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Ever since the California Labor Commission ruled that an Uber driver should be treated as an employee as opposed to a part-time contractor, debate has swirled over what sorts of labor protections are appropriate, particularly among companies in the sharing economy.
On one hand, the drivers who work for ride-hailing companies generally set their own hours and can work more or less at their own convenience. On the flip side are those arguing that the “benefits” of the contractor classification are illusory and in most cases are an issue of an employer who wants to save money on benefits and severance.
While the reality is likely somewhere in the middle, one thing is for certain — with technology startups like Shyp and Instacart already moving to reclassify their contractors as employees, we’re currently at a moment of reckoning for companies that rely on part-time workers. Here are four reasons why that may not be such a bad thing:
Lower turnover
Last year, Uber released a comprehensive report from a survey conducted on its own drivers. While the sample size is relatively small, 11 percent of Uber drivers lasted less than a month, and about half were gone within the year. That’s a huge amount of churn, especially when you consider that recruitment and training are one of the most expensive parts of doing business. Full-time hires tend to have much lower turnover, as well as contractual obligations and incentives (like benefits) that motivate them to stay put. Bringing more of their team on as employees could end up saving startups money down the line as turnover declines and workers get better at their jobs.
Aligned incentives
Whereas most people view full-time employment as a “job,” employment that happens under the contractor status is frequently thought of as more of a “gig.” There’s a good reason for this — under most freelancer contracts, the employer has little to no control over the project until it is completed and handed over. People working “gigs” are also likely working on many projects at once to support themselves, meaning that few projects get much long-term time and attention. Bringing more of your employees on full time will incentivize them to succeed along with the company, as their fates are naturally intertwined. For the on-demand economy in particular, this translates into better relationships with long-term clients.
Teamwork
It has been documented in numerous studies that employees are more responsive to motivation from their peers than they are to their own managers. Perhaps even more surprising is the fact that many workers prioritize praise and the notice of company leadership over pay. While these studies seem to be at odds, they make sense when you consider that one of the most important things people get from their jobs is a sense of purpose, and a sense of being a part of something larger than themselves. This is even more true for startups, where many employees could be fetching higher salaries for easier jobs working at bigger tech companies. Full-time employees are more likely to become collaborative and form bonds over time. These interpersonal relationships are one of the most fulfilling parts of working in the first place, but they also add value.
Loyalty
The most important thing you get from having full-time employees is a greater sense of loyalty. While it’s obviously true that employees show up every day because they get a paycheck, there’s a strong sense of loyalty that grows over time, and which is much harder to cultivate among contractors and part-timers. Working in the real estate industry, we see this issue from both sides. The vast majority of real estate agents work as independent contractors, either selling properties on their own or under the brand of a larger brokerage. Since all of our employees were used to working this way, we decided to test our theory by bringing them on full time for a while, and then getting feedback on which structure they liked better. The results were almost unanimous: Once people feel like they are part of a group, there’s no going back.
There are obviously still going to be situations where hiring a contractor makes sense (there wouldn’t be much value in a small business keeping, say, a plumber on full time). But it’s also time for companies, and startups in particular, to start paying more attention to how they make these kinds of decisions. We also think it’s time for governments to start reconciling labor protections with the realities of 21st-century employment. Canada, for instance, has a separate classification for contractors whose income is dependent on a single employer; dependent contractors, which would certainly describe the Uber driver who is spending 40 or 50 hours a week on the road.
A similar alternative here in the U.S. would empower workers who want more flexibility, while also giving them some of the protections full-timers enjoy. There is a middle ground here, and in light of how companies are reacting to Uber’s ruling, it’s increasingly likely that startups will be championing important legislative change.
Philip Lang is the co-founder and COO of TripleMint, a technology-enabled real estate brokerage that is the refreshingly simple way to find your home. Prior to co-founding TripleMint, Lang worked on Wall Street as an investment banking analyst in the industrials group at Macquarie Capital; he currently serves on the board of the Safety Net Task Force at UJA Federation, which distributes grants to at-risk families. Reach him @philiplang.
This article originally appeared on Recode.net.
