From Fast Company, Sarah Kessler reports that some start-ups are hiring employees instead of independent contractors and are still able to provide on-demand services. Sarah writes:
The on-demand economy has given rise to the on-demand worker. Startups like ride-hailing app Uber, courier service Postmates, cleaning services Handy and Homejoy, and grocery delivery app Instacart don’t hire employees. Instead, they act as marketplaces for labor, where every task is a separate transaction between a customer and a member of a distributed workforce. Uber, for instance, connects drivers with people who need a ride. Postmates connects couriers with people who want something delivered. Handy connects cleaners with people whose kitchens need mopping. And so on. The companies make money by charging a commission for the lead that they provide workers who sign up to take jobs through their platforms.
Because these startups have positioned themselves as mere brokers in these transactions, they aren’t required to pay workers benefits or guarantee them a minimum wage. And because they aren’t employees, workers have the freedom and flexibility to work whenever they want.
At face value, building a workforce this way seems like a no-brainer for many startups, which save about 30% on the cost of labor by paying workers as independent contractors.
But a new wave of app-based service businesses are rejecting this workforce strategy. Like their peers who dole out jobs by the gig, these apps empower customers to do everything from order lunch to get their laundry done with the push of a button. At the other end of their buttons, however, are actual employees who make the deliveries, do the cleaning, and run the errands, even if those tasks are doled out by apps. Startups that have foregone the “gig economy” or “1099 economy” in favor of hiring workforces include office cleaning and management service Managed by Q; on-demand restaurants Munchery and Maple; shared-ride service Chariot; and laundry service FlyCleaners. Parcel, a company that receives packages on its customers’ behalf and then delivers them at a time when they’re home, and Alfred, a personal butler service that runs its clients’ household errands, also dispatch their own employees.
Their founders say the business benefits of hiring employees outweigh the extra 30% in labor costs they would save by doling out gigs by smartphone app.
Read the full story at In A Backlash To The Gig Economy, Hiring Employees Is Cool Again In Silicon Valley