Remuneration in the Gig Economy - A Game of Hard Cash?

Lisa (not her real name), is a young mother who drives for an e-hailing company after dropping her kids off in school. And come the school dismissal time, while she waits near the school, she sources for customers for her insurance business over social media and when she reaches home after picking her kids up, she bakes pastries to be distributed to a few bakeries in her neighbourhood. Her pastries are picked up by Eddy (not his real name) and sent to those bakeries, right before he starts his shift as food delivery person after completing a full day’s work at the office. Welcome to the gig economy, ladies and gentlemen!

According to cnbc.com, there are about 60 million gig workers in the United States and by 2027 it is expected that majority of US workers will be contract workers. This has been attributed to the rise in the block chain system, usage for more and more contract employees for optimum output by large corporations, the advent of Internet of Things which facilitates remote working and the robust networking among freelancers.  Now, it is no longer about acquiring college degrees but building key skills that can contribute to individual compensation.

Compensation, which in essence is the pay or money paid for a service or product, was the main issue in the recent Foodpanda pandemonium.

The underlying question here is – what is the right compensation for the gig economy worker? Before we could arrive at some answers, let us look at the nature of this economy, which is expected to replace the regular work arrangements, which most employees are used to. However, I must qualify my statement here – doing gigs is not new. Buskers, singers, models, part time clinic nurses and insurance sales agents have all been nothing but gigs by those in that field. It is when this pattern started appearing in the most unexpected areas of work, the employment market has started taking notice.

Here are some characteristics of a gig economy profile:

1.      Ability to focus on some specialised skills – patience to drive, good at reading addresses, outstanding language skills, social media savviness are some of the skills that would bring a gig worker a long way. I have used services of e-hailing drivers who have opted not to use Waze app to drop me off at my destination, but knew faster routes, in a way beating technology at its game. How? They may not be native of that place but have driven enough to know that sometime smaller roads will take you faster to your destination than the roads prescribed by apps like Waze.

2.      Flexibility in delivering services in terms of time – gig workers work according to their time availability. In other words, these workers can choose what work to do that day at the break of dawn. I would think the ideal choice would be to choose what could pay the most money against the opportunities for the day, than to do what was done the previous day. On that day Eddy may choose to drive for the e hailing operator, given that it is a weekend and the malls are running some events which are expected to bring in the crowds. If he could get about 8 rides the whole day, he would be very tired but the money would be good. And at night, if he has some energy left, he could still do the bakery drop off and make some extras.

3.      Not everyone works every day – this would be attractive for the gig workers because on somedays family needs could take centre stage. Parents may need to go to hospital for a check-up, kids may have sports day in school, a friend could be getting married – all of which can be accommodated by the gig worker more easily than a full time/permanent employee. The current job design in organisations are employee friendly but may not be good for employer because that would mean downtime in productivity as the employee may need to be on leave to attend to family matters. Gig means, if one person does not turn up another could take up his/her place or the ones who turned up could earn more by putting in more effort and time. It’s a win-win arrangement for both the employer and worker.

4.      Employer pays only for work done – overhead reduces remarkably when the benefit component in compensation is reduced or removed. Many gig workers would prefer money over benefits, though in the Foodpanda controversy the word `benefit’ appeared a few times especially when a junior minister tried to take the company to task over `lack of benefits’. Gig economy is not about benefits, it is about pay for output, take note here, it is not pay for performance, but pay for output, which is more efficient.

5.      Now, let us look at the component called competency which pose the backbone of roles in organisations. Competency consists of knowledge, skills and attitude. Knowledge can be gained through right education stream, skills can be built through experience, attitude? Well, attitude plays the largest part in gig economy because a person’s ability to earn is directly tied to his/her attitude. Though there is no data to support this statement – one with excellent attitude can expect to earn more than one with a lackadaisical one. I have had young girls who are barely 20 delivering my food. Those were wow moments for me because firstly, one would think food delivery is a guy thing and secondly, it is not quite easy to locate delivery locations in suburban areas, but they deliver and I usually tip them a sizeable amount. Go go Girl power!!

Now here comes the controversial part. I am going to assume the role of Compensation Consultant to Foodpanda. I am not going to talk about the new or old payment scheme. I am going to talk about addressing the `benefits’ that have been talked about much by the minister more than the riders. Firstly, what are the risks involved for a rider? I would think the biggest would be accidents while riding. Second, could be customer refusing to pay for food in case it is delayed (for cash on delivery cases only), riders bikes being stolen, riders being robbed or may be there could be more. But I would rank accidents as the top risk. How can the company assist riders who meet accidents, regardless while working or otherwise?

This is what I would do – I would offer insurance coverage based on the following schemes:

Scheme A – voluntary purchase of insurance offered by Foodpanda, by riders. They can opt to pay from what they earn, full premium paid by them. Since they pay themselves, they should be given freedom to choose the types of coverage. Those with personal or coverage by other food delivery company may not choose to join this. So, the money goes back to them.

Scheme B – riders who make X number of trips (which brings in fulfilment of RMXXXX revenue per month, based on the latest month of work before the insurance coverage period starts) should be offered insurance coverage on sharing basis – rider pays 50%, Foodpanda pays 50% of the premium. Plans can be chosen based on mutual agreement.

Scheme C – riders who are top performers, who complete XX number of trips (which brings fulfilment of RM2XXX revenue per month) would be given complimentary coverage but based on the plan the company can afford.

As for other benefits, I would propose that instead of providing benefits, they should be given better payment scheme like bonus for work hours or no of deliveries per week.  In the end gig economy is about undertaking some task, deliver soonest and collect payment.

I have done gigs, too. Some gigs, especially project based like the ones I had done for Appen and PM Learning gave superb returns but such gigs come by once in three months. Other smaller gigs like online surveys pay less but they come by frequently. Then again, there are writing and translating gigs. Those with good skills in writing often land continuous gigs.

I have also played the role of employer – I have hired models, graphic designers, photographers, delivery persons – you name it. Hiring gig fulfillers make more sense than to hire full timers. In the end, it is all about time flexibility and money. The winning remuneration would be one that compensates best based on output, as in the Millennial economy, very few actually look for benefits – it’s a game of hard cash.