Hacker News Reader

Comment by dantheman | Hacker News Reader

The question is why these services exist? I don't think it has to do with wages, I think it has to do with the difficulty of firing employees.

View on HN

I think it has to do with wages. And also with the ability to abuse those employees without exposing the "brand" to public scrutiny and litigation. It also allows you to offer better benefits to your core employees without offering the same to employees that work for contractors (there are fringe benefits like childcare or use of company facilities like private gyms that generally must be offered to all employees in order to expense them).

Oh, you all weren't paid for your overtime? Sorry, you don't work for Hilton. You work for Rent-a-Janitor. And they just filed for bankruptcy and closed shop. Hilton had previously dropped their contract with them due to their unscrupulous practices. We have now contracted with a totally different company, Rent-a-Janitor 2.

(This is a made up example. I have no idea if Hilton does anything like this, but most all huge companies do it.)

> I think it has to do with wages.

It doesn't, you're literally paying a middleman to take away the risk and hassle of hiring an employee. That's the added value here.

Otherwise, you could just hire the worker directly for what that middleman is paying them. Working as a contractor, you get a pretty good idea of what your "rights" are worth in pure dollar terms.

It's not difficult to fire employees in the US. You can't just fire the minorities and the women, but other than that you can fire for any reason at any time.

It's sometimes difficult to fire employees as a way of lowering wages. The people left behind who are expected to make up for that through raised workloads and losing the experienced for green new hires might complain.

It's also not difficult to sue a company for unfair hiring/firing practices.

But if the employee is via third party, there is no hiring or firing involved, limiting the liability of the first company.

In which developed economy is it easier to fire employees than in the U.S?

These companies are b2b and provide value to other businesses who would rather not become experts in say, how to manage cleaning staff, and rather focus on building widgets.

In that regard the sales pitch is similar to how Microsoft can sell a company email and word processing so that the company doesn't have to figure out how to write business software.

Aren't the usual reasons we buy a service rather than doing something ourselves chosen from a list that goes something like:

* X is available more cheaply from a third party supplier (who presumably has achieved some kinds of economies of scale) than our fully-loaded cost to deliver the same

* X is a commodity product where we do not feel we can differentiate ourselves by doing it in-house

* X is ancillary, but important, to our core business and we lack the expertise to do it well, so we will buy in rather than build that expertise

Not many hotels are bothering to drill their own wells these days, bearing in mind that water is available from utility suppliers - why would room cleaning service be immune from the same forces?

I would argue for a fourth point in this case

* Purchasing X through a third party allows us to circumvent laws and regulations meant to protect workers and/or consumers

These "laws and regulations" still apply to the agency that hires those workers. You're simply paying for them to carry the risk.

You can argue that such agencies are more likely to disregard laws and regulations, but how would you fix that? With laws and regulations?

If Big Publicly Listed Company A contracts with Small Fly-by-Night LLC B to provide workers to vacuum and empty wastebaskets, and it turns out that LLC B is illegally withholding wages, then Company A could be partially liable because they should have done due diligence and picked reputable law-abiding suppliers.

I can think of a couple different legal metaphors for this:

1. Something similar to banking's Know-Your-Customer could work... maybe call it Know-Your-Suppliers.

2. People are criminally liable for possessing child pornography even if they had no participation in the direct crimes of its creation. In other words: in this case there is no immunity just because the crimes happened somewhere "upstream".

And in practice, it just doesn't happen much.

For instance, how likely are your Fly-by-night employee or sub-sub-contractor to rat out the Fly-by-night? They may get a beating, their checks withheld, the Fly-by-night go under.

If it still happens, Big Publicly Listed company pays for it to go away in a settlement.

If it goes to court, they Big Company can say "we work very diligently to avoid this situation in the future and what happened is in no way indicative of our values".

Etc.

It is as simple as “X is available more cheaply from a third party supplier.” But in the case of services that depend on low-skill labour like room cleaning, there are no presumed economies of scale. These companies don’t get the same work done with less labour, like utility suppliers. Instead, they pay workers less, and use complex business structures and confidentiality agreements to protect the client from the consequences (unions, lawsuits and PR damage). This isn’t capitalism realising positive-sum efficiencies; it’s just taking resources from workers and giving them to business owners.

Is this an issue in other countries where it is even more difficult to fire employees?

I haven't looked into whether it's specifically an issue but in France it's notoriously hard to fire employees and indeed a lot of work is done by workers hired from agencies. This is also because it is very hard to make temporary contracts here.

Czech Republic here. We are somewhere between France and the US when it comes to hardness of firing people.

Agency work is extremely common here, especially on the lower level of the job ladder. Gig economy and contractors are common even in higher settings, such as software development.

Reply on news.ycombinator.com