I might be too pessimistic about my idea, but why hasn't anyone tried it before?

[drali]

Warning, a lot of boring details; if you get bored easily, just jump to "However" below.



So, I have created an online platform that connects freelancing professionals to workplaces.

The platform charges the workplace a commission of 15% of the fees paid to the professionals. The professionals' fees are £750 on average, so the platform fees are 15% X 750=£112.5

The mechanism is:

1- The workplaces post their bookable shifts.
2- The professionals book the shifts online and work as agreed.
3- The workplaces pay the professionals' fees + the 15% commission to the platform bank account.
4-The platform keeps the 15% and pays the professionals the agreed fees.

So far, just boring and usual details....

However, I plan to pay completion incentives to the professionals (on top of their earnings) to reward them and encourage them to work more, e.g. if one works two shifts a week, they can earn £100. I also thought of cash (up to £400) referral bonuses rather than coupons and vouchers.

This might sound like a brilliant idea to accelerate engagement, but why is it not widely done by businesses? It works on Excel sheets but are there any legal or tax issues that can jeopardise it? Have I done wrong calculations?

Please keep in mind that the professionals are freelancers and neither employed by my platform nor the workplace.


Thanks in advance

 

[Paul Carmen]

It has been done, maybe not in exactly the same format, but Upwork and People Per Hour offer a similar sort of model.

The problems you have are threefold: -

1. For bigger freelancing contracts, people often want to engage directly and avoid large fees
2. The next issue is how do you get enough freelancers signed up, plus how do you vet/assure the quality of their work?
3. The biggest problem is how do you attract enough companies to make it worthwhile for freelancers to actually sign up?

This is potentially a big budget project, that has to compete against some venture capital backed players marketing wise. Plus, you have to market to two different sets of customers.

 

[Mark T Jones]

Let's start with the principle that most ideas can work, and every idea can fail.

The difference is in the execution.

In the this case, marketing - in its widest sense - will pay a key role. And will take a lot of money.

Start with the simple question - why will people use you rather than existing platforms?

 

[drali]

It has been done, maybe not in exactly the same format, but Upwork and People Per Hour offer a similar sort of model.

The problems you have are threefold: -

1. For bigger freelancing contracts, people often want to engage directly and avoid large fees
2. The next issue is how do you get enough freelancers signed up, plus how do you vet/assure the quality of their work?
3. The biggest problem is how do you attract enough companies to make it worthwhile for freelancers to actually sign up?

This is potentially a big budget project, that has to compete against some venture capital backed players marketing wise. Plus, you have to market to two different sets of customers.

Thanks, Paul


My plan to tackle those problems:

1. For bigger freelancing contracts, people often want to engage directly and avoid large fees

The offered benefits, such as completion incentives, invoicing, timesheets and calendars should hopefully keep the contractor on the platform even if the workplace tried to engage with them directly.

2. The next issue is how do you get enough freelancers signed up, plus how do you vet/assure the quality of their work?

I am already in this industry and hold frequent teaching sessions for professionals. The generous referral bonus could also help attract them. I have a reliable system for quality assurance.

3. The biggest problem is how do you attract enough companies to make it worthwhile for freelancers to actually sign up?

There is high demand in the field, and I receive daily emails/calls asking for more professionals from recruitment agencies.

This is potentially a big budget project, that has to compete against some venture capital backed players marketing wise. Plus, you have to market to two different sets of customers.

True

It has been done, maybe not in exactly the same format, but Upwork and People Per Hour offer a similar sort of model.

Well, that is reassuring, many thanks

 

[drali]

Let's start with the principle that most ideas can work, and every idea can fail.

The difference is in the execution.

In the this case, marketing - in its widest sense - will pay a key role. And will take a lot of money.

Start with the simple question - why will people use you rather than existing platforms?

Thanks, Mark

why will people use you rather than existing platforms?

My main competitor platform only engaged with 10% of the UK workplaces, and they have no bonuses system.

Another platform charges professional fees. My platform pays them.

Agencies are 5-10% more expensive, and they impose exclusivity conditions.

 

[Mark T Jones]

Thanks, Mark


My main competitor platform only engaged with 10% of the UK workplaces, and they have no bonuses system.

Another platform charges professional fees. My platform pays them.

Agencies are 5-10% more expensive, and they impose exclusivity conditions.

And have you done research which shows that this will b a deciding factor?

 

[drali]

And have you done research which shows that this will b a deciding factor?

I wouldn't describe my research as fully comprehensible as it comes from limited surveys and casual chats with professionals.

 

[Mark T Jones]

I wouldn't describe my research as fully comprehensible as it comes from limited surveys and casual chats with professionals.

My personal view is that the success - or otherwise - of this will come down to marketing.

Which starts with market research

 

[NickGrogan]

So, I have created an online platform that connects freelancing professionals to workplaces.

In the title you said no one has tried this before. Which part of the plan has no one tried before?

Step 4 - paying the professional will happen long before step 3 - getting paid. Freelancers want paying almost immediately and most businesses will want 30 to 60 day credit - more if they can get it.

Please keep in mind that the professionals are freelancers and neither employed by my platform nor the workplace.

If they are working fixed hours, at a fixed location, and can't send someone else to do the work, then they may be considered employees. This means that tax and ni would need to be paid.

 

[drali]

My personal view is that the success - or otherwise - of this will come down to marketing.

Which starts with market research

Any ideas on how to engage people with surveys? No one is interested in filling them out online.

 

[NickGrogan]

Any ideas on how to engage people with surveys? No one is interested in filling them out online.

People love filling in surveys if the survey are useful to them

 

[drali]

In the title you said no one has tried this before. Which part of the plan has no one tried before?

Step 4 - paying the professional will happen long before step 3 - getting paid. Freelancers want paying almost immediately and most businesses will want 30 to 60 day credit - more if they can get it.


If they are working fixed hours, at a fixed location, and can't send someone else to do the work, then they may be considered employees. This means that tax and ni would need to be paid.

In the title you said no one has tried this before. Which part of the plan has no one tried before?

The part where the recruiter would pay the freelancers weekly cash bonuses.

Step 4 - paying the professional will happen long before step 3 - getting paid. Freelancers want paying almost immediately and most businesses will want 30 to 60 day credit - more if they can get it.

Valid point, I am considering a strict 2 weeks payment from the businesses (might not be so practical, but I will try to push it)

If they are working fixed hours, at a fixed location, and can't send someone else to do the work, then they may be considered employees. This means that tax and ni would need to be paid.

Thanks for mentioning that, it is the responsibility of the workplace to so a self-assessment with regard to the position against the IR35 rule.

 

[NickGrogan]

The part where the recruiter would pay the freelancers weekly cash bonuses.


Valid point, I am considering a strict 2 weeks payment from the businesses (might not be so practical, but I will try to push it)




Thanks for mentioning that, it is the responsibility of the workplace to so a self-assessment with regard to the position against the IR35 rule.

Recruitment agencies will be the parties viewed as being responsible for any unpaid tax as they’re considered the ‘fee-payer’ in the updated IR35 legislation, which is a huge burden to carry.

What do recruitment agencies need to do to protect themselves from IR35?

What do recruitment agencies need to do to protect themselves from IR35? Find out in our IR35 recruitment article.

www.caunceohara.co.uk

 

[drali]

Recruitment agencies will be the parties viewed as being responsible for any unpaid tax as they’re considered the ‘fee-payer’ in the updated IR35 legislation, which is a huge burden to carry.

Thanks for sharing this link, quite surprising but critical to know. Thanks again

 

[NickGrogan]

Contractors receiving bonus payments can find themselves pitched straight into IR35, as HMRC is likely to see such bonuses as being evidence of the contractor actually being a disguised employee.

IR35 and contracting bonuses – how to manage bonus payments to avoid IR35

To avoid IR35, contractors must adopt the correct terminology when agreeing to performance-based bonuses for a project, explains Andy Vessey of Qdos.

www.contractorcalculator.co.uk

 

[drali]

Contractors receiving bonus payments can find themselves pitched straight into IR35, as HMRC is likely to see such bonuses as being evidence of the contractor actually being a disguised employee.

Now, this is what really triggers my worries. Thanks for sharing the article; I actually read it before starting this thread (hence, I worded the payments as completion incentives, not bonuses in my original thread)
Nevertheless, I wasn't sure if simple wording alterations could protect me from the tax consequences, especially as I don't see this type of reward so widespread among businesses. I have to admit that I hardly have any business experience, and I spent my life as a professional.

 

[Ozzy]

Valid point, I am considering a strict 2 weeks payment from the businesses (might not be so practical, but I will try to push it)

Just a small input here, look at taking payment up front and holding it Escrow. That's how it has worked when I've engaged someone via PeoplePerHour. I had to pay up front and they held onto the money only releasing it once I marked the job was completed to my satisfaction.
You may be able to apply something similar

 

[IanSuth]

BEWARE

Similar things have been tried (an ex boss did a sort of version in 2008/9) - there is fine line to tread to not be classed as an agency. Once you are an agency you are covered by the conduct of employment agencies and recruitment business regulations.

If for instance your freelancers become "temps" you suddenly have no right to withhold payment until paid. https://www.legislation.gov.uk/uksi/2003/3319/regulation/8/made

If you are going to do it start from really clearly defining you are ONLY dealing with bona fide PSC's tie down the terms to ensure no contract can stretch/change and make you liable. Most large firms will make you sign TOB's giving them indemnity form any costs arising from the change of employment status

 

[NickGrogan]

Some good advice above.

Nevertheless, I wasn't sure if simple wording alterations could protect me from the tax consequences

No, they won't, otherwise, everybody would do that.

 

[drali]

Just a small input here, look at taking payment up front and holding it Escrow. That's how it has worked when I've engaged someone via PeoplePerHour. I had to pay up front and they held onto the money only releasing it once I marked the job was completed to my satisfaction.
You may be able to apply something similar

Interesting idea, and I appreciated it. I might implement it later once I grow the client base.

 

[drali]

BEWARE

Similar things have been tried (an ex boss did a sort of version in 2008/9) - there is fine line to tread to not be classed as an agency. Once you are an agency you are covered by the conduct of employment agencies and recruitment business regulations.

If for instance your freelancers become "temps" you suddenly have no right to withhold payment until paid.

If you are going to do it start from really clearly defining you are ONLY dealing with bona fide PSC's tie down the terms to ensure no contract can stretch/change and make you liable. Most large firms will make you sign TOB's giving them indemnity form any costs arising from the change of employment status

This is so true and I think I have to place it in the core of my T&Cs. On a similar note, what is the best way to get legal help with T&C, please?

 

[IanSuth]

This is so true and I think I have to place it in the core of my T&Cs. On a similar note, what is the best way to get legal help with T&C, please?

The Recruitment & employment Confederation (the REC) are a trade body and offer model TOB's same with APSCO (association of staffing companies) but in many ways you are trying to not fall under their scope so I am not sure they are the right people.

And trying to get it don't on the cheap could turn out VERY expensive if you slip up and lose a case

 

[ethical PR]

Any ideas on how to engage people with surveys? No one is interested in filling them out online.

How are you trying to engage them?

 

[Casually made]

Sounds like a market with way too much bureaucracy behind the scenes

Lot of comments about marketing

But the core overheads for this model could end up being catastrophic

 

[drali]

The Recruitment & employment Confederation (the REC) are a trade body and offer model TOB's same with APSCO (association of staffing companies) but in many ways you are trying to not fall under their scope so I am not sure they are the right people.

And trying to get it don't on the cheap could turn out VERY expensive if you slip up and lose a case

Thanks, I will see what they offer. I spoke with Lawbite people; their offer is not too bad, but I am concerned that it might be too good to be true.

 

[drali]

How are you trying to engage them?

Just sharing the links over social-media professionals groups

 

[drali]

Sounds like a market with way too much bureaucracy behind the scenes

Lot of comments about marketing

But the core overheads for this model could end up being catastrophic

Care to elaborate?

 

[drali]

Has anybody come across the issue of:
if you run a recruitment agency, you can't receive the payment from the workplace and pay it to the contractors i.e. the payment should go directly from the workplace to the contractor.

 

[Casually made]

Care to elaborate?

I don't need too

read the thread

 

[fisicx]

@drali the chances of this becoming successful all depends on how much cash you have to burn. Forget the bonus scheme, it's going to be far too complicated to administer and, as has already been suggested, in danger of falling foul of tax legislation.

There are a number of successful freelancer and recruitment platforms. Getting employers and freelancers to move to a new unknown platform is going to be very difficult and expensive.

And you may only want to engage with business that pay sooner but most will want 30 or 60 day terms. Which means yoiu need a lot of cash in the bank to pay the freelancers weekly.

 

[Gary Monro]

As a regular on Upwork I'd suggest that if you can fix the problem of endlessly cheap clients seeking out (and finding) endlessly cheap freelancers you'd be on to something huge.

I've no objection to either of those parties; but pay rates are badly suppressed and freelancer work quality is often poor.

For freelancers like me (I'm a sales copywriter) who are trained and experienced - and take our clients' goals and aspirations very seriously - a platform that assessed us, made us jump through hoops and so filtered out amateur freelancers would be a nice place to be.

We'd be too expensive for the regular Upwork/Fiverr client so they'd stay on those platforms while your platform would match skilled professionals with companies who need them.

 

[NickGrogan]

As a regular on Upwork I'd suggest that if you can fix the problem of endlessly cheap clients seeking out (and finding) endlessly cheap freelancers you'd be on to something huge.

I've no objection to either of those parties; but pay rates are badly suppressed and freelancer work quality is often poor.

For freelancers like me (I'm a sales copywriter) who are trained and experienced - and take our clients' goals and aspirations very seriously - a platform that assessed us, made us jump through hoops and so filtered out amateur freelancers would be a nice place to be.

We'd be too expensive for the regular Upwork/Fiverr client so they'd stay on those platforms while your platform would match skilled professionals with companies who need them.

YunoJuno | Freelancer Management System

The Freelance Management System to source, hire, manage and pay contractors and freelancers all in one place.

www.yunojuno.com

 

[Gary Monro]

I did not know about this firm Nick - will take a closer look at this a bit later. Thank you.