Instant payment processing for gig workers is a big draw for businesses looking to take advantage of real-time payments

New research reveals nearly half of Canadian businesses are taking advantage of the gig economy, but the majority are frustrated by outdated payment methods that are costly and time-consuming. Payments Canada’s latest survey, the Payments Behaviour Tracker - Business study, examines gig economy payment trends across Canadian businesses.

Key study findings:

• 54 per cent of businesses using gig workers hire them seasonally or on an on-and-off basis in times when it is busy or because they require specific expertise.
• 45 per cent of businesses have used online platforms or mobile apps (such as Clickworker or Fiverr) to recruit gig workers.
• Interac e-Transfer and automatic payment into a deposit account are the leading and most preferred methods used for gig workers to get paid and for businesses to pay their gig employees.
• For 30 per cent of all businesses in Canada, it takes at least one week to process a payment (i.e., gig worker receives payment in their account).
• The majority of businesses would likely use real-time payments (65 per cent) and services such as request-to-pay (64 per cent) when paying their gig employees if these options were available.

The gig economy refers to temporary and freelance work or short-term contracts that are typically arranged through an online platform or mobile app. Most Canadian businesses (88 per cent) have been taking advantage of gig work for at least four years, with 46 per cent hiring gig workers year-round, and 54 per cent hiring seasonally or on an on-and-off basis.

Reasons for hiring gig workers vary between small and medium enterprises and commercial businesses.

Gig work provides businesses with agility and flexibility that can be difficult to achieve with a traditional workforce. Small and medium enterprises (SMEs) with <$500K CAD revenue, considered smaller SMEs, generally take advantage of gig work to reap cost savings. They most commonly use gig workers to quickly fill in workforce gaps as needed when business demand fluctuates and to help keep workspace costs low. Similar to smaller SMEs, larger SMEs ($500K-<$10M CAD revenue) also commonly use gig workers to scale their workforce up and down during busy seasons. They also leverage the unique skills and services offered by gig workers that their business might not need on a regular basis. Commercial businesses ($10M-$500M CAD revenue) feel that one of the greatest benefits of employing gig workers is their adaptability and openness to change. They are also more likely than SMEs to hire seasonal/on-and-off gig workers to supplement their regular employees in times when it is busy or because they lack a specific skill set (87 per cent versus 54 per cent respectively).

Currently, there is a disconnect between business versus gig worker preferences when it comes to cheque and cash payments.

When it comes to getting paid, gig workers prefer payments that are fast and instantaneous. Automatic direct deposit is the payment method most preferred by both businesses and gig workers and is used most often. In a Payments Canada study conducted in May 2023, 25 per cent of gig workers stated they preferred to be paid in cash, however, only four per cent of businesses prefer this payment method, likely because of the risks associated with keeping large amounts of physical cash onsite. On the other hand, while 23 per cent of businesses prefer to pay by cheque, only 13 per cent of gig workers prefer being paid this way as this method does not always allow the recipient to access their money right away. Digital currency (such as cryptocurrency or stablecoins) is an emerging method for paying gig workers that is also preferred by businesses (13 per cent) but less so for gig workers (three per cent).

Payment reconciliation and the time it takes for gig workers to receive their pay are the leading pain points among businesses.

Reconciliation of all payments — that is, matching each payment with each invoice/contract — is the biggest pain point particularly among commercial businesses when paying their gig workforce (54 per cent). Conversely, nearly half of smaller SMEs say they do not have any challenges paying gig workers at all, likely because they require much fewer gig workers than larger businesses and therefore it is easier to manage payments. Another reason for this is that SMEs are significantly more likely than commercial businesses (46 per cent versus 13per cent) to regularly hire gig workers year round who have replaced some or all of their regular employees. This means they are more likely to have established a routine payroll process for paying gig workers.

Businesses and gig workers are largely aligned when it comes to real-time payments.

Most businesses would likely use real-time payments for paying gig workers if they had the option. In a Payments Canada study conducted in May 2023, gig workers indicated they would also be open to this service once available. For 30 percent of businesses in Canada, it takes at least one week to process a payment (i.e., gig worker receives payment in their account). A real-time payment system would allow businesses to process payments on the same day gig workers complete their work contract. This is likely part of the appeal of real-time payments for businesses that employ gig workers; they are looking for faster ways to pay their gig workers and reconcile their payments.

Though businesses are mostly open to taking advantage of real-time payments, they would like to learn more. The biggest question businesses have about real-time payments is whether or not they will be required to pay a fee per transaction. Many are also unclear about the differences between real-time payments and Interac e-Transfer and want to better understand the security measures in place to keep their payments safe.

Because real-time payments will be cleared and settled in seconds — a capability that Canada currently does not have — businesses will know their funds have been deposited securely with no delays in settlement or risk of failure or cancellation. This will also allow them to better control their cash flow and improve productivity by compressing ordering and payment cycles.

The majority of businesses would likely use request-to-pay for paying gig workers if they had the option.

Businesses are also intrigued by the idea of request-to-pay, and 64 per cent said they would be likely to use this service if it was available. Request-to-pay is an invoicing service that allows a payee to request payment from a payor, gives the payee more information to reconcile a payment when it arrives and deposits the payment in the payee’s bank account as soon as the transaction has been sent. Their biggest questions focus on whether it will require a fee to use, how reliable it will be and what protections are in place to mitigate compromised payment transfers. The businesses that are hesitant to use request-to-pay for paying gig workers feel that they don’t understand how the process works well enough to use it. They are also concerned that authenticating each transaction might be time-consuming and cumbersome.

Overall, real-time payments and request-to-pay have the potential to alleviate some major pain points for Canadian businesses trying to pay their gig workers. Modern payment infrastructure will provide businesses and workers alike with smarter and faster ways to pay and get paid.

About the study

The Payments Behaviour Tracker - Business study was compiled to examine gig economy payment trends across Canadian businesses. In total, 502 Canadian businesses were surveyed, using an online panel managed by Leger Research, between March 27 and April 7, 2023.