Dive Brief:
- Over the last two months, an increasing number of companies in the on-demand industry have announced plans to transition their independent contractors to employees, according to an article in the Los Angeles Times.
- In the last two weeks, on-demand food delivery service Sprig, valet parking service Luxe and grocery shopping and delivery service Instacart said they were phasing out some of their independent contractor roles and bringing on those workers as employees.
- That means benefits such as workers' compensation, unemployment insurance, social security and Medicare payments and, for some, health insurance. Those benefits, experts say, can easily add 30% to each employee's compensation package.
Dive Insight:
The writing may be on the wall. With a few exceptions, the added cost seems to be worth it to employers who started out with the "on-demand" model.
Attorney Gillian Overland, whose Los Angeles firm specializes in employment matters, said it's an "oversimplification" to say these companies are overhauling their business models because other companies such as Lyft and Uber are getting sued. "It's certainly part of it," Overland said. "But the lawsuits, if anything, force companies to look at themselves and make the determination whether their business model is appropriate."
It's no surprise that companies are now realizing that they need to invest in their workers to build a sustainable business, Raj Narayanaswamy, co-founder of time-sheet and management software firm Replicon, told the Los Angeles Times, calling it "Business 101."
