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Why Temporary Warehouse Workers Should Have W-2 Status

May 6, 2016
Employees and employers alike can benefit from a move that encourages full-time rather than temporary work.

Someone always has a better idea.

While the gig economy, which is based on temporary positions with independent workers on short-term assignments, is the direction that many supply chain jobs are going, it often isn't the best road for workers.

About one third of all temporary workers are in light industrial work; this includes pickers and packers, material handlers and construction workers.

When employed as an independent contractor, the major drawback is the lack of coverage for workmen's compensation.

Gino Rooney, who worked in a warehouse while he attended college, felt there was a better way.

While taking a graduate class at Stanford, the purpose of which was to create companies, Rooney drew upon his experiences as a temporary warehouse worker and used that to create BlueCrew, a staffing platform for blue-collar jobs.

He wanted to improve the transparency into these jobs by taking out the middleman. Using an app, workers can register directly with an employer, rather through an agency, and employers can view candidates directly.

While the initial push was for transparency, BlueCrew's key tenet is to "change the way companies staff and empowering workers in the gig economy to move from contract work to opportunities with a clear career path."

The first step to providing this is to make candidates W2 employees. This entitles employees to insurance coverage, which was of utmost importance to Rooney. "This is a vertical where accidents are more likely and I feel strongly that workers needed to be covered by worker's compensation."

W-2 status also provides the full range of non-discrimination protection (including wage and hourly laws), which is not provided to 1099 employees.
From a financial perspective 1099 workers must pay a self-employment tax (15.3% of all earnings) as well as standard income tax. The result of this is that 1099 employees often end up paying 7% more in taxes to the federal government than a W2 employee earning the same wage.

There are benefits to the employer as well when employees have W-2 status.

If you hire an on-demand, 1099-form contractor for a low-skill job, you are obliged to cover any legal and/or medical expenses for related injuries in the workplace. Companies expose themselves to more financial liability, including back pay of IRS taxes and benefits, for misclassified contractors.
Companies that use more than five 1099 contractors from a workforce service (third-party or otherwise) now share liability for any legal or civil action taken against said workforce service providers.
A somewhat unexpected benefit of BlueCrew's candidates holding W-2 status is the ability to offer a career path. As Rooney and his co-founder Cooper Newby got to know their candidates (since they interview all of them before accepting them), they learned that 75% of these temporary workers are in fact looking for full-time jobs.

Rooney was in a position to help them. Since the employees have W-2 status, employers view the workers differently and have hired them on as full-time employees when opportunities arise.

And from the workers' perspective they can pick up different skills at different companies and use that to gain full-time employment. Or they can use the temporary assignments as an opportunity to learn about different companies and then choose one for full-time employment.

So an idea for improving the temporary workforce has turned into a business model on which both employers and employees are better served via protection under a W-2 status.

More importantly the skill level of this industry will increase as workers receive the training they need, even if they are changing companies, and employers will gain another way to find the skilled workforce they need.

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