Home care startup Honor—which grabbed headlines by raising $20 million from investors last year—will be directly employing its caregivers going forward, rather than working with them on an independent contractor basis.
Under their new status, Honor’s in-home caregivers now will receive health insurance and benefits such as workers’ compensation and paid sick leave, as well as training and advancement opportunities, the San Francisco-based company announced today. These workers also will receive an equity stake in the company.
“We will still have flexibility,” Honor co-founder and CEO Seth Sternberg tells Home Health Care News. “[People] still could decide they want to come onto the platform for five or ten hours a week, but they’ll be part-time employees.”
The move comes as startups are facing a growing chorus of concern about the use of contract workers. Companies like ride-sharing pioneer Uber and grocery delivery provider Instacart have created tech platforms to connect clients with service workers—drivers or personal shoppers, for example. In filling these positions, the startups have created a large and growing independent contractor workforce, giving rise to a debate about the value and security of these jobs and the sometimes blurry line between freelancer and employee.
Pending legal actions could settle some of these questions, and the result could be that startups will have to make the switch away from contractors that Honor now is undertaking.
But Honor is not moving away from contract labor because of these potential legal threats to the so-called “gig economy.” Rather, given the way that clients and caregivers utilize Honor, it makes business sense to have full-time employees, Sternberg says.
When the company officially launched six months ago, it was possible that seniors would turn to Honor for home care in brief stints. This is because Honor—and similar startups such as Hometeam (which directly employs caregivers) and HomeHero (which has an independent contractor model)—have created tech platforms to connect caregivers and seniors in an on-demand fashion, similar to how Uber connects drivers and riders. But, so far, seniors have been using Honor to receive care on a consistent basis, Sternberg says.
Another potential scenario: Honor would see rapid turnover of the caregivers on its platform. In fact, industry veterans warned that Honor should expect 60% to 100% annual turnover, which is the standard churn that other home care companies see, Sternberg says.
“Before we launched, the number one thing we heard was, ‘You’re not going to succeed because you’re not going to be able to manage the care pros, they’ll just churn constantly,” Sternberg says. “Nothing could be further from the truth.”
Hard numbers are not yet available but Honor’s turnover is “dramatically below” industry norms, and many caregivers have said they would like to work for Honor on a permanent basis, Sternberg says. The combination of clients’ usage patterns and caregivers’ desire for stability and security drove the decision to change from a contractor to an employee model.
Now, Honor will have a greater ability to evaluate its caregivers and equip them with the training and professional development to succeed and advance their careers, Sternberg says. He is confident that this will create a more skilled and motivated workforce providing a higher level of care for elders and their families.
Labor in Silicon Valley
Raising the bar on service quality also is the goal in giving caregivers stock in the company.
“Giving the care pros equity makes them part of the full team,” Sternberg says. “It incents them to make Honor super successful. I think we’re increasing the value of Honor by making the care pros equity partners.”
Exact details are still being worked out, including how much stock caregivers will receive and how that will compare with other stakeholders, which include some high-profile investors. But in terms of the total payment and benefits package, Honor is committed to outdoing industry standards, Sternberg says.
While Honor still has not been operating for even a full year, workers may indeed see the stock options as an alluring incentive to work for the company—in no small part because Sternberg sold his previous startup, Meebo, to Google for a reported $100 million. But that is not the play that Sternberg foresees for Honor.
“I did that once, and I don’t want to do that again,” he says.
Instead, his vision is for Honor to fully realize what he believes is its potential to transform the market by improving the way seniors receive services in the home, and then to be around for him to use himself when he ages.
The company already is utilizing technology to gain efficiencies, such as in scheduling and communication, he says. The savings gained through these efficiencies is being invested back into the company’s care pros, and this will continue to be the strategy for offsetting the higher costs associated with having employees rather than contract workers.
Although he foregrounds the business case for shifting away from contract labor, Sternberg does acknowledge a personal belief in the value of having full-time employees who are vested in the company—which is not a given in Silicon Valley.
“There’s this kind of thing that tech companies are creating two classes of worker,” he says. “Engineers are treated like rockstars and everyone else is treated like dispensable labor, and that’s distinctly not what we want. The care pros are definitely part of Honor team, and I want them to have equity, so that if the full Honor team wins, they win long-term, too.”
His belief in the value of an upward career path stems in part from speaking with the day laborers who would gather on the street outside his former apartment.
“It seemed so fundamentally unfair to me that no matter how hard they worked, there was no path forward or up for them,” he says.
Still, Sternberg is not out to tell other companies how they should operate, and stresses that providing more stability and upward mobility for care workers is part of Honor’s specific mission.
“Those entrepreneurs have to make that choice for themselves,” he says of other startups’ labor decisions. “I think the real net of this for me is we’re taking a workforce that traditionally really has not been treated very well, and we’ve been working to up-level them, and now we’re up-leveling them even more.”
Written by Tim Mullaney