Why Startups Are Making the Expensive Switch to Traditional Employment • Hacker News Board

Re: Why Startups Are Making the Expensive Switch to Traditional Employment

#51

Post by paulsutter » Thu, Aug 06, 2015, 6:40 PM UTC

a_c_s wrote: post #34

paulsutter wrote: post #16

The individual pays the cost. Today Uber drivers get like 80% of the fare. If Uber needed to pay benefits, give vacation time, etc, the pay rate would be much lower. That would all come out of the 80%. Just like how contract programmers bill a higher rate and get no benefits. Calling someone an employee doesn't suddenly create new money. I can't imagine uber drivers would prefer a lower rate of pay, but hey, I guess…

There's no intrinsic reason Uber's take is fixed at 20% - maybe their business can only viably employ humans (with all of their attendant needs like health insurance) with a smaller take.

It would be likely for drivers pay to be cut in half, if Uber had to pay them as employees (just based on comparable differences between paying contractors and employees in other fields). Their taxes would also go up since they could no longer deduct the cost of their car and other expenses from their income.

Even if you pared Uber's take back to 10%, or 0%, it wouldn't cover the costs of making them employees. And it's the drivers that would take the hit.

Uber provides a tremendous lead-gen service for drivers. Everyone here who's tried to run a business knows that finding customers is the central challenge of a business. Uber completely handles that challenge for drivers, for a risk-free 20%. That's a pretty good deal.

Re: Why Startups Are Making the Expensive Switch to Traditional Employment

#52

Post by pnathan » Thu, Aug 06, 2015, 6:42 PM UTC

Some precedent here: Microsoft famously lost a lawsuit regarding contractors vs full-timers in Washington state. You simply can't treat contractors like employees in the state of Washington - you have to make a very clear distinction.

Now, 20 days ago, Homejoy closed down, and I said what I am quoting below:

https://news.ycombinator.com/item?id=9903831

> the balance of power between the tech company and the "1099 contractors"

That hits the nail on the head. A 1099 contractor (a.k.a. freelancer) has to cut some 30%-40% off their wage to support things like self-insurance, etc (or add yea much). If you're "working" for a gig provider, you're not a 1099 employee by the inherent nature of the thing. Granted, you're not in a normal employer-employee relationship, but neither are you a skilled freelancer contracting your labor out on wages you yourself set and negotiated. While I fully support the idea of TaskRabbit, Lyft, Uber, Homejoy et al, certain realities have to be faced squarely: they are not being real about the nature of their business. They really are something like employers, with something like employees. Cheung is likely correct that a third legal category needs to be created (neither 1099 freelancer nor true employee), but in the absence of that, it seems profoundly more ethical to consider the workers employees.

Re: Why Startups Are Making the Expensive Switch to Traditional Employment

#53

Post by paulsutter » Thu, Aug 06, 2015, 6:49 PM UTC

patio11 wrote: post #20

The biggest issue seems to be control over the work delivered. All of the Uber for X want their service to be a pleasant experience for the customer which is ~98% guaranteed to hit 5 stars or the local equivalent. This generally requires some degree of operational control over the workers. Aside from the (formidable!) difficulties [+] of actually structuring a business to have operational control, that tilts the rela…

So you are saying, the driver is an employee of the passenger? I definitely control the work delivered when I'm riding. I dictate where to pick me up, and the exact destination. Sometimes I even demand a specific route. And to top it all off, I give the guy a rating.

Uber does none of those things. They don't even tell the driver when to switch the app on and off. So I guess, your point is, that Uber doesn't have much risk that drivers be categorized as employees?

EDIT: I WAS KIDDING GUYS! Except my point about Uber. They really don't seem a bit like an employer to me. Particularly w/regard to control over drivers work. Bigger question, why does anyone think it would be an advantage to drivers to become employees and get lower pay?

Re: Why Startups Are Making the Expensive Switch to Traditional Employment

#54

Post by chc » Thu, Aug 06, 2015, 7:03 PM UTC

paulsutter wrote: post #53

patio11 wrote: post #20

The biggest issue seems to be control over the work delivered. All of the Uber for X want their service to be a pleasant experience for the customer which is ~98% guaranteed to hit 5 stars or the local equivalent. This generally requires some degree of operational control over the workers. Aside from the (formidable!) difficulties [+] of actually structuring a business to have operational control, that tilts the rela…

So you are saying, the driver is an employee of the passenger? I definitely control the work delivered when I'm riding. I dictate where to pick me up, and the exact destination. Sometimes I even demand a specific route. And to top it all off, I give the guy a rating. Uber does none of those things. They don't even tell the driver when to switch the app on and off. So I guess, your point is, that Uber doesn't have muc…

Is a waiter your employee rather than the restaurant's because you can order highly customized things and you directly pay them afterward?

Re: Why Startups Are Making the Expensive Switch to Traditional Employment

#55

Post by patio11 » Thu, Aug 06, 2015, 7:03 PM UTC

paulsutter wrote: post #53

patio11 wrote: post #20

The biggest issue seems to be control over the work delivered. All of the Uber for X want their service to be a pleasant experience for the customer which is ~98% guaranteed to hit 5 stars or the local equivalent. This generally requires some degree of operational control over the workers. Aside from the (formidable!) difficulties [+] of actually structuring a business to have operational control, that tilts the rela…

So you are saying, the driver is an employee of the passenger? I definitely control the work delivered when I'm riding. I dictate where to pick me up, and the exact destination. Sometimes I even demand a specific route. And to top it all off, I give the guy a rating. Uber does none of those things. They don't even tell the driver when to switch the app on and off. So I guess, your point is, that Uber doesn't have muc…

Not a lawyer but I'm obligated to be at least partially conversant with this by dint of once being a consultant and now being an employer:

The driver is clearly not an employee of the passenger. A driver given the instruction that they must comply with the passenger's preferences (as opposed to exercising their judgement as an independent business) may well become an employee of the entity enforcing that instruction.

It will probably be remarked upon in litigation over Uber that Uber will terminate their relationship with drivers who fall below a particular cutoff, specifically tells drivers this, and often specifically instructs them in ways to ensure this doesn't happen to them. These do not feel like insignificant facts to me.

I'd ask Grellas to handicap Uber's risk of being reclassified prior to asking me to do it, since he is an expert on this subject and I am not, but even from my lay view of the situation it looks like some of the Uber for Xs are at markedly more risk than others. Uber feels markedly less risky than firms which e.g. develop in-app checklists for heading off particular ops problems.

Re: Why Startups Are Making the Expensive Switch to Traditional Employment

#56

Post by baseballmerpeak » Thu, Aug 06, 2015, 8:05 PM UTC

bmj wrote: post #32

baseballmerpeak wrote: post #31

Earlier quoted context omitted.

Friday nights in excess of a full-time work schedule, yes.

So this is just for hourly employees, then? Because in that case, I assume they'd be getting overtime regardless of the day of the week.

Non-exempt salaried as well.

Re: Why Startups Are Making the Expensive Switch to Traditional Employment

#57

Post by littletimmy » Thu, Aug 06, 2015, 8:05 PM UTC

AnimalMuppet wrote: post #26

tonyedgecombe wrote: post #22

Earlier quoted context omitted.

Except it isn't like every other market because most people don't have a choice not to work, whereas they do have a choice not to buy a TV, phone, bigger house, etc. Employers will exploit this fact and take advantage of people desperate to keep their job.

No. But they have a choice to work elsewhere . Push them hard enough (like forcing them to take shifts that they hate), and they will take that choice.

Yes. But they do not have a choice not to work. That means that capitalists can collude to drive wages down to unhealthy levels. Even Adam Smith warned us against this and advised the state step in to help the worker.

Re: Why Startups Are Making the Expensive Switch to Traditional Employment

#58

Post by ocdtrekkie » Thu, Aug 06, 2015, 8:05 PM UTC

michaelochurch wrote: post #17

ocdtrekkie wrote: post #4

I feel like Silicon Valley tends to think they can save money by skipping out on whatever big businesses have always done, until they find out later that it was a bad idea, and businesses did things that way for a reason. It's what happens, I think, when 20-somethings think they know what they're doing over experienced people with 20-something years of experience in the business world.

I don't know why the fuck you were down-voted. That said, age is only a small part of the issue. I'm older and there's still a lot more that I don't know than there is that I do know. I don't expect that fact to change in a fundamental way: there will always be far more that I don't know. The problem is that Silicon Valley people are arrogant and don't listen. They call the rest of the country "the paper belt" and th…

I know why I was downvoted. I heavily criticized startup culture on a community meant for startup folks. ;)

Sidebar: I have Asperger's. It's not a disease, just a difference. And it's definitely not an excuse.

Re: Why Startups Are Making the Expensive Switch to Traditional Employment

#59

Post by ripter » Thu, Aug 06, 2015, 8:55 PM UTC

fancyketchup wrote: post #47

ripter wrote: post #30

Earlier quoted context omitted.

Where are you getting the 80% number? The drivers I talked to have told me it's much lower.

Maybe they were talking about net[1], or maybe they have a large number of short trips? From memory (from talking with drivers), the formula is: driverDollars = (fareDollars - 1)*0.8 If a driver is mostly taking people one or two blocks, the fares are going to be in the $3-5 range. That means the $1 "safe ride fee" (or whatever it's called) is already 20-30% of the fare, so Uber's total take on short rides is closer…

I just talked with a driver. He said the 80% is correct, gross. Because everyone is a contractor the government takes another 30% on top of it. Plus they have to pay their own insurance, repair, gas, etc. so after everything is said and done, he makes about $13/hr. (This is inside San Francisco.)

Re: Why Startups Are Making the Expensive Switch to Traditional Employment

#60

Post by toomuchtodo » Fri, Aug 07, 2015, 4:02 AM UTC

littletimmy wrote: post #57

AnimalMuppet wrote: post #26

Earlier quoted context omitted.

No. But they have a choice to work elsewhere . Push them hard enough (like forcing them to take shifts that they hate), and they will take that choice.

Yes. But they do not have a choice not to work . That means that capitalists can collude to drive wages down to unhealthy levels. Even Adam Smith warned us against this and advised the state step in to help the worker.

Which is why a proper minimum wage set forth by government is required.