Can Tech Companies Solve Their Temporary Labor Problem?

Some companies are moving away from the 1099 economy, recognizing that relying on temporary contract workers is bad for businesses, employees, and clients alike.
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Some companies are moving away from the 1099 economy, recognizing that relying on temporary contract workers is bad for businesses, employees, and clients alike.
(Photo: robertlamphoto/Shutterstock)

(Photo: robertlamphoto/Shutterstock)

The venture capital-funded promise of companies like Uber, Lyft, Homejoy, Washio, and other businesses that provide cheap, accessible services from car rides to house cleanings on demand is that they are developing technology that allows them to do so. But unlike Google pioneering a new form of data organization to monetize online search, these companies rely much more heavily on people instead of machines and algorithms to let them turn a profit.

In New York magazine, Kevin Roose has deemed this situation Silicon Valley’s “contract worker problem.” Rather than enjoying the benefits of highly paid tech-company employees, Uber drivers, for example, are temporary contractors that the company is free to pay however much or little they choose without offering them health benefits, unemployment insurance, or other resources required for full-time employees.

The language used by businesses to describe this “1099 economy,” so-called for the independent contractor form that individuals must fill out, frames the workers as miniature versions of the entrepreneurs who founded the companies, as I previously described. It’s true—they’re free to set their own hours to an extent, but at low hourly rates, many of the temporary workers can’t afford to work less than overtime. They’re also at the mercy of Silicon Valley’s changing tides and the instabilities of venture capital.

"No matter how you structure something, if the workforce is unhappy, it’s going to show up in the product you present to people."

By now, it’s clear that technology businesses depicting temporary workers in marketing materials as full-blown, happy employees is disingenuous. The truth is that many such jobs offer less support than those at fast-food restaurants. But some companies are reversing this trend, recognizing that relying on temporary contract workers is bad for businesses, employees, and clients alike.

ZIRTUAL, A LAS VEGAS-based company that offers virtual assistants to help with administrative tasks starting at $399 a month, is one such business. In May of this year, Zirtual “started hiring employees instead of independent contractors,” says CEO Maren Donovan. The motivations were not entirely altruistic—it was more about the company’s ability to offer a great product than a sense of social justice.

“Part of it was a cultural thing; there was a big difference between the way that the independent contractors felt and the way that our core team who were employees felt,” Donovan says. The temporary workers “didn’t feel as brought into our vision or team. There was more churn of independent contractors just because they weren’t as bought in.” When the product a company like Zirtual offers depends on highly personal, human interactions of the sort necessary to organize a calendar or schedule a meeting, the constant movement of temporary workers into and out of the system is bad for reliability.

Independent contractors also have legal limits as to how much support and training you can offer without bringing them on full-time, making it “pretty difficult to build a relationship,” according to the CEO. Moving away from that model allowed Zirtual to “invest more in our people—longer training, ongoing education, licensing them company computers, and building out tools for them to use workflow-wise,” Donovan says. “They’re going to take their jobs to the next level. Clients have noticed an adjustment in the work they see done.”

This should not be particularly remarkable. That helping employees invest in the success of the company turns them into more effective workers is a truism of employment. But it presents a marked contrast to technology’s heavy hitters.

Zirtual’s transition wasn’t forced. About half of the independent contractors decided to re-apply as full-time employees, Donovan says. Employment wasn’t for everyone, only “those that did want the paycheck and benefits.” But the new hires are still non-exempt workers on a pay scale that ranges from $11 to $14 an hour depending on the level of client, with bonuses for retaining clients. That rate isn’t very high, but the employment structure does offer more stability than an Uber driver job, which might pay out around $12 an hour after expenses, according to reporting by Slate.

I ASKED DONOVAN IF moving away from independent contractor work is something every tech company should do. Temporary workers aren’t good for Zirtual because the company offers “work where you want to build a relationship,” she says. However, users tend to interact more closely with a virtual assistant than a real-life taxi driver, who offers a highly standardized, interchangeable product.

“I use Uber all the time,” Donovan says. “It wouldn’t make sense for them to use employees.” In my experience in New York City, drivers on Uber are rarely working a full-time shift for Uber—they’re mixing and matching with other platforms, like Lyft or local car services. Thus paying for full-time labor wouldn’t necessarily be beneficial for the company—though it would doubtless be better for drivers.

It comes down to the nature of the company and its relationship with its staff. Uber might not take on full-time employees, but they have to ensure that “there’s not bad feeling between drivers and the company,” Donovan says. “That happens when they feel like they’re making $7 an hour for 10 hours a day.” If technology companies are holding up their end of the bargain and actually empowering temporary workers as entrepreneurs, then there should be no problem. But if value is extracted from temporary workers without giving any back, it could destabilize the entire business. “No matter how you structure something, if the workforce is unhappy, it’s going to show up in the product you present to people,” Donovan says.

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