The gig economy refers to short-term jobs and opportunities that enable you to work for yourself rather than an employer. Websites and apps like Uber, TaskRabbit, Airbnb and Fiverr connect people who have a need with those who have goods or services to offer.
This will vary depending on what sites you use and what you have to offer. If you rent your apartment out on Airbnb, you will make considerably more than if you sell a logo on Fiverr. According to a February 2016 study by the JPMorgan Chase Institute, Americans earned an average monthly income of $533 from gigs.
Even if you manage to earn a good amount, as an independent contractor in the gig economy, you are responsible for costs that you may not realize. These sites make money by taking a commission of as much as 20 percent out of the jobs you complete, so, if you drive for Uber and charge someone $20 for a ride, you will pocket $16. And that’s before factoring in your expenses.
In the ride-sharing example above, you’ll want to keep your car clean, safe and ready to go at a moment’s notice so your customers enjoy their ride and give you a good rating, leading to more customers. This likely means more gas, car washes, oil changes and other maintenance because you’re using your car more frequently.
As an independent contractor, you are running a business, no matter how small it is. As such, you need to pay taxes on the money earned, pay for your insurance – and possibly increase the coverage. You will also lose out on paid time off, matched retirement savings and other perks that come with traditional employment.
There’s always a risk that the job will be cancelled last minute, leaving you without a job and without pay. When you work through the website or app, your payment is generally guaranteed if you complete the job to your customer’s satisfaction.
Should you decide to take a job without the backing of a site, you risk not getting paid for work you complete. It pays to have a solid contract in place and a mutual understanding – written, if possible – of what work will be performed, for how much and within what timeline.
Anytime you lend out your property, you risk loss or damage. When it comes to cars and homes, that can be expensive.
Last but not least, you should always take safety precautions when meeting people after connecting online. Make sure someone knows where you are going, who you are meeting, what you are doing and how long you’ll be gone. Have your cell phone handy and don’t share any personal information, such as bank or credit card account numbers.
The gig economy can certainly offer unique ways to earn money, but before you dive in head first, make sure you understand the reality of its earning potential and the related expenses and risks.