The most popular, fastest-growing on-demand startups rely on people to deliver their services — but companies like Uber, Lyft, and Instacartare facing heat for hiring people as independent contractors instead of full-time employees.
Generally, drivers and other independent contractors want full-time pay — or at least predictable pay — but employers have their sights set on maximizing profits.
Employees are expensive for companies. According to the IRS, is that for common-law employees, employers “must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid” to full-time employees. The same is not necessarily true for an independent contractor.
Benefits are another aspect often extended to employees but not independent contractors. And employers but not independent contractors have the right to control how a worker behaves — how to dress, for example, or specific customer-interaction protocol. You have more labour protections when you’re an employee.
Also, companies pay unemployment taxes on wages paid to employees, whereas they don’t with independent contractors.
So, from a company mindset, it’s easy to see why a fast-growing company like Uber would favour independent contractors.
But hiring laborers as employees not only makes them happy — it gives company more control over their employees. Companies can enforce a dress code or uniform, for example, with employees, or they can dictate on-duty behaviour.
New York-based office cleaning startup Managed by Q is bucking the independent contractor trend.
Managed by Q provides on-demand cleaning services for offices using an iPad, which it installs for free, and also offers other services like restocking the fridge or office supplies. With on-demand and subscription services for customers — and now 150 cleaners in New York — its services have become pretty popular: They’re used by other startups like Flatiron Health, Elite Daily, and Uber.
Managed by Q hires its “operators,” as it calls them, as employees, offering full-time and part-time employment with benefits and stock options. The work is flexible, and Managed by Q works with operators’ schedules.
Managed by Q also offers the opportunity to advance. Operators can be promoted to supervisors, with an increase in pay. Bonuses are also up for grabs.
Though it’s operating only in New York for now, Managed by Q — which is named after the Star Trek character and James Bond’s Q Branch — has plans to expand in the future.
Pay for entry level operators starts at $US12.50 an hour plus health benefits, but some operators earn as much as $US45 an hour for more skilled roles like helper and handyman.
In short, Managed by Q is part of the minority of on-demand services that is paying attention not just to its clients, but to the people carrying out its day-to-day work. And that’s what sets it apart.
Managed by Q was founded in December 2013 by Dan Teran and Saman Rahmanian. It was originally intended to be a home cleaning service for New York residential buildings. But after getting interest from office managers, the two decided to pivot to office cleaning.
Since November, when it announced a $US1.65 million seed round, it’s doubled its number of clients. And since last year, the company has gone from having 75 operators to 150.
When it comes to employee growth, Managed by Q says it prefers giving its current operators more hours instead of adding a ton of employees who wouldn’t get as many hours as they want.
Managed by Q knew that using contractors would prove difficult: the company couldn’t get the results it wanted if it couldn’t directly control the people doing the cleaning. So instead, they decided to hire their operators as employees.
And its employees seem happy. Nancy Gonzalez, who has worked as an operator for Q since October, found out about the job from a friend, who’s currently a technical operator for the company.
“Being an employee rather than an independent contractor is hugely beneficial for me — it gives me a sense of job security that I would not have as a contractor,” she told Business Insider. “It creates freedom outside of my job too, as I don’t have to worry about lack of benefits, insurance, or a regular schedule.”
Jose Lara joined Managed by Q as an operator in December and was quickly promoted to a supervisor role.
“What really drew me to the company was the energy that everyone had. Everyone was always smiling, they were all happy to see you, people you didn’t know introduced themselves as if they had known you for years,” he says.
“I was encouraged to join this team once I attended orientation when they highlighted the huge opportunity for growth — they give all operators a development plan so we can see what steps would need to be taken for us to reach the next level of our structure (e.g. supervisor to community supervisor).”
Teran has been outspoken about his beliefs regarding the on-demand economy — in a Medium post, he predicts that lawsuits against on-demand companies filed by laborers will be the “next gold rush” for law firms. He also believes that as the on-demand marketplace gets increasingly crowded, we’ll see “supply-side challenges” — there’s a finite amount of labour available.
Teran acknowledges that Managed by Q’s employment model will be hard to scale as the company grows, but his company’s approach to labour — providing benefits and reliable pay to employees — is novel in the on-demand economy, and is currently embraced by only a handful of early-stage, on-demand startups, including Alfred Club, Flycleaners, and Parcel.
On-demand startups dragging their feet about classifying their laborers as employees should look at Managed by Q as an example: The company has shown that it’s at least possible to create a popular on-demand service that makes both the employees and the clientele happy.