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Startup Report

TaskRabbit Quietly Doubled The Cut It Takes From Many Of Its Workers

The changes impact repeat work on the platform, which many contractors say provided financial security in the precarious "gig economy."

TaskRabbit Quietly Doubled The Cut It Takes From Many Of Its Workers

[Photo: Flickr user Igor Putina]

An email with the subject line "Tipping is coming to TaskRabbit!" sounded like positive news to Toby, who works as a handyman in New York City on the popular odd-jobs platform. But buried at the bottom of the email, sent earlier this month, was another notice: "We are introducing a flat 30% service fee on all tasks, and discontinuing the 15% service fee for tasks with repeat Clients."

"I never really opened the email because it didn’t seem important to me, until I noticed a huge drop in my pay and I went back and look at it," Toby said in an interview. (His and other names in this story have been changed out of concern about retaliation by the company.) "It’s ridiculous. The notice about doubling their cut was buried in this email and the subject line is just so misleading—it implies you’re going to make more money when in fact you’re going to make a lot less."

Another worker speaking anonymously said: "I was surprised at the good news, but as soon as I read through the email I was pissed."

For over a year, TaskRabbit, which connects independent handymen or housecleaners with people looking to hire help, has taken a 30% cut on the first job a contractor does for a client. After a client rehires the same contractor, the company reduced that cut to 15%. Going forward, however, the company has removed the 15% discounted cut in favor of a flat 30% fee for all new jobs. It has also increased its "Trust & Support" fee, which is billed to clients directly on top of the worker’s payment, from 5% to 7.5%.

Contractors had understood the tiered fee structure to be an incentive to do quality work in the hopes of getting rehired and earning a larger percentage of what the client pays. For many contractors it has worked and helped them build their own small businesses of repeat clients.

Especially for handyman and housecleaning jobs, which tend to be built on trust and repeat work, the reduced 15% cut was seen as a lifeline. Contractors I interviewed for this story said that anywhere between 50% and 90% of the work they do is for repeat clients. (TaskRabbit declined to share statistics for how many jobs on its platform are repeat hires.)

"This hurts better workers for TaskRabbit the most," said Toby. "It also seems counterproductive for TaskRabbit. They’re thinking extremely short term. They’re not going to be able to keep good people like this."

Josh, who works as a handyman in Los Angeles on the platform, tells Fast Company that the motivation to go above and beyond disappears without the reduced fee.

"When you want to get a repeat client, you go the extra mile," said Josh. "What is my incentive now to go above and beyond on these jobs? No one is going to tip 15% for mounting a TV. I’ll do the job and I’ll do it well but I’m not going to go the extra mile. I’m going to do the bare minimum."

TaskRabbit claims that the discount for repeat clients unfairly benefited contractors in fields prone to repeat clients and did not offer as much benefit for workers doing one-off work such as help with moving. Workers argue that clients are willing to pay a premium for one-off jobs but are more prone to price hunting when they hire someone they know will work for them every week or every month.

TaskRabbit says it did not intentionally mislead its contractors, which the company calls "taskers."

"Our intent was never to be disingenuous, rather optimistic about adding tipping to the product," a TaskRabbit spokesperson told Fast Company. "We love Taskers. We knew that removing the 15% repeat service fee could cause friction, so adding tipping was one way of giving them additional earning potential."

But this is not the first time TaskRabbit has come under fire for how it communicates significant changes on its platform to workers. When TaskRabbit removed its system of bidding for tasks posted by clients and set fixed hour rates for specific categories, the company was criticized by upset contractors finding it harder to land jobs. At the height of the backlash, TaskRabbit banned vocal contractors from its private worker-focused web forums.

Repeat work has been vital to many of TaskRabbit’s contractors, who see it as providing some financial security amid the otherwise precarious employment of "gig economy" platforms.

"I count on work from [repeat clients] and strive to create a relationship with them so they come back," said Max, who has been working for TaskRabbit for over a year in Chicago. "It was advantageous for me and for TaskRabbit."

"Taskers understand the value that our platform offers in connecting them with the people who need their services," said the TaskRabbit spokesperson. "Change can be hard and we’re not here to convince them that this will benefit them in the long run, but we believe it will."

The rate changes likely indicate growing pressure for the company to become profitable, a pressure shared by many fast-growing startups in the on-demand economy. At the Code Enterprise conference in San Francisco earlier this month, CEO Stacy Brown-Philpot said in regards to profitability that the company will be there "very soon," according to Recode.

But TaskRabbit’s spokesperson said that rate changes are not related to the push for profitability.

"We certainly don’t believe we need to show profit to investors, as our margins speak for themselves," said the representative. "All companies have to make tough business decisions in order to achieve their goals, and while we always strive to strike the right balance between the costs of running a business with appeasing those who might be affected by those changes, the reality is that it won’t always be a win/win for both parties."

The company, which launched in Boston in 2008, has raised $50 million in venture capital, but has also faced struggles and layoffs. It is generating operating income in each of the 19 cities in which it operates, said Brown-Philpot, who indicated that more fundraising is on the horizon. "If you’re a growing business, you’re thinking about raising money," she said.

As for what the workers will do now, most feel the best option is either to raise rates or try to find work off of TaskRabbit. Of more concern for TaskRabbit, some may poach clients from TaskRabbit and cut out the 30% fee altogether.

"I’m going to raise the hell out of my rates so that I can make close to what I was making before," said Josh, the handyman from Los Angeles. "For us to get this money back, I feel like everybody needs to raise their rates because then there will be fewer customers willing to use TaskRabbit. I’m also going to post more on Craigslist for work and check out other apps instead of TaskRabbit."

Josh, who previously drove for Lyft, says it’s part of a pattern in new gig economy platforms. Lyft raised its rates for new drivers from 20% to 25% at the beginning of this year. Uber takes a similar cut, and as both companies have lowered the price of fares, some drivers say the effective rate, after taxes and expenses, can amount to much more. On Tuesday, Uber drivers across the country joined workers from other low-paying jobs to protest their inability to earn a living while working full-time on the platform.

"Once something seems too good to be true—like a great job that treats you fairly—you know it’s going to get worse really soon," said Josh. "All these tech companies never make it better for the workers. It just gets worse and worse over time."

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