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The freelancer revolution: a new standard for equity and ownership in the gig economy

The rise of the gig economy has brought new challenges and opportunities for both companies and freelancers. Traditional compensation models often fail to adequately reward freelancer contributions and achieve retention. Some companies have begun exploring equity-based compensation as a potential solution. As the freelance workforce grows, it is crucial to consider new approaches to compensation and ownership.

The gig economy has been on the rise, with a McKinsey report predicting that by 2030, 50% of the workforce in the US and Europe will be independent workers. This shift in the way people work has brought about new challenges and opportunities, particularly in terms of equity and ownership. As companies increasingly rely on freelancers and gig workers to drive their success, it is time to rethink the traditional models of compensation and reward. Freelancers who contribute to a company’s success should be granted equity, just as employees receive share options.

A recent Upwork study* found that 38% of the US workforce now comprises freelancers. This trend is expected to continue, with more and more professionals opting for the flexibility and autonomy that comes with freelance work. However, this shift has also introduced challenges for freelancers, such as lack of job security, limited access to benefits, and inconsistent compensation.

Recognising and rewarding freelancer contributions is crucial, as they play a vital role in the success of many companies, particularly in creative and tech industries. A study by the Harvard Business Review found that freelancers bring unique skills, fresh perspectives, and an entrepreneurial spirit to the companies they work with. Traditional compensation models often fail to adequately acknowledge and reward freelancer efforts. Implementing equity and ownership programs for freelancers is one way to address this issue. Companies can grant equity to freelancers based on their contributions, providing them with a sense of ownership and a stake in the company’s success. This approach can benefit both companies and freelancers alike.

For companies, it can lead to increased loyalty, motivation, and engagement from their freelance workforce. A study by the University of Minnesota found that offering equity to employees led to a 32% increase in productivity and a 16% decrease in turnover. For freelancers, it offers financial rewards and a sense of belonging within the organisation. Some companies have already started adopting this approach. Gigster, a platform that connects businesses with freelance developers and designers, offers equity to its top-performing freelancers. This program has helped the company attract and retain talented professionals while fostering a sense of shared success. Famously, Uber, one of the largest gig economy companies, has also experimented with offering equity to its drivers. In 2016, the company announced a program called “Drive to Own,” which allowed drivers in certain cities to earn shares in the company based on the number of trips they completed. While the program was short-lived, it demonstrated the potential for equity-based compensation in the gig economy.

At Koos, we use virtual shares to reward and incentivize our community members and freelancers who contribute to the platform’s growth. By granting virtual shares, we are able to align the interests of our freelancers with those of the company, creating a sense of shared ownership and purpose. This approach has helped us build a loyal and engaged community of freelancers who are invested in the success of the platform.

As the gig economy continues to evolve, it is crucial for companies to adopt new standards of equity and ownership that recognize the value of freelancer contributions. By granting equity to freelancers, businesses can foster a sense of loyalty, motivation, and shared success, while also providing gig workers with the financial rewards they deserve. As more companies embrace this approach, I believe we will see a shift in the way we view and value freelance work, ultimately leading to a more equitable and sustainable gig economy.

It’s no news that the freelancer revolution is here, and it demands a new approach to compensation and ownership. By implementing equity programs for freelancers, companies can not only attract and retain top talent but also create a more inclusive and rewarding work environment. Instead of taking a little ten pound referral bonus like every company is doing today, offer them ten pounds worth of shares now and see what comes out. This mindset shift can pave the way for a more equitable and sustainable future for the gig economy, one that recognizes and rewards the vital contributions of freelancers to the success of businesses around the world.

*Upwork

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    12 June 2024

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