On-Demand Startups Save Money by Increasing Employee Pay

January 9, 2017 - 3 minutes read

The on-demand marketplace is one of the most controversial topics in the great American tech growth spurt, and for good reason. Depending on your perspective, the part-time contractors who make apps like Uber and Sprig function are either liberated from traditional work, or trapped in a dog-eat-dog game of diminishing returns.

While big-player apps like Uber have opted to pay drivers the minimum possible in order to grow margins, smaller startups are beginning to experiment with more well-rounded approaches. The question of raises and perks for employees is particularly relevant this week as Sprig, the growing food-delivery startup in the San Francisco area, opted to raise employee pay, add an optional tipping feature to their mobile app experience, and even offer equity grants to full-time employees.

How this move plays out for them will make a huge impact on how other on-demand app developers in San Francisco decide to structure their service staff — for better or worse.

Speaking to TechCrunch, Sprig stated that they have a goal of bringing around 50% of their staff on full-time. That’s the polar opposite to how many other on-demand apps function, striving to keep employees in that part-time/contractor grey area, where the taxes and fees are less prohibitive from a business perspective. Margins are already well-known for being slim in the on-demand app development space, but Sprig believes they’ll ultimately save money on the change by avoiding employee churn, which costs the business huge percentages of their revenue currently.

The flip side to this strategy, of course, is how it affects customers. On-demand app developers have successfully sold consumers on the idea of affordable, convenient goods and services through an app. When it comes to “customer delight,” there’s a fear that users will prefer more anonymous, super-cheap options like Uber’s delivery service, or the various big-players solutions from tech companies like Amazon.

Whatever happens, it’s now the responsibility of iPhone app developers to prove that the new tech economy can be a win-win for users as well as employees. Will they be able to strike a better deal than traditional workplaces? For now, opinions on the question are mixed.

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