Wonolo, an on-demand work intermediation platform headquartered in San Francisco, announced today it is offering a “W2 Option” for businesses that do not want to engage workers as 1099 contractors.
Wonolo (which stands for Work. Now. Locally.) connects companies with thousands of prescreened workers “on-demand,” helping companies address their unpredictable labor requirements. In a phone call, Wonolo CEO Yong Kim said the digital platform model allows businesses to achieve an average fill rate of 90% and an average time-to-fill (job posting to acceptance) of four minutes. Wonolo serves major metro markets across the United States and tends to focus on two main verticals: light industrial and hospitality. Spend Matters will cover Wonolo in much more detail as the WIP of the Week later this week.
Since its founding at the start of 2014, Wonolo has treated all on-demand workers, which engage with businesses through the platform, as 1099 contractors--until now.
Over the past two to three years, complex, ambiguous worker classification rules, and the common practice of new on-demand platforms to consider their workers 1099s, have created an environment in which a good number of platforms have switched to treating on-demand workers as payrolled W2 workers (with Uber being a major exception). Companies that have tried to make that switch from 1099s to W2s completely (100%) and found their profit models strained. A few of these platforms, like Homejoy, shut down.
Wonolo’s introduction of the W2 Option as an addition and complement to its 1099 model may be unique and less problematic for a number of reasons:
- Wonolo’s adoption of the W2 model is not a total conversion of the on-demand workforce from 1099 to W2. It is incremental, thus not burdening the business model with excessive costs across the board.
- The W2 Option offering has been driven by client businesses’ demand, a revenue generating response to the market.
The introduction of the W2 model reflects the company’s direction to leverage its platform to address innovative, market-driven use cases. For example, the company provides some business clients — perhaps a big box retailer — with just a technology solution that the client uses to transform its on-call, part-time employees into a mobile-app-connected, on-demand workforce (with those workers continuing to be paid as W2 employees by that retailer). But more recently, Wonolo has introduced what it calls a “hybrid” solution that allows the business to manage its own part-time workforce (as above) and also access and engage on-demand Wonoloers (as they are called) to address peak period shortages. These workers are not 1099s; rather, they are paid as W2s by a separate affiliated payrolling entity. It should be noted that business clients can also utilize the W2 Option exclusively, a different use case that Wonolo supports.
AJ Brustein, co-founder and COO of Wonolo, was quoted in the announcement: “With the launch of our W-2 Option, we allow for more choice in how companies fill their short- and long-term staffing needs, enabling them to benefit from the flexibility of on-demand staffing by filling key gaps with W-2 employees or independent contractors depending on the business need. As a result, businesses can quickly find the most qualified talent in minutes, instead of the days or weeks of traditional staffing agencies or the time-intensive effort of going through resumes and vetting candidates themselves.”
Once again, will be doing a WIP of the Week brief about Wonolo, to be published later this week.