I’ve been working side hustles since long before there was such a term. I’ve spent decades as an independent contractor in the IT industry. But lately I’ve been trying several of the newer gig economy jobs such as Task Rabbit and being a Lime Juicer (recharge Lime electric scooters.) When you look at a gig job based on how the pricing is structured, you can see three distinct types. Each have their strengths and weaknesses.
In any side hustle job, there are two or three parties; the Contractor (the person that is to do the work), the Matchmaker (the company/app/platform that is enabling the transaction), and the Client (who the work is performed for.) In some situations, the Matchmaker is also the Client. In other words, the Matchmaker has created the platform for gig workers to perform a job for the Matchmaker’s company, not an end user.
Here are the four types:
Type 1: Contractor Sets the Price
In this type, the Contractor decides how much they want to make. They may charge by the hour or a fixed price. They may be bidding on a job or simply making an offer. The Client will hire only the number of contractors they need to do the job, since the Client will have to pay all that they hire. Expenses such as mileage, utilities, and supplies are negotiable before the job is taken.
So the Contractor puts their offer on the table, and the Client either accepts or rejects it.
This is the way I’ve worked most of my life. As a computer consultant, I have a standard billing rate and I work strictly “time and materials”. The Task Rabbit regular category tasks that I do (mostly furniture assembly) work the same way: I put a number on Task Rabbit that is my hourly rate. Customers can either accept or reject my services. In the case of Task Rabbit, mileage is not included but pre-approved expenses are. Task Rabbit jobs have a one hour minimum so I’m guaranteed so much on each job that is accepted. Usually the jobs run longer.
Type 2: Matchmaker Sets the Price; Sure Thing Tasks
In this type, the Matchmaker decides on a fixed price that the task is worth. The Contractor can choose to accept or reject the task. If the Contractor accepts the task, there is a strong likelihood that they will complete the task and get paid for it. The Client will only offer the task to one contractor at a time, otherwise the Client would end up having to pay multiple Contractors for the same job. Expenses such as mileage, utilities, and supplies are negotiable before the job is taken but are typically not covered.
The Client puts his offer on the table and the first qualified Contractor that accepts it, gets it.
Many side hustle jobs work this way: Uber, Lyft, DoorDash, and Task Rabbit Ikea category. The Task Rabbit Ikea category is different than all the other Task Rabbit categories because Ikea sets the price to assemble each item, so essentially, they are doing the quoting for the Contractor.
Type 3: Matchmaker Set the Price; Not a Sure Thing Task
In this type, the Matchmaker decides on a fixed price that they will pay for the task. Then they put this task in a “pool” of similar tasks that Contractors can compete for. Each Contractor can choose to try to compete for the task or not. The first Contractor to successfully complete the task (or get far enough along to “claim” it) can then get paid for it. Contractors that attempt to claim the task but are not first, get nothing. So the Client is offering the same task to multiple Contractors when only one can complete the task.
With these type jobs, expenses (mileage, utilities, incidentals) are never covered.
The Client puts the offer on the table and all the Contractors race to see who can get to it first.
Comparing the Three Types of Side Hustles
As I said, I’ve worked Type 1 all my life and it works well. I charge what the market will bear. The Client gets their services, and I get my money. If I undercharge, it’s my fault. As long as I’m able to do the task, I get paid. If the task runs long and I’m working by the hour, fine. I do the extra, get paid for it, and the Client is happy. After hundreds of jobs with Task Rabbit, I still have a 100% satisfaction rating so something must be working right.
Type 2 is a little more iffy. It all depends on what price the Matchmaker sets. They have the most control over whether a task will be profitable or not. The only say the Contractor has is wether to take the job or not. I hear the argument all the time that the Contractor doesn’t have to take the job so don’t blame the Matchmaker for setting the price too low! I believe it is a specious argument. If it is “OK” for the Matchmaker to set prices so low that the average Contractor could not possibly make money on the job, then the Matchmaker would soon find that no Contractors would take the jobs. (Or only Contractors that don’t know their own worth and won’t last long.) So it is in the Matchmaker’s interest to set the price where a reasonably efficient Contractor can make a reasonable wage.
Witness the change in Uber pay to their drivers over the years. It started out pretty good, but has gradually been reduced to the bare minimum to keep just enough drivers working. There is a natural tendency for the Matchmaker to lower the pay as far as possible. The same thing happens, of course, to real employees. But there are minimum wage laws. And turnover with real employees has a much higher cost, so this helps support employee wages.
Companies like Uber, Lift, Doordash, and Task Rabbit Ikea category will continue to squeeze the pay as long as they can get enough Contractors. The problem is that people starting out as Contractors often don’t understand what it’s like to be an independent contractor. The taxes, insurance, expenses, etc. Many work for months and think they are doing ok. Then they start doing the math and realize that they are making far less than minimum wage, or even loosing money! They may move on at this point, but there are other inexperienced people lined up to try.
So Type 2 Matchmakers may be good or bad. It just depends on their company philosophy and also what stage they are in their company life cycle. Early on, these companies pay relatively well because they want to develop the contractor base quickly. Once a contractor base is established, the squeeze begins.
Type 3 Matchmakers are very similar to Type 2, but with the added downside that the Contractor may quite possibly not be able to do the task, through no fault of their own. In the case of the scooter charging companies (Lime and Bird), they authorize Contractors to hunt for scooters that need charged. The Contractors see where the scooters are located on a map with an application the Company provides. Each scooter has a specific “bounty” that the company will pay if that scooter is recharged and placed back in service. The scooters that are in need of a charge are “released” all at once, and it’s a free-for-all as all the Contractors race to try to collect as many scooters as they can in the very limited time available. There is no guarantee the any Contractor will get any scooters. So this is the problem, the Company is offering the Contractor X dollars to find, recharge, and release a scooter. But the Company is making this offer to many Contractors at the same time. And only one Contractor will “win”.
Of course there are lots of scooters. But there are also lots of Contractors hunting them. It can and does happen regularly that I go out hunting Limes and get so few, or none, that it was a complete waste of time and money.
In short, I believe Type 3 side hustle jobs should be illegal. By making some operational changes, they can readily be turned into Type 2 jobs. There are way too many problems with a system that asks you to work, but that does not guarantee you any compensation.