So what to do now?
Roughly 57 million people in the U.S. do some sort of gig work. Along with an increasing demand for flexible work arrangements combined with the rise of mobile platforms, the gig economy is exceedingly broad and constantly growing. Today, independent contractors can earn a quick buck by walking dogs through Rover, cleaning houses with Handy and delivering groceries with Instacart.
With the growth of alternative work arrangements, gig economy companies are thriving. Uber and Lyft recently made their debuts as public companies, and Grubhub’s valuation is soaring as other third-party delivery platforms are getting bumped from the competition (i.e., Amazon Restaurants).
The success of these platforms hinges on the contributions of the independent workforce, yet the current business model of the gig economy puts these contractors at increased risk, undermining a century of worker protections. This calculated approach to labor means that companies leveraging an independent workforce do not need to offer the federal minimum wage or overtime, and don’t need to pay their share of Social Security Taxes, slighting not only the workers, but the tax payers.
As gig workers grow increasingly dissatisfied with treatment from gig economy giants, it’s evident that a change needs to be made. In order for the gig economy to continue to thrive, companies must embrace employer status.
Pros & Cons of Joining the Gig Economy
People generally join the gig economy for some combination of three central reasons: freedom, flexibility and a chance. Some ridesharing drivers pick up side gigs for travel or extra spending money, and others do so to supplement their full-time income or to make ends meet. Conversely, a growing 15 percent of workers participate in the gig economy to earn their sole source of income. When a company conducts lay-offs for example, gig work can serve as a safety net to keep workers afloat financially.
While picking up ridesharing or food delivery gigs certainly has its perks, including the low barrier to entry and job flexibility, the downsides can be impactful. Workers that earn their income solely from the gig economy don’t receive the same protections, such as benefits or worker’s compensation, and are therefore putting their own well-being on the line to make money and power our extraordinarily on-demand economy.
The Future of the Gig Economy
It’s no wonder why gig economy giants are putting up a fight to maintain their business models and continue classifying their workers as independent contractors versus employees. If Uber and Lyft were required to embrace a traditional employer status, they could incur increased labor costs of 20 percent to 30 percent.
Instead of opting to reclassify their workforce, these companies are offering minuscule incentives to gig workers that are nothing more than a band-aid over the larger issue of misclassification. For instance, earlier this year, Lyft launched “Lyft Driver Services” which is a set of incentives for drivers that includes no-fee bank accounts, debit cards, vehicle maintenance and more.
However, gig workers aren’t asking for these perks – they’re asking for real protections.
The Solution? Embrace Employer Status
The gig economy is undoubtedly at a crossroads, so how can companies still benefit from an on-demand workforce while ensuring that those workers are treated fairly? It starts by embracing employer status, and ShiftPixy helps businesses do this.
ShiftPixy takes over employment status of a company’s workforce who are then considered employees – not contractors – and are eligible for health coverage, unemployment and other benefits. This solution creates a best of both worlds scenario by letting companies enjoy the benefits of an on-demand workforce and reduced employment costs, while also allowing the workers to have their own gig-like flexibility.
This approach to the gig economy is especially impactful for restaurant operators. In an industry with notoriously high turnover rates, tapping third-party delivery platforms often seems to be the attractive, easy approach to delivery. However, because these contractors aren’t compensated with fair pay, health insurance, workers’ compensation and other protections, there is a heightened risk of a restaurant unknowingly working with an unmotivated employee. This can leave harmful effects on the restaurant’s brand image (not to mention the high fees associated with the services).
There’s no denying that the gig economy is here to stay. Whether that’s seen through the recent addition of the term, “Gig Economy,” to the Merriam Webster dictionary, or perhaps more importantly, the IPOs of Uber and Lyft. The assumed success of these platforms as public companies will lead to additional capital flowing into platform companies and will expedite the growth of the economy. However the gig economy, raking in upwards of $864 billion annually, can only continue to thrive as long as the workforce is content, which will require businesses to finally embrace employer status, and ShiftPixy is here to help.