Today Uber announced a proposal that gig platforms be required to pay for benefits for independent workers, that platforms guarantee occupational accident insurance for workers hurt on the job, and that government include those workers in anti-discrimination laws. In a New York Times OpEd this morning Uber CEO Dara Khosrowshahi stated "Uber is ready, right now, to pay more to give drivers new benefits and protections."

It’s a call to action toward offering financial security in the “future of work” — and that future is here now.

To put this announcement in context, it’s worth examining the major workforce shifts that have led to this moment. For over 70 years, the United States has unfairly tied most core financial “benefits'' to traditional full-time employment, a model that’s becoming increasingly outdated.

The risks of our current benefits system

The world has witnessed a new and extraordinary convergence of factors — the on-demand economy, the increase in alternative work arrangements, the decline of traditional industrial sectors, and now a shift to fully remote work. 

We’re seeing everyone from Millennials to early-retirees thrive by working for themselves and curating a career that suits their individual needs and circumstances, yet it’s still only full-time employees who receive a financial safety net in the form of employer benefits. Those benefits only come with the shackles of a full-time, less-flexible job.

For many workers, full-time jobs are also inaccessible due to life circumstances like caregiving, systemic barriers to education and career opportunities, or simply a lack of available jobs. The antiquated IRS labor classification guidelines don’t address ways a platform company can incentivize contractors without rendering them employees — for example, with contributions to health plans, retirement plans, and other basic financial protection.

Offering benefits to freelance and part-time workers, therefore, comes with the risk of potentially conferring full-time employee status on the worker — an expense that changes the underlying economics of work platforms like Uber and has effectively disincentivized companies from offering benefits to gig workers. In the process, we’ve disempowered the contractors, self-employeds and otherwise non-benefited part-time working Americans in ways that undermine their financial security. As Mr. Khosrowshahi said, "It’s time to move beyond this false choice."

COVID-19 has accentuated this imbalance, putting independent workers who do “essential” work at higher risk, delivering the groceries, meals and services that millions of families benefit from as they safely shelter in place. As a result, we’ve seen large work platforms step up to pay for virtual telemedicine visits, sick leave, COVID tests, and even PPE. This would have been unheard of 6 months ago, but the global health pandemic has tossed the rules out the window and put worker protection first.

Uber’s new proposal to fund benefits is a long time coming and a great new commitment to the independent workforce. This is what we want to see more of: companies committed to providing a financial safety net for all workers regardless of classification, in a regulatory environment that doesn’t threaten their business model.

“Portable Benefits” offer a viable alternative to employer-only benefits

To adapt to the new world of work we need flexible “Portable Benefits” that drive sustainability for an increasingly independent labor force. In their proposal, Uber has called for “proportionality” (with regards to which sources fund benefits), “aggregation” (the ability to combine funds with other sources, like contributions from other gigs) and “autonomy” (choice of benefits).

I believe that this new system also requires benefits that are accessible to every kind of worker, whether they be full-time, part-time, independent, or gig. Imagine a world in which you can change jobs but never have to switch health plans or 401K providers! A new system should also offer the ability for platforms to make pre-tax, prorated contributions to all benefits, similar to employer 401(k) contributions today. This requires a re-working of our tax system to expand the definition of pre-tax benefit contributions, but creates strong business incentives that look and feel like the incentives that have pushed corporations to provide employee benefits for decades.

The Portable Benefits model applies well beyond just the “gig economy” — it could offer large and small employers greater choice in their current “all-or-nothing” binary benefits system for their full- and part-time employees.

Uber’s solution provides a stepping stone to “Portable Benefits” 

There have been myriad public debates about whether new business models can survive funding benefits and there have been numerous proposals seeking harmony across competitors to contribute to pooled funds, invite third party oversight, and offer tax-advantaged contributions. 

These proposals are of great merit; in many cases they represent ideal solutions. But the complexity and cooperation required has meant most have stalled out. Uber’s proposal provides an opportunity to test some of these ideas — to crawl before we run.

For now, Uber offers a practical solution: require platforms to give workers money earmarked for whatever benefits they choose — anything from health insurance premiums to paid time off — without forcing businesses to reclassify them as full-time employees. This more flexible model does not offer any of the tax incentives we see in the employer benefits world and begs for more robust “individual” benefits options that equal those offered by employers, but it gets the wheels in motion. 

In full disclosure, I lead a healthcare benefits company that partners with Uber. As Mr Khosrowshahi noted, through this partnership we’ve learned that each individual Uber driver is grappling with their own unique healthcare benefits situation — including uninsured, covered through a spouse, covered through another job, or enrolled in their own individual ACA coverage with Stride. This new proposal puts drivers in a position to pick and choose how they want to use their benefits to meet their personal needs.

So, what happens now? 

Uber’s new proposal does require legislative change to clarify classification enabling workers to remain contractors while requiring platforms to provide them with funds for benefits. It need not happen at the national level right away — it can start small, state-by-state. The proposal also asks competitors to lock-arms and join Uber in the movement to ensure a level playing field; regulation can force this, but I predict we’ll see it happen organically faster than regulators can move. 

As a country, we continue to adhere to a sharply dichotomous world of the W-2 employee versus the 1099 contractor. It’s a simplistic and outdated portrait of work, and one that’s largely detrimental to the flexibility required by both today’s workers and businesses. As Senator Mark Warner said, “we’re not going to slow this desegregation between employer and employee,” so it’s time to build a Portable Benefits system that delivers full protections, no matter how you choose to work.