Uber, the personification of the gig economy, announced the launch of Uber Works: an on-demand staffing app. In the same way that drivers are matched with riders through Uber’s smartphone app, workers can now be matched with available shifts in event staffing, warehousing, restaurants, and other industries through Uber Works’ app. While this is a natural extension for Uber’s marketplace business model and technology, it a stark change from how most staffing companies operate today. Traditional staffing companies rely on human dispatchers to coordinate between workers and companies with available shifts. This process is often time consuming and inefficient, relying on outdated worker databases and phone calls.
Replacing manual processes with the technology that supports Uber Works’ platform has the potential to transform temporary staffing from a last resort to a must have for both workers and companies. With mobile apps, workers can directly access a broader and more dynamic inventory of shifts, allowing for more choice, flexibility, and higher earnings. Workers further benefit from increased wages from Uber’s well-known surge pricing and cashing out their earnings with Instant Pay instead of waiting for a two week payroll cycle normal to the staffing industry. In the current highly competitive labor market fueled by low unemployment, what is better for workers is better for companies!
While Uber isn’t the first company to modernize staffing workflows with technology in the last few years, they enter the temporary staffing market with the playbook and balance sheet to truly disrupt it. Uber has already used its technology advantage to dismantle the taxi industry with similar human dispatcher dynamics and staffing companies could be next.
As they brace for Uber Work’s impact, traditional staffing companies will need to revitalize their existing operations with technology and implement new tools to digitize their shift distribution and workforce management if they want to survive. This will be a critical step for overcoming their operational bottlenecks and surviving in a more cut-throat staffing market post Uber’s entry. However, despite their best efforts to “disrupt” their own businesses and reduce overhead costs, staffing companies may still see their margins shrink. With Uber Work as an attractive alternative, higher wages may be required to lure away workers and lower markups to end clients will become necessary to win and renew contracts.
This may seem like a classic case of software eating the world, but it is far from certain that staffing incumbents will share the same tragic fate as taxi companies.
There are three key challenges that Uber Works may face as they scale their business:
First, Uber has significant partnership and legal risk in the execution of this staffing business unit. Uber Works adds more complexity & uncertainty to the already-in-question 1099 contractor classification of the company’s core driver workforce because most staffing roles require a W-2 employee classification. To achieve this without directly employing workers, Uber has partnered with TrueBlue, a temp staffing agency, who will be providing Employer of Record services to Uber. In this model, Uber can serve as the matching platform but the role of the employer including payroll, benefits, and classification will be held by TrueBlue. Much like Uber’s partnership with Google Maps, this shores up a key weakness for Uber by partnering with a best-in-breed service. But unlike the rumors of Google exploring the launch of a ridesharing service, TrueBlue last year launched their own temp staffing app: Jobstack. This “co-opetition” - cooperation between future competitors - may work in the near term. However, given Uber’s appetite for market domination, the long term partnership viability remains to be seen and it’s unclear that Uber will be able to bring this employer infrastructure in-house in a simple structure.
Second, the challenge with worker classification comes further into focus with the recent passage of AB5 in California, legislation that sets stricter guidelines for classification of workers as independent contractors. One tenet of the bill is that the independent contractor must not be doing work central to the company’s business. Uber’s argument in ride-sharing is that their core business is a technology platform and that its service is to facilitate a marketplace between riders and drivers where the service provided is the ride. It will be more challenging to make this argument in staffing, given that the entire service is providing the person being staffed. Fulfillment is determined by providing the right person, not the end service performed by the person. By partnering with TrueBlue for W-2 classification, they seem to have acknowledged this nuance. While this defends the launch of Uber Works, Uber as an entity now faces the risk of being accused of trying to have it both ways when it comes to worker classification especially if they use the same worker pool. If the access point for work across the apps starts to look and feel similar, it will be a tight rope for Uber to walk in a legal environment that is already skeptical of the current classification especially in California.
Finally, Uber Works represents a core cultural shift for the company requiring a move to a more Enterprise-focused model, instead of the Consumer-first model of the core ride-share business. While digital marketing and viral user acquisition tactics were synonymous with Uber’s establishment as the dominant player in ridesharing, Uber will now enter the world of selling to large businesses - a different challenge altogether. This learning curve is bound to come with bumps and bruises - as Uber builds a team who can sell and deliver to enterprise clients, an expensive proposition especially given the focus on reducing costs and profitability. A potential short-term focus might be to leverage the existing partnerships from the Uber Eats business and focus on staffing for restaurant clients to build on top of existing relationships, gaining synergies that will help expand the top-line without a massive cost outlay.
Uber has a unique ability to push the entire staffing industry technologically forward in a way that would increase access, wages, and create a highly synergistic model across the core lines of their business. To do so, they need to overcome some serious structural and regulatory hurdles while redefining an internal culture to focus on the enterprise.
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