Unlike Uber, more sharing-economy companies are hiring workers as employees

As Uber fights for its right to deny employee status for its drivers, similar companies that are already hiring their workers are apparently doing just fine.

Image credit: REUTERS/Max Whittaker

Amidst the battles raging over whether sharing-economy workers should be considered contractors or employees, last week I called for a compromise that would combine the appropriate features of both independent contractors and employees to create a new way to deal with this new kind of business relationship.

I still believe that this is the best approach for coping with an emerging class of workers that doesn't fit neatly into either of the existing categories. But what happens until companies, workers, and regulators can strike such a compromise? And what if compromise proves impossible to achieve? Will forcing companies like Uber to actually "hire" its workforce really spell doom for the sharing economy?

If you listen to Uber and friends, the answer is obvious. But in the last week I've heard of several sharing-economy companies that treat their workers as part-time or even full-time employees.

The biggest news was the relatively large grocery-delivery service Instacart, which announced last week that it will offer to hire the independent contractors who pick up groceries in Boston and Chicago as part-time employees, while delivery drivers will remain contractors. According to Wired, the part-time workers will get workers' comp protection and the company will pay their unemployment, Social Security, and Medicare taxes. But they will still be able to choose their own shifts and not have to work a minimum number of hours (though the company won't let them work enough to become full-time workers).

Instacart joins a number of much smaller on-demand operations that already say hiring workers is a better way to roll.

The New York Times wrote last week about e-commerce delivery company Enjoy, which decided to employ its workforce rather than risk dealing with the regulatory uncertainty. Enjoy founder Ron Johnson told the Times,  "I'd rather be taking the high road from Day 1 and not be subject to that business risk." And Johnson said the decision pays off in a better product: "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."

Similarly, the Times article also noted that used-car marketplace Beepi hires and trains its inspectors rather than rely on contractors to provide the desired level of service. That approach is also shared by cleaning and supply service company Managed by Q, whose co-founder Saman Rahmanian said "we didn't want to create a company that had a divide between people that worked in headquarters and the others." The Times story also cited food-delivery service Munchery and used furniture startup MoveLoot as other companies that hire their workers.

Ultimately, I expect to see a mix of different business models, perhaps within the same company, as at Instacart. Different jobs require different amounts of training and dedication, and smart companies will understand that the contractor model may inherently limit just how far workers will go for a company. Add that to the increasing likelihood of regulatory action and we're likely to see rising numbers of sharing-economy workers shedding their independent contractor status for employee positions or some hybrid model yet to be determined.

And while that may boost costs for some companies, it could also lead to better service and even competitive advantage. Uber likes to cry wolf about how stick-in-the-mud regulators are holding back progress by undermining its business model, but the reality is that Uber and its competitors will find a way to work with whatever laws end up applying. Such rulings might force companies to shave profits or boost prices a bit, but no matter how much complaining they do, it's hard to believe that the entire sharing economy depends on how its workers are classified.

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Copyright © 2015 IDG Communications, Inc.

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