ShiftPixy Wants to Slay the Gig Economy Compliance-Risk Dragon

ShiftPixy has recently appeared as another blip on our gig economy radar screen. The company, which was incorporated in Wyoming in June 2015 and is now headquartered in Irvine, California, certainly bears looking into.

The Quest has Begun

In a recent press release, the company described itself as “a disruptive Next Gen GIG Economy provider of unique insurance products, regulatory compliance services, proprietary human administration tools and variable labor force provider, that plans to enable unemployed, under-employed or part-time and/or full-time individuals to apply for variable shift work from businesses in their local market.”

The company also announced that is has “created a new hybrid type worker classification status, designed to avoid the pitfalls inherent in trying to classify shift workers as independent contractors in the traditional GIG Economy model … pitfalls which can lead to crippling litigation.”

This is a curious assertion, since acting as a third-party employer of record (EOR) is not a new concept at all, and the combination of EOR and W2 payrolling and contingent worker placement has long been the model of temp staffing agencies and professional employer organizations (PEO), though not based on a digital platform and not in the market of gig work or shift work, which prevails in restaurant and hospitality businesses). In addition, there are already platform businesses that are serving the market segment across major metro areas. One example is Shiftgig, which does serve as EOR and payroller of shift workers.

ShiftPixy describes itself elsewhere as “a temporary staffing service provider that contracts with clients with large contingent part-time workforce demands, primarily in the restaurant and hospitality business to become the employer and provider of workers to these, primarily for part-time shift work.” The company also identifies its target market as “the restaurant, hospitality and maintenance service businesses [that have] 50 or more full-time equivalent employees,” which under the Affordable Care Act (ACA) must offer benefits to full-time employees. It appears that one of the value propositions of ShiftPixy for businesses is to transfer ACA-related responsibilities and risk from client businesses to itself, in addition to taking on other compliance responsibilities and enabling gig and shift workers in a number of ways, such as providing “unique insurance products.”

Who Will Win the Contest?

It may be that ShiftPixy has unique know-how and capabilities to take on the ACA compliance burden within the market segment it is addressing; however, it is not quite clear how this is a differentiator. Admittedly, though, we may be missing something here.

A recent article at the website Pizza Marketplace quoted ShiftPixy Founder and CEO Scott W. Absher as saying that “ShiftPixy has established a unique, and what we believe are, a highly desirable suite of services that merge insurance coverage access, operational, compliance and financial support, along with intermediation of shift workers and available shifts at participating businesses." He was also quoted as saying that ShiftPixy management “has leveraged its expertise and long-standing market alliances within the property and casualty producer community to assemble a large backlog of potential provider clients for what we believe to be the company's unique platform and programs," and that "ShiftPixy now is in the position of being able to select rather than inviting provider clients into its proprietary program, which we believe will enable ShiftPixy to grow more rapidly and select clients that may add more profitably to our operations."

Monetization of the platform is also addressed in the Pizza Marketplace article, with Absher saying that “ShiftPixy intends to collect nominal monthly user fees from shifters who participate via [a new mobile] app. The app will also serve as a gateway for shifters to access the benefits available to them through the company, like health, dental and vision coverages, 401(k) or IRA access, and a variety of discounts."

In other words, the platform will be monetized by shifters’ monthly user fees and broker commissions on insurance policies (a little Zenefits-esque?). Of course, all of this will constitute a major step forward in supporting the viability of the gig and shift economies, provided that the net economic benefit to workers — not just businesses — increases with this model. One question that comes to mind is if workers will get better insurance deals through ShiftPixy than they would through state exchanges.

The Road Ahead: Treasure or Travails?

CrowdFund Insider reported that ShiftPixy will be “raising capital under Regulation A+” and “has enlisted WR Hambrecht as sole underwriter on a “best effort” basis to raise up to $50 million with a minimum raise of $15 million.” There is now an “offer circulate” that provides more details about the ShiftPixy business plan (including expansion from its beachhead market in Los Angeles) as well as insight into the recent ShiftPixy early stage financials (just the period from June 2015 through August 2015).

Over the past year or so, we have seen the entry of new gig economy players that would reduce marketplace friction and support gig workers with financials, taxes, health benefits (e.g., Crowded.com, QuickBooks Self-Employed, Zen99, Stride Health, etc.). Now ShiftPixy appears to be entering the fray, but with a different focus on shift work in restaurant, hospitality and maintenance service businesses that have 50 or more employee equivalents.

ShiftPixy today is more concept than reality; however, that could change over the next 12 months if its business formula is correct. So it will be interesting to watch it unfold. At any rate, ShiftPixy is an example of new intermediaries that are arising and attempting to fill in gaps in the gig and shift economies — on the one hand addressing business compliance issues, and on the other hand, addressing the needs of workers to be fully employed and have access to health and other forms of insurance, etc.

ShiftPixy is an early stage startup with big ambitions. If it is successful, we can only hope that all members in the ecosystem (businesses, workers, insurance providers and investors) will achieve net positive economic outcomes.