The gig economy has created untold opportunities for companies to leverage the cost savings, expediency, and availability of an on-demand workforce. Talent who participate in platform-based capitalism frequently cite the advantages of flexible working arrangements and the boons of additional income earned through side hustles. Despite the virtual nature of the business models, however, researchers have found that “most digital economy workers are exposed to the health damaging precarious employment conditions characteristic of the contemporary working class in high income countries.” Business leaders, contractors, and government regulators are all seeking ways to seize the benefits of the sharing economy without the risks, exposure to hazardous conditions, and circumvention of taxes that may accompany this new paradigm. Rather than dismantling the structures or inundating courts with lawsuits, the solution may lie in employer of record services from specialized staffing agencies.
The Rise of Analog Work in a Digital World
Last summer, employers created 37,000 new manufacturing jobs. Industrial jobs in July 2018 had outpaced white collar jobs, according to October 2018 employment data from the U.S. Bureau of Labor Statistics: 54,000 professional and business services roles compared to 24,000 in transportation and warehousing, 23,000 in construction, and 18,000 in manufacturing—for a total of 65,000. This year, despite slower jobs growth, industrial roles made up nearly 28% of all non-farm occupations. The economy added 51,000 professional positions, but jobs in transportation and warehousing, construction, and manufacturing totaled 62,000.
(Bureau of Labor Statistics, Current Employment Statistics survey, July 05, 2019, https://www.bls.gov/web/empsit/ceshighlights.pdf
The continuing momentum of job openings in industrial and manufacturing sectors is not the most intriguing aspect at play in this scenario. Acknowledging the irony, it appears that the same companies fueling the digital capitalism of the gig economy may also be accelerating an unintentional influx of “analog” work. The apps that connect gig talent to their gigs are absolutely digital. However, that’s where the automated platforms end and the manual efforts begin. TaskRabbit, Handy, and Amazon’s Mechanical Turks serve as virtual marketplaces where “customers” and prospective “vendors” connect, meet, and interact through the exchange.
The work these contractors and freelancers perform carries its own set of challenges and difficulties. The people who service rentable scooters and electric bikes, for example, face the risks inherent with driving through crowded cities, repairing damaged equipment, avoiding encounters with thieves or vandals, and more. There are also issues of stability and compliance. As physicians reported in a 2017 study for the Journal of Occupational and Environmental Medicine, the gig economy’s benefits may sometimes be clouded by the shadow of increased vulnerability to “wage theft, independent contractor misclassification, job insecurity, and lack of occupational health protections.” Back in 2013, OSHA also launched the Temporary Worker Initiative as part of its effort to protect temporary workers for accidents and injury. The challenging wrinkle was the new measure’s emphasis on the concept of “joint liability.”
Where does that leave us? Companies want the cost savings and on-demand availability of gig talent. Contractors seek independence, flexibility, and additional income sources. The government demands compliance. Of course, independent contractors should carry their own insurance as a best practice, but how many are really operating as legitimate LLCs or corporations, with general liability, professional liability, and injury claims coverage? Not nearly enough. And who’s checking? So not only are we dealing with the problems of joint responsibility, we once again find ourselves haunted by the ever-present specter of worker misclassification that has plagued gig businesses since their inceptions.
This is where employer of record (EOR) services, particularly those that specialize in high-hazard payrolling, provide a welcome source of relief. An EOR takes over as employer for tax purposes. Clients and staffing firms can use an EOR to payroll their workers and alleviate burdens such as payroll processing and funding, tax deposits and filings, I-9 and E-Verify compliance, unemployment insurance, employment contracts and paperwork, and the thrill-a-minute joys of worker’s compensation.
The client company or staffing agency retains control over business operations and responsibility for workplace safety guidance. Meanwhile, the EOR handles compliance, tax withholdings and reporting, workers’ comp claims, and the intricacies of on-time payroll processing. Because EOR entities concentrate on payrolling, they have greater latitude to afford the high premiums that come with high-hazard positions. In fact, they’re usually in an ideal position to negotiate preferential rates with major insurers by leveraging their buying power.
For clients, an Employer Of Record arrangement can be a time- and cost-saving windfall, liberating internal staff from human resource functions, onboarding and offboarding processes, benefits administration, payrolling, workers’ compensation, and compliance issues. The money saved by outsourcing these functions can be reinvested in business growth or innovation. In the end, it’s a perfect solution to an imperfect situation.