A huge point of controversy in the sharing/gig economy world has been how to classify those of us who work in it. Most people reading this have probably seen or read about lawsuits challenging Uber’s classification of its drivers as independent contractors, rather than as employees. The same lawsuits have been raging on with basically every app out there in this space, including delivery apps like Postmates, DoorDash, and Caviar.
I’ve sometimes wondered if the folks fighting to be classified as employees understand the huge benefits they could be giving up by going that route. Don’t get me wrong, I totally understand the problem with misclassifying workers. Most people need the benefits and protections that come with traditional employment.
But, I suspect that many people fighting to be classified as employees under these apps don’t really understand what they stand to lose. For a side hustler like me, any reclassification to employee status would be devastating. And to be honest, I doubt that any workers on these apps would stand to gain any benefits as an employee other than a (low) guaranteed hourly wage. I highly doubt a company like Uber would allow any newly classified employees to work enough hours to qualify for any benefits.
Instead of blindly jumping in with the masses, let’s stop and think for a second about why you want to be an independent contractor when working in the sharing/gig economy space.
Why You Want To Be An Independent Contractor In The Sharing/Gig Economy
In the debate over being an independent contractor vs. employee, I think many people forget the huge benefits that come with being an independent contractor. These are benefits that you simply cannot get in a traditional employer-employee relationship. Let’s take a look at what I mean:
1. Opens Up Side Hustling To More People
The amazing thing about these sharing/gig economy apps is how much they’ve opened up side hustling to the general population. Being classified as an independent contractor is the only reason that someone like me has been able to step into this space. It’s the reason why we live in the golden age of side hustling. Anyone, if they want, can literally go out and start making extra money today.
Before the rise of these sharing/gig economy apps, side hustling wasn’t really side hustling for most people – it was just picking up a second job. You can get a feel for this just by listening to some of the older personal finance gurus out there. Look at Dave Ramsey, for example, who regularly tells people hustling to pay off debt to consider delivering pizzas at night. Or look at Homer Simpson, when he picked up a second job at the Kwik-E-Mart in order to help pay for a pony for his daughter. These aren’t side hustles. They’re just classic examples of second jobs.
If you’ve got a short-term goal, then picking up a second job is totally fine. But, it’s not sustainable over the long term. Professionals, like myself, don’t have time to commit to weekly schedules at a second job. And there aren’t a ton of jobs out there that will let me work just a few hours a week whenever I feel like it.
In contrast, I think I could do these sharing/gig economy apps into perpetuity.
Fine, you might say, don’t pick up a second job. Instead, start your own side hustle. As much as we like to think it, though, not everyone is cut out to create a side business out of nothing. And not everyone wants to do that anyway. Some of us just want to make a little bit of money on the side without having to deal with a ton of commitment.
2. Gain Access To Extra Tax-Advantaged Space
The little-known benefit of being an independent contractor in the sharing/gig economy space is that you gain access to additional tax-advantaged accounts that most people don’t have access to. When you earn income as an independent contractor, you’re in essence, running your own little business. This makes you eligible to contribute to self-employed retirement accounts like the Solo 401k.
Even a lowly Uber driver or Postmates courier is eligible to put some (or in some cases all) of their earnings into a self-employed retirement account. Your highest level employee can’t even do this. When it comes to independent contractor vs. employee, the independent contractor wins hands down in this arena.
Remember this important fact. Every dollar you earn in a side hustle is a dollar you don’t need to spend. You can literally save 100% of it.
3. Work Whenever You Feel Like It
The ability to work on my own schedule, anytime I want, is the only reason I’m able to do any of these gigs. My day job can be demanding and there’s simply no way I could commit to working any set schedule as an employee in a second job. Even if I could, I wouldn’t want to. I value the flexibility of knowing that I can side hustle whenever I want.
As an example, there’s one prominent delivery service in my city that regularly advertises for delivery couriers. I’ve always wanted to sign up. The problem is that the company classifies its workers as employees. This requires people to work set schedules and make a set hourly wage. It’s probably good for people who are looking for a job, but it’s not good for someone like me who’s just looking for a side hustle. I can guarantee that there are zero lawyers doing deliveries on that platform. The only people working on there are people who really don’t have the skills to do anything else.
For someone working in the sharing/gig economy full time, being able to work whenever you feel like it has another added benefit – you can work as much as you want. Most employers aren’t going to allow employees to work any number of hours. I suspect that if Uber were forced to classify its drivers as employees, it would respond simply by capping the number of hours anyone could work.
4. You Can “Care” Less
Maybe not the best thing to say – you should probably try your hardest at everything you do – but the nice thing about being an independent contractor is that you don’t have to “care” as much. There’s something about picking up a job that makes me feel obligated to work really hard. It’s just a different feeling when you’re an independent contractor using these apps.
Problems With Being An Independent Contractor In The Sharing/Gig Economy
I’m firmly of the belief that most people fighting for employee status stand to lose more than they gain. But, I will admit that I see the reasons why people on these platforms might advocate to be classified as employees. Here are just a few of those reasons:
1. No Safety Net
One issue with being an independent contractor is that the rug can be pulled out from underneath you pretty much without warning. It’s pretty common to hear stories of people who’ve had their accounts deactivated for no particular reason. And unlike with a traditional employer-employee relationship, you’re not eligible for unemployment or other similar benefits.
This isn’t a problem for someone like me who doesn’t rely on this income to make ends meet. But I know that there are many people who need this money in order to live.
2. Most People Doing These Type of Gigs Aren’t Sophisticated Enough To Be Independent Contractors
When you’re an independent contractor, by definition, you’re running your own little business. In the past, people working as independent contractors usually did more complicated tasks. You didn’t really have independent contractors doing menial tasks like driving people around or delivering food. The level of sophistication with an independent contractor was probably higher.
You can get a sense of the level of sophistication in most sharing/gig economy works if you interact with the community. I’m in a ton of these sharing/gig economy Facebook groups and most of the people in there have no idea what they’re doing. Many don’t realize that they can deduct their vehicle expenses. The vast majority have no idea how taxes work. I’d say most people on Postmates or Uber would probably benefit from the hand holding that comes with a traditional employment relationship.
3. More Competition
A workforce of independent contractors usually means more workers. Since the barriers to entry are low, it’s easy for anyone to step into this space. All I have to do is sign up on the app. In many cases, I don’t even need to go in for an interview.
These companies also have little incentive to reduce the supply of workers. Their goal is to get as many workers signed up as possible in order to improve the customer experience. Since these companies aren’t hiring employees, they really don’t have to worry about making sure there’s enough work to go around.
Independent Contractor vs. Employee: You Want To Be An Independent Contractor In The Sharing/Gig Economy
I understand why many sharing/gig economy workers are fighting for employee status. If you’re making a living doing these type of gigs, employee status matters. There’s something to be said about knowing that you’re in a traditional employer-employee relationship and that you have some sort of backup if something happens to you.
But for someone like me, and for most of you reading this, any court ruling or decision to turn sharing/gig economy workers into employees would basically be an end to these gigs as a side hustle. I don’t have the time to take on a second job. I definitely don’t have the time to work scheduled nights and weekends as a delivery person. What I do have time for is to do deliveries on my own time, whenever I feel like it.
I’m all for worker’s rights and I do believe that people should get paid enough so that they can live comfortably. But in the sharing/gig economy space, I’m not sure that reclassification to employee status would be the right move. Instead, look at the positives that come with independent contractor status and capitalize on it. That’s what I’m doing anyway.