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Portable Benefits for the On-Demand Worker

The emergence of the gig economy has opened an important debate about having portable health and other benefits for the On-Demand Worker. There has been a number of calls for a new category for those who occupy the gray area between employees and independent contractors. Freelancers often work through a middle man or a marketplace (think Upwork.com or 99Designs) or an intermediary, typically an “app,” that customers use to identify themselves as needing a service—for example, a car ride, landscaping service, etc. This enables the employer to maintain some sort of arms-length distance from the worker. (We all know this is often broken, however). How can you work for someone without them giving you some sort of direction?

It’s increasing, but today it appears that at least about 600,000 or .4% of the US Workforce work with an online intermediator. The Hamilton Project at Brookings (I once interned there while I was a student across the street at Johns Hopkin’s University’s SAIS program across the street), recently hosted a gig economy event where Brookings made a proposal for  Modernizing Labor Laws in the Online Gig Economy. The talk focused on health and other benefits, and how to ‘force these new forms of work (from Uber, etc.) into a traditional employment relationship could be an existential threat to the emergence of online-intermediated work, with adverse consequences for workers, consumers, businesses, and the economy. “One of their One of the key benefits they proposed was portable benefits, which is a fascinating idea because (Independent contractors tend to have multiple gigs at one time). Their definition:

As we are defining it, the online gig economy involves the use of an Internet-based app to match customers to workers who perform discrete personal tasks, such as driving a passenger from point A to point B, or delivering a meal to a customer’s house. Note that this definition excludes intermediaries that facilitate the sale of goods and impersonal services to customers, such as TeacherPayTeachers.com, a Web site where teachers sell lesson plans and other non-personal services to other teachers, and Etsy.com, a Web site where individuals sell handmade or vintage goods. It also excludes Airbnb, a Web site where people can rent apartments, houses, and other accommodations.

The authors of the Hamilton Report highlight that ‘because it is conceptually impossible to attribute their (workers’s) work hours to any single intermediary.” Today, these independent workers do not qualify for hours-based benefits, including overtime or minimum wage requirements. These independent contractors rarely, if ever, qualify for unemployment insurance benefits. If intermediaries could pool independent workers, however, for purposes of purchasing and providing insurance and other benefits at lower cost and higher quality without the risk that their relationship will be transformed into an employment relationship, then they might be open to pooling their resources and having portable benefits for the contingent workforce.

The Ubers of the worls could then save on the costs if they have to eventually hire these workers full-time and on legal fees (although Uber has changed their driver terms of service agreement that bars drivers from participating in class action lawsuits against the company and instead requires them to enter into arbitration in the case of disputes).

As Steve King points out in his short analysis of this proposal, this new portable benefits law probably should include gig economy workers who work in the B2B sector, or sell goods, or rent real estate, but they do. But even though they are excluded from their analysis, they would likely be included in any portable benefit laws. Portable benefits seems to be a hot topic. Next week the Aspen Institute is holding a workshop on portable benefits.

Protection of the 1099 is important. I have heard of companies (the employer and the intermediary) using algorithmic scheduling to ensure their works never go beyond 29 hours of work a week, which ensures they don’t have to pay them health benefits or provide the other goodies full-time employees receive. It’s important to figure out how to address this barrier to benefits.  Ouch! Talk about Big Data hurting the worker!

Another reason to address this is that Brad Smith, the CEO of Intuit and one of the best leaders I have ever worked for, has indicated that his company’s data data shows that 40% of their self-employed customers also have income from a W2 job. (I know several people who wear these two hats). So this problem of multiple employers with different tax and benefit regimes started way before the Ubers, Lyfts, Instacarts came on the scene.

Portable Benefits basically means a person should be able to use the same benefits when they work for different on-demand companies. The Hamilton proposal is a start – it has accelerated the discussion about a new class of employees or at least the call for examining how workers are currently classified. Their proposal really doesn’t focus on online or offline, but instead stresses that workers should be protected and receive benefits. As the chart below indicates, this will continue to become an increasingly important issue to address in our On-Demand Society.

You can read The Hamilton Report here

1099, Being Freelancer, Companies, People

Risk Profiles of Freelancers Versus Non-Freelancers

Originally published by Steven King at Emergent Research

There’s lots of people criticizing independent work these days as being too unpredictable, risky and all around bad for both workers and the economy.

But a pattern we’ve noticed is almost all the criticism comes from people with traditional jobs. This got us thinking about risk profile differences between independent workers and those with traditional jobs.

In the 2013 MBO Partners State of Independence study we surveyed non-independent workers asking them about their views of independent work. The results were quite interesting.

First, non-independent workers see the advantages of independent work as, well, less advantageous than independent workers do.

Risk profiles 1

Second, non-independent workers see the disadvantages as being much greater. As the chart below shows, for every category mentioned non-independents see bigger challenges than independent workers.

Risk profiles 2

One of the more fascinating findings was that half of the non-independents considered “having to invest their own money” as a major challenge. For independent workers, so few listed this as a challenge it didn’t make the top 10 challenges list, so it was scored as “not applicable”.

It’s clear from this an other research that, on average, independent workers and non-independent workers have different risk profiles. The bottom line is:

Independent workers are more comfortable than non-independents with the risks associated with being independent and more willing to accept these risks in return for greater work autonomy, control and flexibility.

This is why the majority of independent workers are satisfied and happy as independents and prefer independent work over traditional employment.

Going forward these risk profile differences raise a very important issue.

Our work indicates most Americans fall into the more conservative risk profile category. Our work also indicates those with conservative risk profiles are less likely to be successful as independent workers.

But as the economy shifts to greater levels of contingent employment, more people with risk profiles not suited for independent work will become independent workers. This is a key reason we need new policies and programs to make independent work safer and more secure.

So when reading or hearing people talking about how bad independent work is, keep in mind risk profiles. The chances are the critic has a risk profile that biases them against independent work.

But also keep mind without making independent work safer and more secure, growing numbers of Americans will likely struggle at work going forward.

Freelancers, Industry Research, News, People, Your rights: Presidential Election, Laws, etc.

In the News: week of 9/1


Sen. Warner Drills Down On Digital, On Demand, Jobs

The senator has spent the past year or so studying the on-demand economy, including how to come up with a safety net system for the ‘net-driven …

A Class of Their Own? Independent Contractors Causing a Conundrum

The on-demand economy, driven by technology companies that immediately deliver goods and services to meet consumer demand, and typified by …

Tim O’Reilly: The argument over whether Uber should have contractors or employees is ‘fake’

Some venture capitalists have argued that the on-demand economy has created a new, third type of worker. Meanwhile, the threat of lawsuits and the …

Office Depot® Brand 1099-INT Laser Tax Forms And Envelopes, 4-Part, Pack Of 10

Fill out and mail your tax documents securely with these specially-designed forms and envelopes. Includes1099 forms and envelopes to easily report …

A brief guide to America’s sharing economy

As the sharing economy booms, it’s experiencing major growing pains. … called the “gig” economy, because it involves on-demand freelance work, ..
Industry Research, People, Your rights: Presidential Election, Laws, etc.

From University President to Uber Driver: Understanding The Sharing Economy Through Social Experiment

These days, your Uber driver could be anyone. Literally. But imagine your Uber car pulling up and seeing your university president behind the wheel. That’s exactly what happened when Oglethorpe University President, Lawrence M. Schall, decided to run a social experiment of sorts. Schall is spending the summer moonlighting as an Uber driver, along with his full-time responsibilities at Oglethorpe.

Why? Because of the sharing economy.  

More and more of his students are faced with the prospect of joining the freelancing marketplace, whether by choice or by necessity. His wife is a freelance advertising executive and spends many of her days at Panera or Starbucks with a laptop, along with contractors just like herself.

The key learnings from Schall’s experiment is interesting is that it says a lot about both the growing freelance workforce as well as the traditional full-timers. With the flexibilities of a being a freelancer also comes the challenges: no benefits and instability. But from this experiment, Schall learned something about the traditional workforce he didn’t really expect to: the challenges and the grind of the daily commute just to make a living. Many of the passengers he picked up had to resort to Uber due to the inadequacies of public transportation. It’s apparent that both this new freelance nation and the traditional full-time workforce face challenges, but in very different ways.

So what can we, especially those of us part of this freelance workforce, take away from Schall’s social experiment?

  1. Have multiple part-time gigs outside of your industry. To be successful and most importantly make income, freelancers string together various jobs, like these Uber opportunities. The earnings potential can be lucrative but it’s a tough business to be in. You have to understand the intricacies of each business to maximize your profits.
  2. Think outside of the office. A year or two ago, who ever thought Uber would be a viable source of income? Business is rapidly changing, especially technology, and new opportunities pop up everyday. Think outside of the traditional office.
  3. The old economy and the new economy are intertwined. One of the most interesting parts of Schall’s experiment was his interaction shuttling workers back and forth from their job (as well as the daily struggles they faced). It’s apparent how intertwined this old and new economy is and, on a bigger scale, how much they are reliant on each other.
  4. The face of the freelance workforce is ever evolving. The profile of a typical freelancer today is changing. It’s no longer made up of young adults looking to break away from stereotypical jobs. It includes seasoned executives, stay-at-home moms, and retirees looking for something to occupy their time. As Schall mentioned, a large percentage of Uber drivers are over the age of 50 and that’s also indicative of the changing face of the freelancer.
  5. It’s all about the hustle. Last but certainly not least, it’s all about the hustle when it comes to a day in the life of a freelancer. There’s no guaranteed paycheck and a large part of success is about chasing opportunities, not waiting for them to come. Becoming an Uber driver is one example of that.
Being Freelancer, Freelancers, Industry Research, Ondemand Platform, People

Research: Today’s Independent Worker

According to MBO Partners (State of Independence profiling survey) the definition of an independent worker is anyone older than 21 years old that describes themselves as one of the following:

  • An independent consultant/contractor
  • Self-employed,
  • A freelance worker ,
  • A temporary worker,
  • A fixed term contract worker
  • An on-call worker
  • A small business owner with fewer than a few employees

Some of these people are sole-preneurs or just as individuals having side gigs. Most of these folks are independent workers because they:

  1. Want control over the kind of work they do
  2. Want the flexibility to determine when and where they work, and
  3. Want the autonomy to work in the way they believe best.

Other highlights:

  •  Independent workers continue overall to be satisfied with their path. Independent workers’ satisfaction remains strong, with 82% reporting that they are either highly satisfied (63%) or satisfied (19%) with their work style. Only 7% reported being dissatisfied. The vast majority plan to continue as independent workers, with 76% indicating they will either continue as solopreneurs (61%) or build a larger business (15%). All of these numbers are consistent with prior years
  • Despite the economic recovery and a much stronger traditional job market, the number of independent workers continues to grow. The number of solopreneur workers, those committed to the independent work path, rose to 17.9 million in 2014. This is up from 15.9 million — 12.5% — since our base year study in 2011. This growth, which is substantially higher than the 1.1% growth in the overall U.S. labor force during the same period, indicates a continued, structural shift towards independent work.
  • Independents make a clear and positive economic impact on the US economy. Solopreneurs generated about $1.1 trillion in total income in the past year. They also spent more than $150 billion on non-payroll/contractor expenses. These independents earn income both globally and locally: About 1 in 8 do business overseas generating roughly $38 billion in exports while a robust $710 billion came from their metro areas. A little more than 10 million U.S. households receive at least half of their income from independents.
  • Independents hire other independents. Although the vast majority of independent workers are solopreneurs and don’t have traditional employees, they don’t work alone. During the past year, 38% of solopreneurs spent a total of $92 billion hiring the equivalent of 2.2 million full-time workers via contract hiring.
  • One in seven independents plans on building a bigger business. A little more than 2.5 million solopreneurs plan to launch larger businesses. These nascent entrepreneurs will build businesses that will create additional traditional jobs and spur greater economic activity.
  • The challenges of independence felt more manageable over the past year. Independent workers are acutely aware of the risks and responsibilities they face. In particular, they feel challenged by their uncertain income stream (57%), concerns about retirement (38%) and worries about a lack of job security (34%). Yet, while navigating these challenges is a natural part of this work path, the perceived burdens and challenges of independence have slightly but consistently declined from the base year of 2011.
  • Women and men have different reasons for being independent. Men and women choose to be independent at nearly identical rates, have similar satisfaction levels and plan on staying independent at similar rates. They also have consistent views on the challenges associated with being independent. But there is one area where men and women differ: they have different reasons for being independent. Women tend to be more interested in flexibility and developing fulfilling work that fits into their lifestyle. Men tend to focus on being in control, being their own boss and maximizing their income.
  • Independents use multiple revenue streams to reduce risk. Most solopreneurs (60%) have more than one revenue generating activity, with 19% having either a full (4%) or part-time (15%) traditional job. Those with multiple revenue generating activities and jobs report doing this to have a steady source of income, which reduces their overall financial risk.
  • Part-time Side-Gigger independent workers are focused on supplementing their income. In 2014 we expanded on three years of survey research to include not only the solopreneurs who, on average, work full-time, but also “Side-Giggers”— independent workers who work regularly as independents but do so on a part-time basis alongside traditional jobs, retirement or family care activities. 12.1 million Americans fit this description and share many attributes with their 17.9 million solopreneur colleagues. But while flexibility, autonomy and control are the key reasons solopreneurs choose this path, most Side-Giggers (58%) are working as independents primarily to supplement their income. A little more than 40% also report they do what they love which may result in a more committed solo business in the future.
  • The independent workforce will continue to grow. Given the structural shifts in the economy, sustained interest in control over one’s career/personal life, and lowering hurdles to entry, the solopreneur workforce is forecast to grow to 24.5 million by 2019. When we add today’s Side-Giggers into the fold, we expect the number of active, self-realized independents to grow from 30 million today to nearly 40 million by 2019.