by Shelly WhiteheadThe so-called “gig” or freelance economy shows no signs of slowing down, nor does the problem that many freelancers face when trying to obtain benefits since they are often working less than 40-hour weeks for any one employer. That and the entry of the Affordable Care Act and the new federal overtime regulations have necessitated a whole new approach to employment for many businesses and business people. And all this holds especially true for the food service industry, which has always operated with a heavy contingent of part-time workers.
In other words, somebody had to come up with a new approach to the problem. This week, it appears somebody has.
Representatives of a business with the inauspicious-sounding name of ShiftPixy said this week it has created its own proprietary workforce to be “lent out” to third-party employers. According to a company news release, the organization will begin by addressing this need in the restaurant and hospitality industry in late summer, just in time for compliance with those new overtime regulations that take effect in December.
Executives of the southern California-based company, which provides insurance, regulatory compliance services, administration tools and variable shift labor, said it is rolling out a new application this coming Labor Day that will allow people working or wanting to work in the restaurant industry to apply for variable shift employment in their communities. Then, ShiftPixy will actually employ these workers, who they call “shifters,” and then “lend them out” to third-party employers who need them. This initiative will start in September with employers across the food service industry.
The idea is that the application gives restaurateurs the benefit of having the workforce to meet the demands of variable hours, without requiring the chain or individual restaurant owner to also provide benefits and other requirements that would be mandated for full-time employees. Instead, ShiftPixy handles those responsibilities as the “shifter’s” true employer.
A number of studies show that the compulsory insurance requirements of the Affordable Care Act not only have led more individuals into the gig economy, but have also caused more companies to cut employee hours to avoid having to provide insurance. As a result, many employers particularly in food service have ended up needing additional employees to work more shifts comprised of fewer hours, according to a news release.
An opportunity and problem: $10 billion more in gig economy businesses
This manpower need is only expected to grow as the benefits of the “gig economy” to business owners spread. For instance, a Greylock Partners analysis shows that delivery platforms that rely on contract workers, like Lyft, Uber and Instacart, could grow by as much as “$10 billion this year,” according to a news release. That’s because these contract employee-based businesses can operate with 20 to 30 percent lower labor costs, according to research.
But the inherent problems in operating a business with strictly freelance labor has caused many to predict that the gig economy will trigger so many employment law suits and other complications that the employment model will soon fall into disuse.
Enter ShiftPixy, whose founder and CEO Scott W. Absher, believes his business can solve the problems of these employers who depend on part-time workers. In essence, ShiftPixy aims to give its business clients the manpower they need when they need it, while providing the contract employees the benefits they need. Employer clients get the workers needed without many of the regulatory and financial burdens. Employees get the full-time hours and benefits they need to make an adequate living.
The coming overtime regulations that take effect this December are likely only to contribute to the client base for this kind of firm, since so many in the restaurant industry have feared the new regulations which many said will force restaurants to either raise employee salaries or drastically cut individual hours and hire more part-time workers. employees
“A survey of more than 600 small business owners by the Society for Human Resource Management found that 20 percent of companies surveyed reported they have cut the number of workers they employ,” Absher said. “A related study found that 12 percent of employers nationwide plan to reduce workers’ hours as a result of ACA.”
Combine the above information with the fact that of the current 26 million part-time workers in the U.S., more than 6 million would prefer to work full-time but can’t find a job, and you can see where there is a need for what ShiftPixy provides from both employee and employer standpoint.
“We have seen that the race to meet the new demands and covering new regulatory requirement gaps are stressing small business as never before,” Absher said. “The new demands have made compliance, staffing, and cash flows more challenging for small employers who provide most of the U.S. employment. To address these widespread pain points, ShiftPixy has established a unique,and what we believe are, a highly desirable suite of services that merge insurance coverage access, operational, compliance and financial support, along with intermediation of shift workers and available shifts at participating businesses.”
From the new mobile app the company will offer in September 2016, ShiftPixy will initially target the restaurant and hotel industries, a market comprised of 13 million workers.
“Management has leveraged its expertise and long-standing market alliances within the property and casualty producer community to assemble a large backlog of potential provider clients for what we believe to be the company’s unique platform and programs,” Absher said. “ShiftPixy now is in the position of being able to select rather than inviting provider clients into its proprietary program, which we believe will enable ShiftPixy to grow more rapidly and select clients that may add more profitably to our operations.”
Absher saiad the ShiftPixy mobile app was designed as the primary entrance into the ShiftPixy ecosystem for potential employees to select and manage shift opportunities. ShiftPixy intends to collect nominal monthly user fees from shifters who participate via this app. The app will also serve as a gateway for shifters to access the benefits available to them through the company, like health, dental and vision coverages, 401(k) or IRA access, and a variety of discounts.”
The company is planning marketing to support the launch of its mobile app, as well as generating buzz around ACA enforcement actions and steep penalties that are expected to be leveled on employers who failed to comply with the law last year. It’s also actively seeking investors through regulatory channels.