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Startups Formalize The Gig Economy

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Around 40 per cent of migrant workers returned to their hometowns from cities like Bengaluru, Delhi after the pandemic-induced lockdown last year. Experts called it the reverse migration and some even predicted it to become an irreversible phenomenon. However, as normalcy resumes, we now see many workers coming back to cities. This time, they are in more demand than earlier, owing to the surge in users of ecommerce, food and grocery delivery platforms. These sectors are leading the creation of a large number of blue-collar jobs in India. 

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Further, organizations are now more cognizant about the value these workers bring in. This has led to the rise of many startups such as Apna, Vahan, JustRojgar, Betterplace, Lokalpe and others who are leveraging the power of technology to help these workers find jobs that match their skills and organizations find employees who fit the job profile the best. Most startups in the space also offer upskilling for the gig workforce. 

These startups have also become investors’ favorite business models to bet their money on. Apna, a blue-collar employment startup, recently attained unicorn status after raising $100 million in a Series C round. Vahan, a Bangalore-based job and livelihood platform raised $8 million in Series A funding round led by Khosla Ventures and SaaS platform for the blue-collar workforce, BetterPlace raised Series C fundraise of $24 million from CX Partners, Jungle Ventures, others.  CDC Group, Capria Ventures, 3One4 Capital among others.  

“The space has seen a proliferation of networking and job matching platforms. These platforms have simplified the signing-up and job-seeking process, 3 to 4 step registration process, local language options and non-resume-based profiles. This coupled with faster turnaround time, relevant job suggestions and giving the workforce a chance to build professional communities and upskill themselves has led to mass adoption of services. On the employer front, the platforms have gained traction due to fewer hiring costs and a faster turnaround time from posting to interview,”  Ankur Bansal, co-founder and director, BlackSoil.       

Why The Demand

During the pandemic, the inadequacy of skilled blue-collar workers was highly felt by companies, which made them realize the necessity of upskilling this workforce. “The need for upskilling combined with the digitalization of recruitment has led to this segment witnessing massive disruption,” Bansal added. 

Increasing smartphone penetration is making it possible to build mobile-first business models and products for blue-collar workers. “There hasn’t been a better time to build products for India’s blue-collar workforce and that’s why you see so much capital rushing towards startup’s that are building for blue-collar workers,” said Viral Chhajer, co-founder- Smartstaff, a mobile-first blue-collar workforce management platform that digitizes and automates workforce management practices.

Madhav Krishna, founder and CEO, Vahan, explains a few macro trends that have come together to spur this interest in the blue-collar space. “First, India has over 250 million blue-collar workers, excluding those who work in agriculture, and now most of them can be reached digitally given the recent growth in smartphone and internet penetration,” he said.  Vahan’s clients include Zomato, Flipkart, Uber, Swiggy, Rapido, Grofer’s, Dunzo and Shadowfax and they recruit 8000+ blue-collar workers across 200 cities every month. 

Startups like GigIndia operate in the grey-collar workers’ space. The startup works with a high-quality pool of skilled gig workers including young professionals/freelancers/job seekers, who work remotely to help large enterprises scale their businesses rapidly. The company provides a flexible workforce along with tech-enabled real-time tracking for work completion in Inside Sales, Remote Onboarding, Customer Success, Recruitment On-Demand, Influencer Marketing and Field Operations, among others.  “The industry and businesses have realized that this is the future of employee & employer engagement models. Now, enterprises are keen to improve productivity and ROI and hence are moving towards a flexible, cost-optimized and productive channel of employee engagement,” said Sahil Sharma, co-founder and CEO, GigIndia.

How They Leverage Tech

The startups in the space are trying to solve the deep problems of this space in a tech-first manner. For instance, GigIndia’s AI and ML-enabled application helps manage projects end-to-end from automatic sourcing of gig workers to tracking, everyday planning, execution and reporting of every gig in real-time. This, it claims, reduces overall turnaround time. The Smartstaff platform connects workers, businesses and other key stakeholders with a seamless web and mobile platform. Through the Smartstaff application, each business creates a digital ecosystem for their workers through which they can give their workforce a real-time view of their timesheets, payroll summary etc.

As a B2B SaaS platform, BetterPlace works with 1000+ organizations in India and has custom-made tech solutions that allow them to manage the entire lifecycle of their blue-collar workforce from hire to retire.  The product uses a scalable cloud solution built on top of Microservices and deploys deeply engineered systems including AI and ML to automate, recommend and simplify workflows for its TG Ex – automated PF/ESI registration, touchless attendance system, OCR-based doc upload, etc. 

“In Direct-to-Consumer play, we deploy big data systems to record and process every data point that is generated. We use ML algorithms to create intelligent profiles, their scores, and ranking to personalize the offering with guided experience. We use a micro frontend framework that helps to scale up the digital services on offer to consumers as a distribution play,” said Pravin Agarwala, co-founder and CEO, Betterplace.

 Unorganized Sector

Since the market is highly unorganized, challenges galore. For instance, these startups often face resistance from middlemen who have so far benefited from the lack of transparency and accountability in the sector. “When startups try to organize the market and build transparency in the system through technology, they usually face a lot of friction from these middlemen,” said Chhajer of Smartstaff.

Other challenges include sourcing and filtering of the right talent and executing programs in remote areas, where customers may have vernacular differences and different levels of product or service awareness. “Other than these, there can be malpractices and unethical approaches to showcase results and customers having wrong expectations. We have checks and balances in place to mitigate such occurrences,” said GigIndia’s Sharma.

Future Trends And Business Models

The blue-collar ecosystem is, however, slowly but surely moving towards more formalization. While the rate of formalization in traditional industries such as manufacturing and construction is quite low, more modern jobs in logistics, sales and customer service are formalizing at a much faster rate. “This macro trend, in fact, is responsible for making blue-collar jobs a very large opportunity for companies like ours,”  said Vahan’s Krishna.

According to a report by ASSOCHAM, India’s gig sector is expected to grow to $455 billion at a CAGR of 17 per cent by 2024 and has the potential to grow twice as compared to pre-pandemic estimates. “Around 2.5-3 lac delivery workers are hired in India every month and this number is expected to increase 3-5 times in the remaining months of this year. India’s job market has seen a major transformation in the last few years especially with the pandemic adding a number of restrictions that have led to greater adoption of app-based services,” said Vahan’s Krishna.

Further, companies that are able to engage blue-collar workers and capture rich profile data about them and use those data assets may unlock a lot more value downstream. For instance, use cases within financial services such as earned wage access, micro-lending and micro-saving are hugely relevant in this space.

“In fact, we’ve found that gig-economy workers go through 6 financial emergencies a year on average which is very high! The top type of financial emergency is a health-related one. And blue-collar workers don’t have money on hand to pay big hospital bills because they are unable to save in the first place. Giving them access to capital in such times of need would only help strengthen the value proposition and therefore the stickiness for platforms such as ours. This can only be pulled off through deep data-led insights about the audience,” added Krishna. 

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More opportunities under 12th Malaysia Plan, gig economy to benefit

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KUALA LUMPUR: Malaysia, like many other countries, has not been spared from the effects of the COVID-19 pandemic. This is evidenced by the rising unemployment rate, which shot up to 4.5 per cent in 2020 from 3.3 per cent in 2019.

In its Graduates Statistics 2020 report, the Department of Statistics Malaysia also showed that the number of unemployed graduates jumped to 202,400 in 2020 against 165,200 in 2019.

Fortunately, the gig economy has emerged with a new opportunity, particularly for fresh graduates, to compete for jobs available not only locally but also through international platforms.

Under the recently unveiled 12th Malaysia Plan 2021-2025 (12MP), the government has assured that it will create an ecosystem that supports the development of the gig economy to encourage the people to take full advantage of this opportunity.

To improve the situation, Malaysia University of Science and Technology (MUST) professor Geoffrey Williams opined that several initiatives could be done in the 12MP, including to promote new forms of employment, new innovative companies, start-ups for graduates and a whole fresh new feel to employment post-COVID-19 crisis.

“This means liberalising markets; promoting entrepreneurs; freeing up opportunities; making life simpler for micro, small and medium enterprises; and promoting decent, well-paid jobs with good work-life balance and long-term flexibility and security in a whole new future of work,” he told Bernama when contacted recently.

Apart from that, he said, social pensions and social insurance with help from the government and companies should be added to safeguard the welfare of gig workers.

Asked what should the government focus on while creating the ecosystem as mentioned in the 12MP, Williams noted that it is important to not allow unemployment and underemployment to become the norm.

Taking Europe and the United States in the 1980s for example, he said unemployment had become a structural problem for decades.

“We must avoid this, as we can see it is not so much that graduates lack skills or a determination to work, it is more that there are too few good jobs in existing firms,” he said.

While the importance of the gig economy has been emphasised in the 12MP, one of the major concerns is that the gig economy in Malaysia is often linked to “lowly jobs” such as delivery riders and e-hailing drivers who constantly work in an environment with lack of proper welfare protection.

To prevent gig workers, especially fresh graduates, from falling into such a “low-value-added-job trap”, Williams is of the view that the government should provide a good, transparent and supportive environment with less interference.

He said laws should also be reviewed to ensure gig workers are protected and have rights, particularly to be paid and paid properly.

“Gig economy jobs can be viable, empowering and flexible income options, so the right legal framework and due process options must be there,” he said.

According to Williams, there could also be an ombudsman scheme to help make enforcement easier, even with online claims.

“We need to stop unscrupulous firms using gig-economy workers to avoid paying minimum wages and benefits, and we must also stop exclusive zero-hour contracts which act as a constraint on trade for gig economy workers.

“People should be free to work for multiple companies so they can get gigs from whoever has them available,” he said, adding that laws should also be made easier for gig workers to register as enterprises and create enforceable contracts, rather than just template agreements with mega-firms.

Encouraging high-value gig jobs

While acknowledging that gig economy jobs are often linked to low-skilled, low-income work such as delivery riders and e-hailing drivers, Williams said the people should not limit their ideas to these.

He said nowadays, freelance professionals often set up micro-enterprises using online platforms to provide services in areas such as graphic design and branding, digital marketing and e-commerce, freelance writing and content creation, virtual assistant and professional support, online training and coaching, as well as web development and coding.

“Even professionals like lawyers and accountants are offering services using online platforms now, and it is becoming quite respectable and well-paid,” he said.

To encourage high-value gig jobs in the country, the Malaysia Digital Economy Corporation (MDEC) piloted the eRezeki High Income Apprentice programme in 2016 to explore the opportunities in the digital freelancing segment.

The six-month pilot programme, which ended in December 2016, trained and mentored 658 participants who successfully generated a cumulative income of RM2.9 million.

Among the jobs and work performed by digital freelancers are programming, graphic design, data analytic, content writing, proofreading, translation, and transcription. These jobs are normally high-value in nature and therefore requires relevant qualifications.

The pilot project was later scaled up as the Global Online Workforce (GLOW) programme in 2018, with the aim to empower local talents, especially the unemployed and underemployed graduates, to become digital freelancers by leveraging their knowledge, skills, and abilities to secure and perform jobs from the global market.

This effort will be continued in the 12MP to train the local talents on how to become digital freelancers by providing relevant opportunities that could improve the capabilities and the quality of Malaysian digital freelancers in the global market.

Meanwhile, upskilling and reskilling training programmes will be made available to improve the career path of the gig workers in the location-based platforms. – Bernama



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Prop. 22 governing gig workers found unconstitutional, but in effect

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By Christopher B. Dolan and Matt Gramly

This week’s question comes from Josh D. from Marin County. With our current 24-hour news cycle, it’s hard to keep up with all the important issues in our daily lives. It seems like Proposition 22 was an initiative constantly discussed five years ago that went away. Did Proposition 22 ever take effect?

Dear Josh: Thanks for reaching out. Many people may have forgotten about Prop. 22. On Aug. 20, Alameda County Superior Court Judge Frank Roesch ruled Prop. 22 to be unconstitutional.

Recall that Prop. 22, a ballot initiative passed by California voters in 2019, permitted many gig economy companies such as Uber, Lyft and DoorDash to classify their drivers as independent contractors instead of employees. These companies and others poured over $200 million into the campaign to pass Prop. 22.

The benefit to the companies in classifying drivers as contractors rather than employees is that it allows them to evade almost every regulation in place governing how companies treat their employees, as well as most costs associated with having employees. These include health insurance benefits, minimum wage laws, safety regulations, workers compensation insurance, etc.

Relating specifically to drivers, the companies would be excused from paying employees mileage and reimbursing them for the cost of gasoline and vehicle maintenance. The cost savings to these companies would have been in the billions of dollars annually. The downside, of course, is that drivers would have to pay for their own health insurance coverage and would have almost none of the benefits that most full-time employees receive. The cost savings to the companies gets shifted to the drivers, as expenses to them.

Prop. 22 was far reaching and expansive in its language and in the sheer number of components it included. For instance, it also contained language that would prohibit drivers from forming a union. For that reason, as well, the judge wrote, Prop. 22 violated the constitutional requirement that ballot initiatives be limited to a single subject.

Relative to the point prohibiting unionization, Roesch wrote that it “appears to only protect the economic interests of the network companies in having a divided, un-unionized workforce, which is not a stated legal goal of the legislation.”

Roesch is saying that the drafters of Prop. 22 overreached both on process and in substance.

Prop. 22 was created as a ballot initiative by gig-worker companies as a direct response to Assembly Bill 5, a law passed by the California Legislature and signed by Gov. Gavin Newsom. AB 5 would have required these companies to classify drivers as employees, thus granting them benefits including minimum wage protections, workers compensation insurance, overtime pay, etc.

Much of the basis for Roesch’s ruling in finding Prop. 22 unconstitutional rests largely on the idea that in California, in accordance its Constitution, only the Legislature can, for example, regulate compensation for workers’ injuries. The goal cannot be accomplished through a ballot initiative process because the Constitution grants that right exclusively to the Legislature.

In essence, Roesch said that Prop. 22 took that power away from the Legislature, thereby violating the Constitution. In his ruling, Roesch also said California voters have the power to make such a change to the Constitution, but, “If the people wish to use their (ballot) initiative power to restrict or qualify a plenary and unlimited power granted to the Legislature, they must do so by (a ballot) initiative constitutional amendment, not by (a ballot) initiative statute.”

Voters would have to amend the Constitution first, amending it to permit, in effect, the passage of legislation through ballot initiatives. Neither the voters nor the Legislature have thus far amended the Constitution in such a manner. The state Legislature followed the Constitution in properly passing AB 5 through the legislative process as dictated by the Constitution. Prop. 22’s authors and backers did not, thereby violating the Constitution.

Ride-hail giant Uber has filed an appeal and requested a stay on Roesch’s ruling until the appeal is complete. While it pending, Roesch’s order does not yet take effect. For now, at least, these companies do not have to classify drivers as employees and can continue to use them as independent contractors, saving billions of dollars in costs, to the detriment of their drivers.

Christopher B. Dolan is the owner of Dolan Law Firm, PC. Matt Gramly is a senior litigation attorney in our San Francisco office. We serve clients throughout the Bay Area and California from offices in San Francisco, Oakland and Los Angeles. Email questions for future articles to: help@dolanlawfirm.com. Each situation is different, and this column does not constitute legal advice. We recommend that you consult with an experienced trial attorney to fully understand your rights.

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