Technology has pushed the “gig” worker into the business model spotlight. Thousands of apps allow independent contractors to connect with each other – and with their work. But, these relationships also come with risks, as gig industry leaders Uber and Lyft know.
Both companies are dealing with lawsuits from drivers who demand to be treated as employees, while their employers continue to identify them as independent contractors. In a 2015 case against Uber, California ruled that the driver in question should be defined as an employee and treated as one. The industry leader had to reimburse the employee who filed the suit more than $4,000.
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This tech strategy has blurred the image of full-time employees and independent contractors. As these technologies keep certain employees out of sight, their absence from the office can incline employers to view them as independent contractors and withhold the benefits they deserve.
How tech gave rise to the “gig worker”
With the privilege of being always on and always connected in today’s world of work, fewer and fewer jobs rely on the worker physically being in a specific place at a certain time to complete tasks. As a result, many have left behind the idea of the 9-to-5 workday in search of better work-life balance.
This movement lends itself to “gig workers,” or people who use apps and other platforms to take on projects for pay, instead of committing to work for an organization permanently and on a set schedule. With the technology continually developing to help support the relationship between gig worker and client, networks like Elance are advancing.
At the same time, people are realizing the power of crowdsourcing and what perfect strangers can accomplish when they have a common goal. All they need is a way to collaborate. And new software and apps do just that.
As platforms like Uber see it, they provide the software that connects people, not the service those people provide. The actual technology – the app – is their product, and therefore they don’t need to shell out the cash to hire employees or to buy the basic resources needed for the job. Airbnb, for example, doesn’t need to build hotels because it’s a tech company, not a lodging service.
Gigs aren’t always bad. People can make extra cash on the side, or test drive new passions and projects on a more flexible basis. But, it also blurs the line of the employer-worker relationship and makes unclear just how much support a company should give its workers.
As mobile technology has allowed business to outsource more tasks, and has offered professionals more flexibility, the gig economy makes professionals chose between the two things they want most – freedom or security.
How we really define “employee”
The Department of Labor (DOL) defines employ as “to suffer or permit to work.” Furthermore, according to the DOL, the worker is an employee if “as a matter of economic reality, the individual is dependent on the entity,” that is, the company.
Other determining factors include how much the worker’s tasks matter to the employer’s business, the worker’s profit and loss opportunity, whether the work requires special skills or initiative, and the permanency of the relationship.
But technology develops faster than the law and it’s fallen behind in this area — just as it has for other issues like cyberbullying, health app security and regulations, and privacy issues on social media. Without the law to reference, the defining question has become, “Who is asking the employee to work, or is the employee making his own work decisions?”
Should we protect the gig worker?
So, should we better protect the gig worker by supporting employee classifications liberally?
The good news is technology enables better communication and collaboration to ensure tasks get done. Problems only emerge when the terms aren’t clearly defined — be it gig or no gig.
Protecting the gig worker means drawing clear lines between contractor and full-time employee — and technology can help with that. Here are some suggestions for using tech to do just that:
1. Outline how and when work is completed.
The main distinguisher between employee and contractor is who has the right to direct the work, so keep that clear with an app that connects project members.
Create dynamic organization charts to separate contractor work from employee work with a talent or project management system. Choose from a number of applications that allow employees and contractors to manage their hours and assignments, as well as communicate with each other – wherever and whenever they work. Apps like Asana remove the middle man of email and allow teams to access project resources and communicate on-the-go.
2. Specify classification in written terms.
Let employees know from the beginning whether they are an employee or an independent contractor. Perhaps most importantly, in all onboarding documents, specify the terms of the relationship. Define who has the right to direct work, who stands to make a profit or loss, and any other employee requirements, such as meeting participation. These factors help the IRS regulate worker classification.
Additionally, keep all employee defining documents on a cloud storage platform to which all employees and contractors have access. By using tools like Google Drive to organize important information, you allow your team to access it from anywhere at anytime.
3. Decide who is entitled to which benefits.
While technology has changed the face of employee definition, it has also changed benefits. In the past, benefits enrollment was a paper-based process, where employers provided packets of information about the benefits offered, and employees were left to sift through the options. The gig workforce has made this process more complicated. Both employees and contractors are confused about which benefits are available and which options are the best for them.
A good rule of thumb is to look for software that enables automated benefits enrollment, simplifying the process and clearing up any confusion about benefits options available. Decide which benefit options you’d like to reserve for employees and which you’d like to extend to contractors. Allow each to put together their own custom plans based on the options you provide.
Using technology to make information about benefits easily available to employees and contractors ensures everyone is on the same page.
4. Gain better control over tax reporting.
Payroll has come a long way from the days of handwritten spreadsheets, but it’s still a complicated process. You’re pulling together information from different databases and sources, and now you have contractors to worry about. But HR tech makes managing taxes easier – with the right system.
Employees and independent contractors have different processes for tax season, so it’s important to keep their classifications straight. With Namely, a person’s hours are automatically entered to their profile, making the employee definition clearer. Then, taxes are automatically calculated, deposited, and filed.
Plus, you can sync payroll and HR information in the platform to save time. And if an employee needs to edit their tax withholding, there’s no need to go through a head of HR. They can just hop into the platform and make the change themselves. This way, you and your employees – of all classifications – can have a stress-free tax season.
In many ways, tech can serve the “gig economy” it helped create. Using HR technology via the cloud and apps, employers can look out for all their employees and keep the line clear between full-time employee and independent contractor.
Read next: The problem with human resources