Why Homejoy’s collapse is not a harbinger of doom for the on-demand economy

cleaning the stoveFrom The Washington Post, Lydia DePillis discusses how other start-ups are addressing the controversy about classifying workers as employees or independent contractors.  Lydia writes:

“It would be easy to conclude, therefore, that regulations — and the resulting litigation — are what’s strangling the on-demand economy. That forcing employers to put workers in boxes built for the 20th-century workplace, as some employers have alleged, is making it impossible to innovate new business models.

But that conclusion would be incorrect (and not just because closing up shop was a convenient way for the struggling Homejoy to shake the lawsuits, with a soft landing from Google). Already, some companies are finding excellent reasons to build themselves with employees from the ground up.

Take Managed by Q, an on-demand provider of office cleaning services. Co-founder and CEO Dan Teran says there was never much question what tax classification his workers would get, for a couple reasons: First, they needed to control the customer experience more than they could with contractors. “Our staff are very much part of our interface. Categorically, we needed to be able to train people,” Teran says. Training is a key determinant of employee status.

And second, they needed to attract great staff. “We thought, ‘what do the best people need?’ and worked backwards to provide that,” Teran says. Parents often provided the best service, and they really need health insurance, so the fact that Managed by Q provided it became a selling point in recruiting.

Of course, it is pricey to provide all those benefits and pay the extra taxes associated with employing people — on the order of 20 to 30 percent more expensive. Teran says they deal with it by having other sources of revenue besides labor, like building maintenance and supply replenishment, so compensation isn’t their only cost driver.

That works if you build the company from the ground up. But what about transitioning mid-stream? Teran thinks it’s possible, even for an Uber or a Handy, the other large home cleaning service that’s already vacuuming up the workers Homejoy has let go….”

Read the full story at Why Homejoy’s collapse is not a harbinger of doom for the on-demand economy 

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