How Temporary Labor Marketplace Vendors Are Running on a Broken Model

Studies estimate by 2020, more than 40% of the American workforce or some 60 million people will be independent workers-freelancers, contractors and temporary employees. Companies like UpWork and TaskRabbit have derived from this growth in temporary labor, bringing a lot of innovation and attention to this sphere in the total workforce ecosystem. With this attention has come a need to engage the growing number of contingent workers. 

An excerpt from Why Talent Pool Management Is A Must-Have Strategy For All Employers:

Over the past decade, a growing number of organizations have adopted an increasingly sophisticated and effective integrated approach to managing their workforce. This approach is characterized by a greater use of contingent workers and inclusion of those workers, along with permanent employees, as part of a holistic talent strategy.Thomas Jajeh

In addition, an oversaturation of temporary marketplace vendors set to bring significant changes to the way our economy views the standard worker has taken precedence.

With technology working to make it simpler to hire remote workers, the economy accepting the fact that full-time work isn’t always going to be the norm and that freelancing is the next big thing, marketplaces like UpWork, Catalant, Shiftgig, and Twago are making freelance work more accessible.

By 2020, more than 40% of the American workforce will be independent workers-freelancers, contractors and temporary employees. Click To Tweet

So what makes the model of these temporary labor marketplaces so broken?

In our latest whitepaper, we dive head first into how technology that was initially focused on serving SMBs is now being forced to evolve into contract staffing firms in order to keep the lights on.

An excerpt from Why Talent Pool Management Is A Must-Have Strategy For All Employers:

Today, the annual cost of talent management has grown to more than $100 billion globally. This large number accounts for the increasingly diverse categories of workers, including traditional temporary staff (both light industrial and clerical), professional contingent workers and permanent employees, as well as a fast-growing number of independent contractors or freelancers. In line with demographic changes and economic cycles, this last group is rapidly becoming the biggest talent pool for professional skill sets in many markets. The challenge, for many companies, is that the MSP approach can lead to a “closed loop” that isolates certain talent from other parts of the workforce. Thanks to advances in technology and strategy, today’s organizations can now address and solve this isolation risk to create a more effective workforce engagement and a stronger talent strategy.Thomas Jajeh

Companies like UpWork and Twago are shifting to contract staffing work while keeping the gig staffing on the bottom tier. This is most likely due to misplaced focus on serving SMBs while not placing enough importance in landing enterprise-level employers.

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How do we know this is happening?

We’ve been keeping a pulse on these temporary labor marketplaces, and have noticed a few things. For example, TaskRabbit just recently doubled their cut from their contractors, according to FastCompany.

We are introducing a flat 30% service fee on all tasks, and discontinuing the 15% service fee for tasks with repeat Clients.TaskRabbit

This change in their pricing model proves our point. Landing numerous SMBs who use you minimal times throughout the year compared to larger enterprises who will use you continuously is most likely the reasoning behind this transfer of fee payment from their clients to their contractors.

Temporary labor marketplace vendors are running a broken model, but how do we know? Find out from @TalentTechLabs: Click To Tweet

Decreasing the service fees for clients gives their SMBs the opportunity to use their marketplace more, but takes away from the contractor. It’s not an ideal change for really anyone involved, the contractor or the client when contractors move to other marketplaces. However, it does highlight the fact these marketplaces are looking to better serve the SMBs they’ve already landed.

An excerpt from Why Talent Pool Management Is A Must-Have Strategy For All Employers:

While these solutions are a great match for mid-size clients that do not utilize MSP programs or VMS systems, the duplication of VMS functionality and MSP, as well as broker processes for the freelance space, can lead to siloed-thinking and a lack of transparency. In other words, if not carefully applied, the solutions can create what amounts to separate silos for freelancers, isolated from the contingent workforce MSP, further fragmenting the way talent is managed.Thomas Jajeh

How are they doing that?

They’re turning into glorified contract staffing firms, and the proof is in UpWork’s introduction of UpWork Pro and UpWork Enterprise. Perhaps this was the plan all along, but there’s nothing telling us that UpWork Enterprise isn’t just a staffing firm in a temporary marketplace vendor’s clothing.  

They are turning into temporary labor marketplaces focused on remote workers in comparison to contract staffing firms which focus on on-premise workers. It will be interesting to see if they bring on-premise workers onto their platforms or if they are able to build an enterprise business around remote works.Jonathan Kestenbaum

Will more of this temp marketplace tech be making the switch and offering the enterprise level services? What does it take to attract these enterprise-level companies? Is it the white glove service and full-service staffing they’re in need of or can temporary marketplace technology survive on its intended model?

Download Why Talent Pool Management is a Must-Have Strategy for All Employers to further explore:

  • The rise of MSP programs and the challenge of the “closed loop”
  • How Freelancer marketplaces are growing into the enterprise space
  • The ways companies are expanding contingent labor management


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