The “gig economy” has changed how people work and how businesses find talent. Whether you’re exploring freelance opportunities or considering hiring independent contractors, understanding the benefits, responsibilities, and potential challenges is essential.
With the gig economy projected to reach $2.52 trillion by 2035, this guide explains what gig work is, how it affects businesses, and what both workers and employers should know before getting started.
What is gig work?
“Gig work” is any individual task, short-term project, or ongoing work that an independent worker completes for a client that is not their W-2 employer. These gigs may be project-based, hourly, or part-time and can either be an ongoing contract or a temporary position.
To earn enough money to make a living, gig workers typically take on multiple jobs or gigs at a time. Some do outsourced work in addition to their traditional jobs to earn extra money or gain skills in another field.
How does the gig economy affect small businesses?
The gig economy gives small businesses more options for meeting their workforce needs. Companies can use independent contractors to remain agile, whether they’re filling temporary gaps, completing specialized projects, or responding to customer demand. Some of the biggest ways it affects businesses include:
- Greater flexibility. Businesses can hire independent contractors for short-term projects, seasonal demand, or specialized work without adding permanent staff.
- Access to specialized talent. Small businesses can work with professionals who have expertise in areas such as marketing, design, accounting, or software development when those skills are needed.
- Hiring responsibilities. Businesses must properly classify workers and understand the legal and tax requirements that apply when working with independent contractors.
[Read more: How Employers Can Compete With the Gig Economy]
How does the IRS classify gig workers?
The IRS considers gig workers as self-employed contractors, not employees of the companies they work for. This means employers don’t withhold taxes or provide benefits, and workers have the advantage of controlling how and when they work.
To determine if you are an employee or an independent contractor, the IRS considers three factors:
- Behavioral. Gig workers generally have the freedom to decide what they do and how they do their job.
- Financial. Gig workers control how they receive compensation, which expenses they cover, and which, if any, tools they use.
- Relationship type. Gig workers typically work on temporary projects for a company, whereas ongoing or core work can indicate employee status.
While employers receive W-2 tax forms, gig workers are given a 1099-NEC form come tax season and are typically responsible for paying self-employment taxes to the IRS.
How do gig workers pay taxes?
The primary difference between an employee and a gig worker is how they handle taxes. While employers cover specific tax responsibilities and withhold taxes for W-2 staff, a gig worker is self-employed and responsible for themself. Businesses typically issue a 1099-NEC if they pay a gig worker $2,000 or more in a calendar year, as of tax year 2026.
A contractor will generally owe self-employment taxes for Social Security and Medicare. To avoid penalties, many contractors make estimated quarterly payments to the IRS to cover the taxes.
Contractors may be eligible for tax deductions that lower liability, such as a qualifying home office, mileage and vehicle costs, supplies, and retirement contribution deductions. If unsure about tax obligations, seek advice from a financial expert to clarify what is owed.
How do gig workers find freelance jobs?
With the number of freelance job listing websites, as well as corporate America’s shift toward using contractors to supplement its workforce, the gig economy has become easier than ever to participate in. Some of the most common 1099 job opportunities include rideshare driving, delivery driving, creative work (writing, editing, graphic design), software development, and web design.
Gig workers usually find work through the internet and apps. Employers post their company’s needs on job boards and are paired with a gig worker best suited for the position. The wages, skills, and gig workers’ suitability for the project can be taken into account when matching them with an employer.
Best platforms for finding work as a gig worker
Online platforms have helped gig workers find countless new opportunities. Each platform caters to different industries, so it’s important for the gig worker to choose the right one based on their skills, pay expectations, and flexibility.
Creative and professional services
- Upwork and Fiverr. For more structure and ongoing contracts, Arjun Mahadevan, CEO and Founder of doola, suggests gig workers share their services on Upwork. For quick, one-off projects, he suggests Fiverr Pro.
- Time etc and Zirtual. For those with administrative experience, Time etc and Zirtual can connect gig workers with employers seeking virtual assistants.
Home and local services
- Thumbtack and TaskRabbit. For contractors with home improvement skills, use these platforms to showcase your services and help time-strapped homeowners.
- Wag! and Rover. Good with animals? Advertise your pet care services, including dog walking, pet sitting, and boarding, and connect with clients.
Delivery and driving
- DoorDash and Instacart. With a car and a clean driving record, a gig worker can earn money as a delivery driver, picking up orders from restaurants, stores, and more.
- Uber and Lyft. If they enjoy driving and meeting people, they can turn their car into a rideshare business and earn money on the road.
[Read more: Tap, Deliver, Thrive: How Small Businesses Are Growing With App-Based Platforms]
Other ways to find gigs
Social media
Contractors can use social media to showcase their talents and connect with potential employers organically.
“When it comes to creative talent—photographers, designers, storytellers—social media has been surprisingly effective,” said Sean Cavenaugh, Co-Founder and Brand Architect of Buchart Colbert. “Instagram and TikTok, in particular, allow us to see a creator’s style, personality, and audience engagement at a glance. [It] helps us identify people who can not only deliver beautiful work but also translate our vision into clear, engaging deliverables.”
Referrals
Many gig workers find the best opportunities come through networking and word-of-mouth referrals from past clients.
“The best freelancers … [have] come through referrals, other founders, or operator communities,” noted Mahadevan. “If someone I trust tells me, ‘This person delivered for me,’ that’s worth more than scrolling through reviews online.”
Pros and cons of being a gig worker
There are many factors to consider when becoming a gig worker. Here are some of the pros:
- You will be your own boss. Gig workers only have to answer to themselves and the work they take on.
- You can work a flexible schedule. Working as a contractor or freelancer allows you more freedom than you would get with a 9-to-5 job. For instance, you can go grocery shopping in the middle of the day, take a long lunch break, or work around your children’s school and activity schedules, as long as you deliver to your clients on time.
- You decide which jobs to accept. Gig workers can choose only the jobs they want to and decline any project that doesn’t suit their interests or desired pay. Many businesses use short trial projects, giving freelancers the opportunity to see if the project is a good fit before committing. “We run almost any new hire (short- or long-term) through a [paid] test project … to gauge their work product and how well they … fit with our team and culture,” said Jared Navarre, CEO of Keyni Consulting.
- You can focus on your passions. With more flexibility as a gig worker, you can start your own side hustle or pursue your passion projects.
However, there are a few downsides to gig work, including:
- You’ll owe self-employment taxes. One of the biggest challenges gig workers face is setting aside enough of their earnings to cover taxes like FICA and Social Security that a corporate employer normally covers.
- Clients can drop you at any time. Freelance clients can come and go, with or without warning, and you may lose a sizable chunk of your income if one of them drops out.
- You’ll need to work hard to brand yourself and build a client base. Because gig work isn’t always steady, you’ll constantly need to market yourself and look for new projects to sustain your income.
- You’re typically not eligible for employer-sponsored benefits. Unless you have a particularly generous client, you will likely not be eligible for any kind of employer-sponsored health insurance, retirement savings plan, or other benefits as a 1099 worker.
[Read more: Tax Resources for Independent Contractors]
"The best freelancers … come through referrals. If someone I trust tells me, ‘This person delivered for me,’ that’s worth more than scrolling through reviews online.Arjun Mahadevan, CEO and Founder of doola
Small business considerations before hiring gig workers
Project scope and business needs
Before employers hire a gig worker, they should determine whether the work is temporary, specialized, or ongoing. Independent contractors are often best suited for clearly defined projects with measurable outcomes and flexibility, while recurring responsibilities that are central to daily operations may be better handled by employees. Evaluating the scope and duration of the work can help businesses choose the most appropriate staffing solution.
Cost versus long-term value
Hiring gig workers can reduce expenses associated with recruiting, benefits, payroll taxes, and training. However, business owners should compare those savings against the value of developing in-house expertise. For projects that require ongoing collaboration or institutional knowledge, a permanent employee may provide greater long-term value.
Compliance and worker classification
One of the most important considerations is ensuring workers are properly classified. Federal and state agencies use various criteria to determine whether someone qualifies as an independent contractor or an employee. Misclassification can result in fines, back taxes, and other legal consequences, making compliance a critical part of any hiring decision.
Communication and availability
Because gig workers often serve multiple clients simultaneously, business owners should establish clear expectations for deadlines, communication methods, response times, and project deliverables. Setting expectations early can help prevent misunderstandings and keep projects on track.
Quality assurance
While gig platforms provide access to a large talent pool, skill levels, experience, and backgrounds can vary significantly. Business owners should review portfolios, references, client feedback, and past work before hiring. Starting with a small paid project can also help assess a contractor’s strengths, communication style, and reliability before committing to larger engagements.
Small businesses that benefit from gig workers
Many small businesses use gig workers to fill specialized skill gaps, manage fluctuating workloads, or complete projects that don’t require a full-time employee. While nearly any industry can benefit from freelance talent, some sectors are particularly well-suited to flexible staffing arrangements.
- Marketing and advertising agencies. Agencies often hire freelance graphic designers, copywriters, videographers, and social media specialists to support client campaigns and manage peak workloads.
- Professional services firms. Accounting firms, consultants, and legal support providers may work with independent researchers, bookkeepers, specialized consultants, and administrative assistants for specific projects.
- Technology companies. Small software and technology businesses frequently engage freelance developers, cybersecurity professionals, UX designers, and IT specialists to complete technical projects.
- Home services businesses. Contractors, landscapers, cleaning companies, and repair businesses may use independent professionals to handle seasonal demand, specialized work, or overflow projects.
- Retail and e-commerce businesses. Online stores often hire freelance photographers, product description writers, digital marketers, and customer service professionals to support growth initiatives.
- Hospitality and event businesses. Restaurants, venues, and event planners commonly use gig workers such as photographers, entertainers, event coordinators, and promotional staff to support individual events and busy seasons.
Lauren Wingo and Miranda Fraraccio contributed to this article. Some source interviews were conducted for a previous version of this article.
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