In a recent article for the New York Times, Farhad Manjoo (@fmanjoo) details the dilemma many start-ups particularly in the sharing economy are dealing with about hiring employees versus independent contractors.

Ron Johnson, founder of Apple’s retail division who later ran J.C. Penney, has recently started an e-commerce delivery company called Enjoy which sends experts to deliver and set up tech products in homes and offices. Rather than following Uber’s independent contractor model, Johnson decided to actually hire employees rather than use contractors. His reasoning: “There’s a good chance that one day there could be a change in how the law qualifies these contractor jobs — and I’d rather be taking the high road from Day 1 and not be subject to that business risk.” Considering the recent ruling by the California Labor Commission which determined that Uber drivers should be classified as employees rather than contractors, it seems Johnson made the right decision.

While this ruling is not binding, it has powered companies to look for alternatives to using independent contractors, like Johnson’s company and another handful of on demand startups. Though these start-ups hiring employees rather than contractors are small, especially in comparison to Uber which has contracted with a huge amount of drivers around the world, they provide hope that on-demand companies can offer stable careers rather than force people to make a living through unpredictable, app-based tasks. According to Johnson, these businesses have parted from Uber’s vision because real employees are better employees, for they have more of a commitment and vested interest in the company. “We’re providing a personal service — our product is a person. The vision says that it’s really smart to make them employees, so we can get the best people to deliver the best service.”

Uber does not have the legal right to tell their drivers what to do apart from warnings and customer ratings, though one should wonder if they practice the letter of the law. The independent contractor system revolves around autonomy - workers are considered to be independent businesses, responsible for their own expenses and taxes. According to the IRS, a business that hires an independent contractor is not entitled to dictate how or when the contractor performs a job - therefore limiting a company’s power to train and schedule its workers.

This is a major difference in comparison to on-demand companies that embrace the employee model who say their main goal is to deliver an experience that wows their customers. The only way to maintain this level of excellence is to train and systematically deploy the workers - something that can only be done with actual employees. As said by M. Diane Burton (@mdianeburton), a professor of human resource studies at Cornell University, “When people are your source of competitive advantage, it’s clear that a long-term employment relationship and what we would call a ‘good job’ is good for the workers and good for the companies.”

At Beepi, a company that lets customers buy and sell used cars online, new auto inspectors are trained for 3 months to become “Beepi Certified” - something that is not possible under the independent contractor model. Co-founder and chief executive of Beepi, Ale Resnik (@AleResnik), stated, “The promise of our brand is that we are going to inspect every vehicle as if it’s one you’d sell to your mother or a good friend. For that, you need people who are invested in the customer. They need to really care - and they only care when you invest in them.” This mentality gives rise to a new trend in entrepreneurialism called “full-stack start-ups”, in which companies aim to control every part of their service rather than just the technical aspect, such as by hiring front-line workers.

Munchery, a prepared-food delivery service, pays drivers a base wage that exceeds the minimum wage, plus driving expenses, plus tips, which comes out to about $23 an hour in San Francisco, much higher than other delivery jobs. Those who work more than 30 hours a week also get health and retirement benefits. Beepi’s auto mechanics and delivery people get an above-market salary, overtime pay, and medical benefits. At Enjoy, delivery experts are paid either a full-time or part-time salary rather than a per-customer fee, and are also given health coverage, retirement plans, and stock in the company.

We still don’t know if the costs of shifting to employment will impede growth, but for now, these start-ups are all growing rapidly and their business models have been accepted by investors who, initially skeptical, have now been won over. This is not to say that Uber’s model is doomed - David Plouffe (@davidplouffe), Uber’s chief adviser and board member, said that a flexible schedule is one of the main benefits of working for Uber and that much flexibility would be lost under an employee relationship. “We don’t have many drivers who are saying, ‘I’m going to do this for five, 10, 15, 20 years,’ ” he said. “We hope a lot of them do, but the honest truth is that many will do it in a more transitional nature, and it will ebb and flow. One week they may drive 30 hours, the next they may drive five.”

I think it’s safe to say Uber is a great in-between, flexible work. But, if you’re looking for a stable, comfortable career, stay tuned, as the sharing economy is propelling more and more start-ups in that direction.

Read the source article at The New York Times