Performance Pay for Gig Workers?

Editor’s Note: If you’re interested in learning more about the gig economy, you can join Cafe contributor Stephanie Thomas, Cornell ILR Professor Susanne Bruyere and Former US Deputy Secretary of Labor Seth Harris for a livestream event from eCornell today at 12 PM ET or on-demand any time. Free with access code HRTW17: http://bit.ly/2wXI5zW.

From Amazon’s Mechanical Turk to Fiverr, TaskRabbit, Upwork and Behance, gig platforms are everywhere. If you need something done, whether it’s a simple microtask or a complete overhaul of your marketing strategy, chances are there’s a gig worker on a platform somewhere that can do it for you.

Gig workers aren’t just for small start-ups anymore. In a recent report from the University of Oxford’s Internet Institute, more and more Fortune 500 companies and multinational enterprises are incorporating platform sourcing into their business models. According to this report, platform sourcing is gaining in popularity because of (1) easy access to scalable sources of labor, skills and expertise, (2) reduced start-up and transactions costs, and (3) the elimination of conventional hiring barriers.

For many of us, the gig economy is something that’s indistinct and difficult to wrap our arms around. There isn’t a lot of reliable data about this growing piece of the workforce. Well… we think it’s growing, but we don’t know for sure. The last time the U.S. Bureau of Labor Statistics surveyed the contingent workforce was in 2005! (a new survey is in progress, but results won’t be available for a while…)

If you’re thinking about tapping into the pool of gig workers, you need to think about how you’re going to pay them. On Mechanical Turk, most microtasks are paid at a fixed rate; if you complete the task successfully, you earn a few cents. Over the course of a full day, Turkers can earn an average $6.00 to $12.00 per hour. Workers on other platforms, performing more complex tasks, can earn hundreds or even thousands of dollars per month.

Regardless of the type of task or platform used, compensation is typically output-based: the pay that gig workers receive is based on the success or failure of the gig. This is fine if the outcome of the gig can be categorized as “yes, you did it” or “no, you didn’t do it.” It doesn’t work so well for gigs where the quality of the output matters.

One of the unique features about the gig economy is that workers have discretion over how much they work. But just like the non-gig economy, workers also have discretion over how much effort they put into that work. As the tasks gig workers perform become more complex and mission-critical, employers need to consider that discretionary effort, just like they do for conventional employees.

There’s some interesting new research-in-progress examining performance pay for gig workers (for example, Sebastian Butschek, Patrick Kampkötter and Dirk Sliwka, “Paying Gig Workers”, unpublished) and I’m excited to see what this new avenue of research will reveal. In the meantime, here are some easy and practical suggestions for paying your gig workers based on performance:

  • Early delivery bonus: If the timing of deliverables and/or hard deadlines are critical to your project, consider offering an early delivery bonus (assuming quality standards are satisfied). For time-sensitive tasks, a small early delivery bonus could be the little extra incentive your gig worker needs to make sure things are wrapped up on time.
  • Cost control commission: Cost control is always important. But if cost savings are make-or-break to your project, consider offering your gig worker a percentage of the cost savings she generates for you. This little commission could motivate your gig worker to find alternative suppliers who provide the same quality inputs at a lower price and be a win-win for everyone. 
  • Rubric-based quality bonus: Quality bonuses can be tricky. It’s hard to know how good is good, and how much better than good really good is. Rubrics can be useful here. A rubric is nothing more than a document that articulates the expectations for an assignment by listing the criteria (what counts) and describing levels of quality from poor to excellent. If you can all agree on what constitutes “poor” through “excellent” quality, you can offer a 0 / check-minus / check / check-plus bonus scheme.
  • Retention / repeat worker bonus: If you have a really good gig worker, you need to actively try to maintain that relationship. According to a study by JP Morgan, one in six online platform workers is new in any given month, and more than half of platform participants quit within a year. If you find someone who does a great job and is a great fit for your organization, you might want to incentivize her to continue to accept your future gigs.

There are numerous ways to incorporate performance pay into your compensation structure for gig workers; these are just a handful of ideas to get you thinking.

Performance pay is not going to be a component of your pay strategy for all of your “gigged” tasks. But for more complex tasks, those that are time sensitive, or those that require a little more than “standard” effort, you should consider the possibility of paying for performance. I’m sure you can find a gig worker to help you think it through…

Stephanie Thomas, Ph.D., is a Lecturer in the Department of Economics at Cornell University. She teaches courses on economic theory and labor economics in the College of Arts and Sciences and in Cornell’s School of Industrial and Labor Relations. Throughout her career, Stephanie has completed research on a variety of topics including wage determination, pay gaps and inequality, and performance-based compensation systems. She frequently provides expert commentary in media outlets such as The New York Times, CBC, and NPR, and has published papers in a variety of journals.

This post originally appeared on Compensation Cafe
Author: Stephanie Thomas