Tech must radically rethink how it treats independent contractors

Despite a surging stock market and many major tech players having record quarters, we’re still seeing layoffs throughout tech and the rest of corporate America. Salesforce recorded a huge quarter, passing $5 billion in revenue, only to lay off around 1000 people. LinkedIn is laying off 960 people one day after reporting a 10% increase in revenue.

These layoffs may seem like a contraction in size for these huge enterprises, but it’s actually the beginning of something I call The Great Unbundling of Corporate America. They still need to grow, they still need to innovate, they still need to get work done and they’re not simply canceling projects and giving up on contracts.

Just as COVID-19 has accelerated the move to remote work, our current crisis has accelerated the trend toward hiring independent contractors. Back in 2019 a New York Times report found that Google had a shadow workforce of 121,000 temporary workers and contractors, overshadowing their 102,000 full-timers. ZipRecruiter reported in 2018 that tech, along with its record employment growth, was showing an increasing share of listings for independent contractors.

A study from the Bureau of Labor Statistics found that between 6.9% and 9.6% of all workers are now independent contractors, and according to Upwork, that may be as high as 35%. Mark my words — companies are using this time as an opportunity to swing the pendulum toward independent contractors and trimming the fat, justifying it with a vague gesture toward “an unprecedented time.”

That’s why, in my opinion, you’re seeing the NASDAQ hitting record highs despite everyone’s turmoil — depressingly, investors can see that large companies are tightening up and cleaning up waste, while finding an affordable workforce at will. As they have unbundled themselves from our physical offices, large enterprises are going to unbundle themselves from having to have a set number of employees.

When Square allowed its entire workforce to work remotely permanently. It wasn’t just because they wanted them to feel more creative and productive, but was likely a move away from having quite as much expensive, needless office space.

Similarly, if there is work that a full-time employee does that could be done by a flexible, independent contractor, why not make that change too? And it’ll be a lot easier to make without as many people at the office.

The argument I’m making is not anti-contractor, though.

I can’t think of any point in history where it’s been better to create a freelance business — the startup costs are significantly lower, and as companies move toward remote work, you can theoretically take business nationally (or internationally) like never before. Companies’ moves toward replacing W-2 workers with contractors is an opportunity for people to create their own miniature freelance empires, unbundling themselves from corporate America’s required hours, and potentially creating a way to weather future storms by taking away any single company’s leverage on their income.

The rush to remote work is also likely to push more workers into the freelance economy too. By having to create a remote office, with a remote presence in meetings and having to manage and organize our days, the average worker has all but adjusted to the life of a freelancer.

Where some might have gone to an office and had things simply happen to them, the remote world requires an attention to your calendar and active outreach to colleagues that, well, models how one might run a freelance business. Those with core skillsets that can be marketed and sold to multiple clients should be thinking about whether being a wage slave is necessary anymore, and with good reason.

That said — corporate America, and especially tech, has to treat this essential workforce with a great deal more empathy and respect than they have thus far.

Uber and Lyft were ordered to treat drivers as employees in part due to the fact that they never treated their contractors like parts of the company. Other than the obvious lack of benefits (paid time off, health insurance, etc.), Uber, like many large enterprises, treats contractors as disposable rather than flexible, despite them being the literal driving force of the company. When Uber went public, they gave a nominal bonus for drivers that had completed 2500 to 40,000 trips, with a chance to buy up to $10,000 of stock — at the IPO price. These drivers, that had been the very reason that many people became millionaires and billionaires when Uber went public, were given the chance to maybe make money, if they sold the stock quickly enough.

It’s an abject lesson on how to not build loyalty with independent contractors. It’s also a lesson on what the next big company that wants to build themselves off the back of the 1099’er should do.

What I’m suggesting is a radical rethinking of freelance contracting. I want you to see independent contractors as a different kind of worker, not as a way of skirting getting a full-time employee. A freelancer, by definition, is someone that you don’t monopolize, and someone that you should actively give agency and, indeed, part of the network you’re building. One of the issues of corporate America’s approach to freelance work is an us-versus-them approach to employment — you’re either part of us or you’re simply a thing we pick up and put down. What I’m suggesting is treating your freelancers as an essential part of your strategy, and compensating them as such. Freelancers should own equity and should have skin in the game — they may be working with you on a number of projects and take literal ownership of vast successes throughout your history.

Contracted work has only become mercenary through the treatment of the freelance worker. Where tech has succeeded in creating hundreds of thousands of independent contractor positions, it also has to lead the way in reimagining how we may treat them and reward them for their work. And corporate America needs to take a step beyond simply seeing them as a cheaper, easier way to do business. They’re so much more.

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