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Is tech finally realizing that contractors need benefits, too?

SurveyMonkey broke the Silicon Valley mold this year by extending full benefits to workers that contract with the company through third-party agencies. Could the rest of the industry move away from scrimping on benefits to save costs?

Is tech finally realizing that contractors need benefits, too?
[Photo: WN/iStock]

Every day at SurveyMonkey’s campus in San Mateo, Derrick Lau leads his entire team in the cafeteria kitchen as they prepare meals for the over 400 employees that work out of the office. “Derrick is like the MVP of SurveyMonkey,” Becky Cantieri, the company’s Chief People Officer, tells Fast Company. He’s well-loved by staff and checks in with people on Slack–which is not exactly a typical relationship between Silicon Valley chefs and company staff.

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But as much as Lau feels a part of the SurveyMonkey family, on paper, he’s not. For its kitchen and catering services, SurveyMonkey contracts with a third-party company, Bon Appétit Management. As such, he was not entitled to the same benefits packaged that SurveyMonkey offers its full-time employees.

[Photo: WN/iStock]

Lau’s situation is far from uncommon. While in the past, workers like chefs, janitors, and building maintenance were employed directly by the companies and offices in which they worked, they’re now often hired on a contract basis via a third-party company. Labor economists estimate that one in every five workers is employed on a contract basis, and in Silicon Valley, that means as many as 39,000 workers are in this position. SurveyMonkey mainly contracts with three agencies–Bon Appétit, Clean & Green, and Eastridge Workforce Solutions–which respectively provide catering, janitorial, and workforce management services via teams of contract workers.

Third-party agencies such as these often contract with a wide range of smaller companies, and deploy workers to complete tasks on an hourly or project basis. The company (in this case, SurveyMonkey) pays the agency, which then pays its workers by the hour. Workers are often not entitled to benefits, which can save companies as much as 30% on labor costs. This arrangement, in turn, saves money for the big companies that contract with these agencies: Instead of having to pay benefits and provide pensions to the people serving their food and cleaning their buildings, they pay the agency just for the hours of worked performed.

Becky Cantieri, SurveyMonkey’s Chief People Officer, and Rocio Vargas, founder and CEO of Clean & Green. [Photo: courtesy SurveyMonkey]

But SurveyMonkey recently reconsidered this arrangement and landed on the decision that whatever cost savings materialize by working with independent contracts are not worth depriving those workers of quality benefits. Each year, the company sends out a survey to its employees as it moves toward open enrollment, asking people how they feel about SurveyMonkey’s suite of benefits. “Through our survey last year, we learned that people were really satisfied with the level of benefits coverage we were offering them,” Cantieri says. “But in the open-ended questions at the end, an employee named two our or janitorial services members and said: ‘We’ve got really good benefits, but how about these workers?'”

That question, Cantieri says, got her thinking. “We set out on a mission to understand the delta between what we were offering our own employees and what our three main vendors offer,” she says. “Not surprisingly, there was a pretty significant gap.”

SurveyMonkey consulted with its benefits broker, i2i Benefits, to develop a set of standards “for any third-party vendor that we work with that has employees working side-by-side with SurveyMonkey employees,” Cantieri says. These standards include providing employer-sponsored medical, dental, and vision plans that surpass national average benchmarks, for which the employer sponsors 85% of the employee premium (i2i Benefits did pro-bono work to recommend the coverage plans to the vendors), as well as a monthly transit subsidy and through paid time off and paid family and sick leave. Rocio Vargas, Clean & Green’s CEO and founder, also opted to give her workers a retirement package. Recognizing that these benefits packages are expensive for third-party agencies to offer, SurveyMonkey contributed the necessary cost–around $200,000–to bring them up to standard. Benefits for vendor-agency employees have been in place at SurveyMonkey since this January.

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While the subcontractor agencies like Clean & Green were certainly on board with SurveyMonkey’s idea to expand benefits to their workers, it is not something that they proposed or pushed themselves. That makes sense: When margins are tight and industry standards do not mandate that agencies offer their independent contractors benefits, they are not exactly in a position to advocate for change. But with SurveyMonkey pushing for and paying for expanded benefits, perhaps subcontractor agencies will begin to demand it from their side.

“We have expectations for ourselves that we use our platform to contribute positively to the industry,” Cantieri says. The prevailing independent contractor model in Silicon Valley leads to “two groups working literally side by side, who have a very similar impact on the day to day experience of working at the company, but are treated very differently,” she adds. It’s still an unusual arrangement in the tech world, so SurveyMonkey has been slow to scale it to its other offices outside of San Mateo, as they want to ensure they’ve ironed out the kinks, but they intend to do so going forward: This open enrollment season, they will bring expanded benefits to contract workers at the Portland office.

[Photo: WN/iStock]

While SurveyMonkey is the first big tech company to establish this type of benefits extension to the independent contractors it works with, it’s by no means tech’s first move to bolster the benefits of part-time contractors. When Dan Teran founded Managed by Q, a company and tech platform that manages part-time janitorial, building maintenance, and secretarial workers, in 2014, he made the decision to classify all workers on the platform as employees and offer them benefits, including a matching 401(k) retirement program. “Even though it may seem like a higher cost up front, we believed that the overall value of doing so would be higher than us just saying it’s not worth investing in our employees,” says Maria Dunn, Managed by Q’s director of people.

While the experience for companies contracting with Managed by Q is similar to working with more standard third-party agencies–there’s the same ease of booking and flexibility, for instance–the prices are a bit more steep to account for the employee benefits and equitable pay. “We’re believers in the idea that you get what you pay for,” Dunn says.  Managed by Q is betting that the companies they work with are willing to pay more to ensure the workers who perform labor for them are treated well, which results in lower turnover and, says the company, higher quality work. So far, it seems to be a successful bet–Managed by Q has raised over $76 million, is turning a profit, and just acquired NVS, an office space planning company.

For executives like Cantieri and Teran, their models are as much about providing quality benefits to everyone who works on behalf of their companies as about proving to the rest of the tech world that this approach is viable and necessary as the business landscape continues to shift toward contact work. “The reality is that we’re a relatively small sized company in Silicon Valley,” Cantieri says. “If we can implement this program at our size, then the bigger companies with huge pockets of revenue certainly can–it will actually be easier for them because they have more resources.”

[Photo: WN/iStock]

These new benefits aren’t limited to SurveyMonkey. Rent the Runway, a popular clothing rental marketplace has also taken on this idea. In May, RTR cofounder Jennifer Hyman penned an op-ed in The New York Times spelling out her decision to offer hourly employees–those who worked in warehouses, retail stores, and on the customer service team–benefits. “In America, some of the biggest companies have decided to handle the dual pressures of keeping costs down while retaining ‘corporate talent’ by ramping up benefits packages,” but only for full-time employees, Hyman wrote. When she founded Rent the Runway, she simply followed suit and set up the same dichotomy between full-time and hourly or contract workers. It took her years of reflection on the circumstances of her hourly workers–especially understanding difficult situation of needing to care for your family during times of need, but not being allowed paid family leave–to convince her that she could change the way things were done.

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When Hyman announced her decision to equalize benefits for all RTR workers, regardless of status, she wrote that she hoped it would correct some of the inequities that are endemic to the working landscape in modern America: That just 14% of workers have access to paid family leave, and just 21% of part-time workers receive any kind of health insurance. But she also thinks it will be good for her business, which she’s hoping will see higher retention and productivity rates, and lower training costs as a result. In essence, Hyman echoes what Cantieri says about the decision to expand benefits: While it may require an additional cost on paper, protecting all workers equally is something that “pays for itself.”

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About the author

Eillie Anzilotti is an assistant editor for Fast Company's Ideas section, covering sustainability, social good, and alternative economies. Previously, she wrote for CityLab.

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