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On-demand economy: Creating entrepreneurship or exploitation?

Sharon Florentine | Feb. 24, 2015
Companies like Uber, FancyHands, Airbnb and Snagajob are flourishing, driven by technology, a slow economic recovery and consumer demand. But what does that mean for today's workers?

Snagajob's applicants must be vetted and screened by clients in a fairly traditional hiring process to avoid such problems -- the service merely acts as a facilitator to match open jobs with qualified candidates, says Harrison.

"The downside is fairly obvious - the workers don't work for you, thus you don't truly control them. If they get a better offer, you lose. They have no loyalty or real skin in 'your' game, so it's virtually impossible to own their actual mindshare. They work for themselves, not you," says Duplessie.

"Presuming you have a legitimate, long-term need for skills, I contend you are always better owning that talent versus renting it. We at ESG use contractors/freelancers for 'burst' requirements, but never rely exclusively on them. I always want to have someone on the payroll directly when things like quality matter -- and even more so when customer satisfaction is paramount. An employee is far more willing to go the extra mile than a contractor," Duplessie says.

Another problem is how companies in the hourly employment market classify workers. As Kevin Roose explains in his article for NYMag, "The IRS has a 20-factor test to determine whether businesses are treating their service providers like contractors or employees. Most of the factors have to do with the degree of control the company exerts over a worker. Does the worker have a schedule set by the company? Does the company require the worker to wear a uniform, receive job training, or use tools provided by the company? If so, that 1099 worker might be properly classified as a W-2 employee -- and the company might be on the hook for thousands of dollars in back payroll taxes," Roose points out in the article.

But recent lawsuits have brought this issue to the attention of the U.S. Labor Department, and courts have ruled in favor of workers who claim they were expected to conform to the same rules and conduct of full-time employees without being classified as such. In these cases, regulation and oversight are key to ensuring that businesses can operate successfully and efficiently and that workers are not being exploited for a pittance and are receiving proper benefits and are able to exercise their rights in the labor force.

On-Demand on the Rise
The on-demand economy shows no signs of slowing down in a post-recession, technology-driven world. Figuring out how to meet the needs of efficiency conscious businesses and hot startups while respecting the rights of the workers in the labor force will continue to be a balancing act.

 

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