How ‘Matchmaking’ Brought in a New Classification of Worker

by Tami Simon, JD, managing director, Xerox HR Services

A matchmakers’ business model centers on making connections. In the days of “Fiddler on the Roof,” the connection was made by an old woman named Yenta. Today, many matchmaking sites promote “uniquely designed” computer programs that promise to find a person’s perfect match (e.g., match.com, zoosk, eHarmony).

In other words, the matchmaker simply makes the business transaction possible. And much to Jane Austen’s Emma’s delight, this business model seems to work. According to eHarmony’s website, 438 US couples marry each day as a result of being matched on the site. Who knew?

Business is beginning to apply this same principle to talent. Uber, Lyft, and Airbnb are very popular, and they essentially work the same way as an online dating service—matching someone who needs something with someone who can give it to them.

The number of people willing to do these jobs and the employers willing to employ these workers is growing. According to the U.S. Government Accountability Office, over 40% of the U.S. and many of those workers fit the matchmaker and Uber model—and that number is rising. A new kind of work has emerged.

What explains the advent of this new worker? Indubitably, several factors contribute, but a few key reasons are:

• The rise of the on-demand economy (also referred to as the shared or gig economy). 
• The desire—often attributed to the Millennial workforce—not to be tied to one employer that limits flexibility, quick advancement, immediate feedback, and varied work experiences.
• A decline of traditional “sticky” employee benefits such as the defined benefit pension plan and longer vesting schedules.
• In the U.S., the option to go to a public health exchange—brought about by the Affordable Care Act—rather than stay tied to an employer for health insurance coverage.
• Fewer ongoing employer expenses, such as Social Security contributions, paid vacation, workers compensation, limited or no benefit obligations, training, on-and off-boarding, and performance management.
• The continuing rise of organizations tapping into the global workforce.
• Contingent workers typically don’t require many overhead costs associated with permanent employees (e.g., real estate, technology, office supplies, and administrative support).
• The flexibility to increase and decrease one’s workforce quickly and find individuals with unique or specialized skills. 
• Contingent workers are often more efficient because they don’t have competing projects or goals.

Worker classification isn’t a new topic and under current U.S. definitions, the contingent worker is a square peg trying to fit into round holes. Employers currently using this class of worker need to decide how to appropriately classify them and apply—or not apply—the protections, rights, and benefits afforded to them. This decision may often boil down to the employer’s risk profile and interpretation of the current laws.

For instance, the Fair Labor Standards Act (FLSA) establishes minimum pay standards for employees. This same definition of employee is generally used for eligibility in other benefits and protections, such as family and medical leave, unemployment insurance, and safety standards.

Misclassification of workers has resulted in lawsuits under the FLSA and state laws, with Uber recently settling such a suit. As the use of contingent workers continues to spread, state and federal governments struggle with how to properly classify—and which protections should apply to—this group. This isn’t just a U.S. phenomenon. As the global labor market experiences some of the same worker fluidity, meaningful international collaboration may be necessary.

This newly emerged worker—who sits somewhere between the traditional employee and independent contractor—doesn’t yet have clear rights and protections, if any. And whose job it is to set those rights and protections is even more debatable. Other open questions also exist, such as:

• What are the implications of these new workers to current labor and employment law protections in place for workers? For instance, who will police organizations to confirm no child labor laws are violated and that specific classes of individuals (e.g., the disabled, minorities, etc.) are properly protected from discrimination?
• Could this evolution affect or be affected by the global immigration debate?
• Will organizations lose valuable historical company knowledge or experience brain drain that might hit the bottom line?
• How will accurate worker performance be measured?
• Could the U.S. begin to see a shift from an employer-sponsored health insurance to increased reliance on a public system?
• Might this result in a less formal U.S. system for retirement savings and hurt the financial well-being of this country?

While it is clear that a new kind of worker has emerged, until many of these questions are answered, its full evolution won’t be complete. And until it is, employers will likely balance the convenience and flexibility of the contingent worker, with the dependability and long-term value of a traditional employee. Even Yenta the matchmaker would approve.

Tami Simon is the global practice leader and managing director of Xerox HR Services, overseeing the company’s Knowledge Resource Center. She is responsible for Xerox HR Services’ national multipractice legal analysis and publications, government relations, research, surveys, training, and knowledge management. She serves as a national resource on issues affecting employers’ health and welfare benefits, and has been a faculty member for the Harvard Business School, Chief HR Officer Summits, American Law Institute, Society for Human Resource Management, American Benefits Council, and ERISA Industry Committee.