Venmo is an easy, low-cost way to pay anyone

We are moving quickly — for better and worse — into an economy that relies heavily on freelance labor. Call them temps, independents, or the contingent workforce, but in the final analysis, they do their work and then they need to get paid. And for workers who are doing spot work and not working consistently over time with their clients, the effort involved in setting up a payment scheme of the sort used for full-time or “longtime” workers is too high. Businesses need a simple and low-cost way to pay their short-time workers.

New York–based Venmo was acquired last summer by Braintree, the startup providing the credit card system for OpenTable, Fab.com, AirBnB, and Uber, and this week the pair announced Venmo Payouts. Payouts, like the basic Venmo product, is based around the idea of paying anyone who has a phone number or email address so that businesses can simply not spend the time and money involved collecting bank account information. Payouts charges only $0.25 per payment, so it is a low-cost competitor to PayPal, and, of course, for those using Braintree’s existing software, it’s an easy choice. Payouts is an API designed for developers to integrate into their products or possibly into corporate systems.

Today the infrastructure to manage freelance workers — like short-time payroll — is just starting to be invented, and there are more gaps than anything else. Venmo’s basic product is designed for easy payments from friend to friend, and it is easily used for paying freelancers, too. The fee is 3 percent, but that is waived if you pay via Venmo balance, bank transfer, or debit card. Receiving money is always free.

Companies using short-time workers want to keep their margins tight and liabilities at arm’s length. Using a solution like Payouts instead of the system you use for full-time workers is another way to maintain that distinction for tax and legal purposes. For example, Uber is being sued by drivers who claim they are — for all intents and purposes — employees, and therefore they are entitled to benefits, like vacation time and sick leave.

Note that I am an advocate for building a better social contract for freelancers, but I think that will have to come from cities, states, and nations passing laws to provide a better set of laws: extending the policies that are generally imposed on employers for the benefit of fulltimers so that short-timers can also benefit. For example, companies with more than five employees, for example, would be required to pay 1/40 of any short-timer’s social security on an hourly basis. This would counter the double payment that freelancers make to social security and put them more in line with full-timers, whose employers pay half of their social security. Again, note that a service like Venmo Payouts could be modified to support those payments automatically.

Relevant Analyst
Stowe Boyd

Stowe Boyd

Lead analyst, future of work Gigaom Research and stoweboyd.com

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