time. They’re likely to accept more orders from your business if you process payments instantly and as promised.
But it’s not just about honoring the payments. It’s also about valuing their time and effort.
It’s just simple logic. The more you prove yourself to be a reliable business, the more your gig workers will prove to be reliable for you.
- The Remote Ordeal
Right from the start of the Covid-19 pandemic, businesses have gone remote.
And it’s especially true for businesses that provide digital services, such as logo design, advertising, blog writing, etc. These service providers will work with businesses around the country.
So, it only makes sense to adapt to the instant payment infrastructure to send and receive funds quickly.
What You Can Do To Facilitate Faster Payments
If you don’t already have an instant payment infrastructure in place, it’s time to embrace it and implement its framework into your ecosystem. Instant payment apps like Venmo, Google Pay, and so on help you send and receive funds in real-time.
You can process payments to your contractors as soon as the contract details are locked in. No more time wasted on checks that are “being processed”. No more worrying about cash shortages.
The instant payment infrastructure allows you to transfer funds directly from your bank account to your vendor’s bank account, enabling transparency of transactions. This information can be later used for your 1099-NEC reporting.
You can even verify the vendor TINs with online W-9 solicitation, before you onboard them to your payroll framework.
This way you make payments to vendors who are compliant and verified.
Businesses have to keep up with the evolving payments ecosystem and implement newer technologies to sustain.
Digital payments mean convenience for you and your business. What usually takes about hours to complete, can now be completed in under a minute.
Get the technology, verify your vendors, record all the transaction data, and use it to e-file your 1099 forms. Instant payment infrastructure is just a convenience for businesses that need to process payments on the go.
Gig workers and gig companies prefer to work with businesses that process payments instantly because most businesses are now connected remotely.
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