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        Inflation Causes Drivers to Switch Car Insurance Carriers

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        The Right Amount of Cards, Cash and ID to Carry in Your Wallet

        Inside the Push to Make Everyone Friends at Work

        Strategies for Onboarding in a Hybrid World

        Strategies for Onboarding in a Hybrid World

        How do sustainable supply chains improve the continuity of supply and protect the environment?

        How do sustainable supply chains improve the continuity of supply and protect the environment?

        3 Ways Boston University’s Online MBA Is A Disruptor In Business Education

        New Immigration Data Point To Larger U.S. Workforce Issues

        A Risk Management Nightmare at Silicon Valley Bank

        How CFOs are navigating the debt ceiling standoff

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        Demotivating Effects of Relative Performance Feedback on Middle-Ranked Workers’ Performance

        Demotivating Effects of Relative Performance Feedback on Middle-Ranked Workers’ Performance

        S1:E1 CVS Paying the “Pink Tax” on Certain Products and the Evolution of the Electric Vehicle Industry

        AI: What is it and how will it impact business?

        Is Creativity in Advertising Dead in the age of AI?

        Is Creativity in Advertising Dead in the age of AI?

        How Higher Ed Can Contend with Learning Platforms

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        How Companies Deal with Disruption

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        Money: It’s created. It’s destroyed. But what is it?

        Money: It’s created. It’s destroyed. But what is it?

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        Should Companies Refrain From Making Political Statements?

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        The Right Amount of Cards, Cash and ID to Carry in Your Wallet

        Inside the Push to Make Everyone Friends at Work

        Here’s Why Experts Say Russia and China’s Attempts to ‘De-Dollarize’ Global Markets are Going Nowhere

        5 ways Russia’s been sidestepping Western sanctions and keeping its economy alive, from switching to the Chinese yuan and dabbling in ghost trades

        Strategies for Onboarding in a Hybrid World

        Strategies for Onboarding in a Hybrid World

        3 Ways Boston University’s Online MBA Is A Disruptor In Business Education

        New Immigration Data Point To Larger U.S. Workforce Issues

        A Risk Management Nightmare at Silicon Valley Bank

        How CFOs are navigating the debt ceiling standoff

        Opposing scientists find no clear evidence for gender bias in academic science

        Opposing scientists find no clear evidence for gender bias in academic science

        Ethics Professor Raises Key Questions About the Future Use of AI

        Questrom marketing researcher explores the data-tracking debate

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          Make It Safe for Employees to Speak Up – Especially in Risky Times

          Will Generative AI Create a New Era of Search Competition?

          Will Generative AI Create a New Era of Search Competition?

          A Better Approach to Customer-Centric Messaging and Engagement

          A Better Approach to Customer-Centric Messaging and Engagement

          How Coworking Spaces Impact Employee Well-Being

          How Coworking Spaces Impact Employee Well-Being

          Will Salary Transparency Laws Change Employee Compensation?

          Will Salary Transparency Laws Change Employee Compensation?

          Heroes from Above But Not (Always) from Within? Gig workers’ reactions to the sudden public moralization of their work

          Heroes from Above But Not (Always) from Within? Gig workers’ reactions to the sudden public moralization of their work

          To Encourage Patients to Fill Prescriptions, Fix Copays

          To Encourage Patients to Fill Prescriptions, Fix Copays

          Is Tesla’s Era of Dominance Coming to an End? What Experts Say

          Is Tesla’s Era of Dominance Coming to an End? What Experts Say

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          Home Our Insights Business Functions Finance & Accounting

          Should It Be a Gig or a Job?

          Adriane AylingbyAdriane Ayling
          January 11, 2019
          in Finance & Accounting
          16
          A A
          Should It Be a Gig or a Job?

          AS THE MARKETPLACE FOR SERVICE-BASED EMPLOYMENT INCREASES, FIRMS MUST CAREFULLY DECIDE HOW TO ALLOCATE CONTROL AND EMPLOYMENT STATUS TO THOSE WHO DELIVER THOSE SERVICES, ACCORDING TO ASSOCIATE PROFESSOR ANDREI HAGIU, IN HIS LATEST RESEARCH.

          In the age of Uber, TaskRabbit, and Upwork, the line between employee and contractor has grown increasingly fuzzy. Controlling vs. Enabling, new research by Questrom’s Andrei Hagiu and National University of Singapore’s Julian Wright, suggests that proper classification depends significantly on the amount of decision-making power firms cede to workers — and that appropriate revenue sharing should follow suit. “In many cases, the share of variable revenue that is retained by workers is a good proxy for whether they can be considered independent contractors or regular employees,” says Hagiu.

          The research, published in Management Science, notes that in any service, there are investment decisions the firm must make, investment decisions a worker must make, and investment decisions that could be made either by the firm or the worker. This is true in a range of different service areas, from transportation to consulting to franchising.

          For example, a ride-sharing company must invest in the service’s technological infrastructure. The worker, meanwhile, must invest in service quality. But there is a third set of “transferable investment decisions” — such as car quality and maintenance — that can be decided either by the firm or the worker.

          Because these transferable investment decisions affect customer demand and total revenues generated, Hagiu and Wright’s research suggests that revenues should fall primarily to the entity taking on these investment decisions. A firm that chooses to control most of these transferable decisions should both expect to keep a higher share of the revenues and to employ their workers. A firm that enables workers to make more of these transferable decisions should provide a higher share of revenues to workers and engage them as independent contractors.

          While the exact balance between worker autonomy and employment status varies, the pair suggest that a 50 percent revenue split is often the tipping point. Firms that wish to classify their workers as independent contractors and provide a higher share of transferable decisions to workers should be paying them at least half of variable revenues. Firms that pay less than half of variable revenues to a worker should likely employ the worker, but provide a lower share of transferable decisions to workers.

          As technology makes it increasingly possible to build marketplaces and platforms for services, firms must carefully decide how to allocate control and employment status to those who deliver those services. “When deciding how much control to allocate to their agents over revenue-enhancing activities, firms must match more control with higher revenue shares,” says Hagiu.

          Read the complete paper on Management Science.

          Tags: Andrei Hagiu
          Share2Tweet1ShareShareSend
          Adriane Ayling

          Adriane Ayling

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