Employee or Independent Contractor?

Freelance becoming the norm

working at a laptop

From the TribLIVE/The Washington Post, this story describes the shift away from traditional 40-hour-per-week employment towards more on-demand employment or the “gig economy.”  It does a great job of outlining the three different ways in which this takes form:  low-wage workers who might be taken advantage of by employers; high-wage professionals seeking freedom from traditional employment; and traditional workers who might become independent contractors because their jobs might not be needed all year long.  It states:

More and more, companies are shifting portions of their work to independent contractors, managing large pools of people available as needed for anything from tech support to landscaping. This relieves them of having to pay employees a fixed amount every month — not to mention health insurance, Social Security taxes or workers’ compensation.

It’s difficult to know how many companies are going in this direction, or how quickly. The number of self-employed people as a percentage of the workforce has remained fairly constant for decades, at about 10 percent; much of the contracting out that has occurred is to firms that have employees, rather than sole proprietors.

Regardless, a lot of money is going into start-ups that are competing to ease the transition — and profit from it. Take Work Market, a platform where Wooldridge finds most of his jobs. It raised $20 million from leading investors, including Union Square Ventures principal Fred Wilson, who thinks it has the potential to “transform the way enterprises leverage the on-demand labor economy.” Translation: Businesses can save money by using freelancers, and Work Market takes a cut of that savings.

Of course, if businesses are saving money on labor, it probably means workers are making less of it. Wooldridge likes running his own show but hasn’t been able to make the six figures he used to. On an annual basis, he figures that what he has made since starting freelancing in July is about $75,000, before taxes.

But there are more trade-offs: Health care coverage is more expensive, for example, going from about $350 in monthly premiums in his old job to $600 per month on his own. He is working many more hours — 60, sometimes 80 — now that he has to drive between job sites. Sometimes a site isn’t well prepared or doesn’t have the tools for him to do his work.

3 WAYS OF THINKING

The shift toward an “on-demand economy,” as venture capitalists call it, is happening on the high and the low ends of the wage scale — and there are a couple of ways to think about it.

The first is that employers are taking advantage of comparatively low-wage workers such as housekeepers and construction workers by illegally misclassifying them as independent contractors, leaving workers without the protections and benefits that come with being an employee.

The Labor Department has been cracking down on this tactic, which cheats the government out of payroll taxes. Some companies, such as the car-hailing app Uber and the cleaning “platform” Handy, are being sued by their own service providers for allegedly inappropriately classifying them as contractors when they don’t have anywhere near the amount of freedom that that’s supposed to entail.

The other way of thinking about the “on-demand economy” is that it liberates professionals to design their own schedules and set their own rates, enabling them to take on more clients and make more money.

And then there’s the vast middle ground: Traditional employees who could be legally transitioned into independent contractor status, with the help of a system to manage them all. That’s potentially the tectonic shift, as companies seek to pay workers only when they have the work, rather than keeping them on staff all year long…

Read the full story at Freelance becoming the norm | TribLIVE.

Back to Top