The new darling of startups, on-demand model, runs into rough weather
The on-demand labour model is all but flourishing in India. Recognising the power of a marketplace to bring on disorganised supply and demand, following the success of the cab aggregation model, various products and services ranging from laundry to last-mile delivery are also adopting a log-in, log-out approach to bring on suppliers and service providers.
And yet, the touted model is showing its first signs of floundering where it all started. In the Bay Area and across the US, on-demand startups have been slammed by worker classification lawsuits from part-time contractors demanding employee benefits. Home services marketplace Homejoy, backed by Google Ventures and Andreessen Horowitz among others, shut down amid such allegations; while Uber was most recently charged with a $7.3-million fine in California.
With startups on this side of the world increasingly providing protection and benefits to lure on more providers onto their platforms, will the model be at risk?
Arjun Mendu, cofounder of home services marketplace Housejoy, is confident in the contractor model. “Freelance hiring in India is the way to go because of the sheer size of the population and demand. It needs to be a hybrid model,“ he said.
Housejoy now has 3,000 service providers who receive specific skills training and microcredit assistance, among other benefits.Here startups are well-advised to stick to ESIC laws related to training contractors, said Manish Saigal, managing director of professional services firm Alvarez & Marsal. “There is a very high sensitivity in India to any labourrelated abuse and manipulation.If you are a well-funded or bigname startup, compliance levels have to be very high.“ Amid an increasingly competitive labour market for delivery boys, logistics startups such as Roadrunnr have taken to contracting fleets on an on-demand basis as well, but not before doing due diligence. Before launching the business-to-busi ness service in January, the founders had approached the la bour inspector to receive writ ten legal advice on the compa ny’s rights and responsibilities, said cofounder Mohit Kumar.“The grey area comes when the delivery boys simultaneously work for another employer,“ he added. “While `control’ continues to be the most important criteria for determination of worker misclassification, unlike in the US which has well-defined set of tests that may be applied, we are yet to witness such jurisprudence in India. Also, given the practical challenges of employment litigation in India, it is unlikely that we would witness large-scale lawsuits on whether a person is an employee or an independent contractor as currently ongoing in the US,“ said Vikram US,“ said Vikram Shroff, head of HR Law at Nishith Desai Associates. “However, it is important to learn from some of global developments and apply it in the Indian context.“ A lot of the time such startups make use of third-party hiring agencies to recruit and even train blue-collar labour, which shields them from risk as long as such agencies are in line with employment-related policies.
Source : Economic Times
Times – 29-07-2015