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Comment by numlocked | Hacker News Reader

W2 employees are considerably more expensive than 1099 contractors, which is why so many companies ride the edge of 1099 vs. W2. In this case though, using the IRS' 20-factor test[0], I'm sure Shyp could have kept their couriers as 1099 from a legal standpoint. I buy that they are genuinely doing this for the reasons stated.

So that's great and very feel-good (don't we all want to give our employees additional training and benefits?), but I'm surprised to see it happen in what I presume is a pretty low-margin business. Benefits are expensive!

[0] http://www.twc.state.tx.us/files/businesses/form-c-8-employm...

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You're only accounting for one kind of expense here: short-term, visible payroll costs. But Shyp's whole goal here is to create a brand built on amazing customer service. That's determined by things that are much harder to measure.

Making decisions based only on the most visible numbers is a business version of the Streetlight Effect[1]. If we want to do this right, we also have to ask things like: What's the expense of increased turnover? Of lower morale? Of poorly trained employees? Of decreased service quality? Of worse word-of-mouth advertising? Of increased advertising budgets needed to compensate?

That's not to say that cheap is never the way to go. But if we're going to use numbers, we should use them well.

[1] https://en.wikipedia.org/wiki/Streetlight_effect

  What's the expense of [...] decreased service quality?

This is particularly important for Shyp.

If I order a parcel from Amazon and my delivery driver's bad, it's unlikely I could get Amazon to change couriers. But if I request a pickup from Shyp and the pick up driver's bad, I can change couriers tomorrow.

Keep in mind, being an employee doesn't automatically entail the "benefits" people think of (e.g. health insurance). Instacart is only allowing their in-store employees to work up to 30hrs/week, since that's the cutoff for having to provide health insurance.

The real costs are (1) employer's share of FICA taxes (7.5%) and (2) workers compensation (which can get expensive in certain industries, though likely not outrageous for delivery).

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