To achieve financial security, gig workers need more solutions and support

The growing community of gig workers currently makes up nearly 35% of the U.S. workforce — and that proportion is likely higher when looking at workers earning low and moderate incomes (LMI). Gig work has risen in popularity for a number of reasons in recent years: flexibility, supplemental income and independence, to name a few. But there are also drawbacks, including low and unpredictable wages and difficulty accessing benefits — all of which can make it difficult to build emergency savings buffers.

Companies are increasingly turning to gig workers to power their workforce — and they have a vested interest in ensuring that gig workers are able to continue in their roles. We know that employers lose up to $250 billion in productivity each year due to the impact of financial stress, and employers who rely on gig workers are no exception. Financial well-being is closely tied to emotional well-being, and a recent survey by the American Psychological Association indicates that stress over money is the highest it has been since 2015.

Read more: Use financial benefits as a strategy to boost business and create stress-free workers

Understanding that the financial security of traditional and gig workers alike is going to be an increasingly large issue in coming years, our financialy-security nonprofit, Commonwealth, has partnered with Green Dot, the payroll platform GigWage and Steady to begin early research on effective financial interventions and benefits for these workers. Our goal is to uncover the benefits that help relieve stress, assist the recipient in managing future emergencies, and bolster overall financial security so that the worker can begin building emergency savings.

In a recent, small pre-pilot program, we examined the impact of three types of financial interventions on 138 gig workers, offering up to $1,000 in funds over a four-month period. This is an early first step in examining the unique financial needs and benefits design opportunities for gig workers, and much more research is needed.

The pilot introduced three potential interventions: a weekly stipend, a grant and a loan. In every case, the participants were eligible for up to $1,000 in assistance over the four months. Overall, these benefits helped to reduce the short-term financial stress that the gig workers experienced — but they did not sustain long-term impact.

In fact, hardships for the gig workers were frequent, expected and expensive — and demand for support was high. In our pre-pilot study, nearly all participants experienced at least one financial hardship of less than $1,000 over the course of four months. Seventy-six percent of respondents experienced a financial hardship of more than $1,000 in that time, with 32% experiencing three or more such hardships. The interventions were primarily used to pay for basic needs like rent and utilities as opposed to covering volatile dips.

Read more: It's time for new financial security benefits that meet low-income workers' needs

The good news was that the interventions produced a positive short-term impact for the workers, reducing their stress and providing financial relief. Unfortunately, the size and frequency of the hardships remained a challenge, and the interventions introduced did not provide a long-term financial impact.

So what can employers learn from this early research as they consider how best to serve their gig and non-traditional workers? First, listening to better understand the specific needs of non-traditional workers is important. It's our role at Commonwealth to give a voice to workers earning low and moderate incomes, who are often left out of traditional benefits and financial wellness programs. In our work with these gig workers, the frequency and cost of their financial hardships emerged as a major theme, and one that bears more examination.

Our interventions were taken on their own, but employers should consider integrating an intervention like a grant, loan or stipend into a more holistic financial benefits approach.  Beyond specific interventions, gig workers need to have the basic building blocks of financial security. A livable income is important, but insufficient, to build worker financial security. More research and innovation is needed to understand how other benefits such as earned wage access, reimagined Health Savings Accounts, student loan repayment, flexible retirement plans and others can help reduce future hardships and give gig workers the opportunity to build financial capability.

Read more: Working Americans are in a savings crisis — and employers can help

Delivery also proved important in our study. When offering a financial benefit, ensure that a trusted source facilitates the communication and implementation, include clear terms on the details of the benefits, and simplify the process of distributing funds.

And finally, designing with the specific intervention in mind is important. Each of the interventions we tested requires a different design. Aim to best understand how your employees access and plan to use these financial benefits in order to align the benefit design with their needs. (There are more details on plan design in our full report.)

This pre-pilot was a promising start in better understanding the challenges that gig workers face. More research and innovation is needed on this front to pave a path towards long term financial security and wealth building.