After making a lot of noise in 2015, the term ‘gig economy’ is set to bring even bigger change to the working world throughout the upcoming year. The number of independent contractor forms (1099) issued by the IRS has risen by 22 percent since 2000, with much of the growth occurring in the last five years. During that same timeframe traditional W-2 forms grew less prevalent.
Despite the fact that more workers are choosing the flexibility of contingent employment over regular 9-5 jobs, many companies continue to put off upgrading to a more efficient payments process that accommodates the preferences of their workers.
It’s time to break the archaic biweekly pay period that has become all too common among businesses. While Braintree, Stripe and WePay have simplified how businesses receive payments from consumers, little has been done to help independent freelancers and contractors still struggling to get paid. Old payout processes are not designed to service a new economy in which worker classification remains hotly debated.
Ridesharing rivals Uber and Lyft have made headlines in recent months as they struggle to define a worker classification status that both drives supply side liquidity, and offers appropriate services and protection to their workforce.
In December 2015 Judge Edward Chen ruled that all Uber drivers who have worked for the company since 2009 can participate in a class-action lawsuit that argues Uber should reimburse drivers for gas and other expenses. Just one month later Lyft agreed to pay $12.25 million to settle a pending worker classification lawsuit in California. As the battle between the two ridesharing giants and their drivers plays itself out in courtrooms across the country, businesses must take steps to reduce the complexity that hinders supply-side payment.
One size doesn’t fit all
The first step is integrating payment processes into their infrastructure to better cater to the payment preferences of independent workers. While one worker may ask that his or her funds be deposited into a savings account opened in Australia, others could be more comfortable with a payout to an existing debit card in New York.
In order to improve worker satisfaction and long-term scalability, businesses must be prepared to accommodate such requests. Seamless integration of bank vs. card capabilities, for example, will go a long way toward meeting the needs of a globally dispersed payee community, while minimizing costs. Implementing additional features such as payment tracking and security along with customer support will further enhance the user payout experience.
Raising retention
Businesses should also consider a loyalty application that includes custom branded payouts and appropriately placed offers. After all, recruitment and retention efforts are crucial to supply-side liquidity. Instead of just meeting a worker’s preferences regarding payment type and currency, businesses can leverage the power of payments to build a stronger bond with workers and turn them into brand evangelists in the process.
As the ‘gig economy’ gains popularity, supply-side hurdles such as the payout user experience will play an increasingly important role in the happiness of workers and the long-term growth of businesses. Unfortunately for businesses, payment processes of the past won’t cut it. By catering more closely to the preferences of independent workers, businesses can take the pain out of payments.